-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QOgGcWfaIf8KvYIluB59j+SBRVKJsiPhAbG4aA9mtmPzRIeJz+XStpRldA0PstJX sLIZtOs0zqZlHrth4I5Njg== 0000950131-96-001588.txt : 19960417 0000950131-96-001588.hdr.sgml : 19960417 ACCESSION NUMBER: 0000950131-96-001588 CONFORMED SUBMISSION TYPE: SC 13E3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960416 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3 SEC ACT: 1934 Act SEC FILE NUMBER: 005-37025 FILM NUMBER: 96547629 BUSINESS ADDRESS: STREET 1: 767 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10153-0075 BUSINESS PHONE: 3135565000 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MOTORS CORP CENTRAL INDEX KEY: 0000040730 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLES & PASSENGER CAR BODIES [3711] IRS NUMBER: 380572515 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3 BUSINESS ADDRESS: STREET 1: 767 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10153-0075 BUSINESS PHONE: 3135565000 SC 13E3 1 SCHEDULE 13E-3 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13E-3 RULE 13E-3 TRANSACTION STATEMENT (PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934) GENERAL MOTORS CORPORATION (NAME OF ISSUER) GENERAL MOTORS CORPORATION (NAME OF PERSON(S) FILING STATEMENT) CLASS E COMMON STOCK (TITLE OF CLASS OF SECURITIES) 37044240 (CUSIP NUMBER OF CLASS OF SECURITIES) J. MICHAEL LOSH EXECUTIVE VICE PRESIDENT GENERAL MOTORS CORPORATION 3044 WEST GRAND BOULEVARD DETROIT, MICHIGAN 48202-3091 (313) 556-3549 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT) COPIES TO : WARREN G. ANDERSEN ROBERT S. OSBORNE, P.C. GENERAL MOTORS CORPORATION KIRKLAND & ELLIS 3031 WEST GRAND BOULEVARD 200 EAST RANDOLPH ST. DETROIT, MICHIGAN 48202-3091 CHICAGO, ILLINOIS 60601-6636 (313) 974-1528 (312) 861-2368 This statement is filed in connection with (check the appropriate box): a.[X]The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities Exchange Act of 1934. b. [XThe]filing of a registration statement under the Securities Act of 1933. c.[_]A tender offer. d. [_None]of the above. Check the following box if soliciting materials or an information statement referred to in checking box (a) are preliminary copies: [X] CALCULATION OF FILING FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE** - --------------------------------------------------------------------------------- $25,683,110,907.75 $5,136,622.18 - ---------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- *Valued in accordance with Rule 240(a) and (c), solely for the purpose of determining the filing fee, on the basis of the average of the high and low prices reported on the New York Stock Exchange Composite Tape on April 12, 1996 for the Class E Common Stock, which will be converted into common stock of Electronic Data Systems Holding Corporation on a one-for-one basis pursuant to the merger described in this Transaction Statement. **Calculated based on the transaction valuation multiplied by one-fiftieth of one percent. [X]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Filing Party: Electronic Data $8,856,245.14 Systems Holding Corporation Form or Registration No.: Date Filed: April 16, 1996 Registration Statement on Form S-4 being filed simultaneously herewith - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ITEMS 1 THROUGH 17. INTRODUCTION This Rule 13e-3 Transaction Statement is being filed by General Motors Corporation, a Delaware corporation ("General Motors"), in connection with a split-off (the "Split-Off") of General Motors' wholly owned subsidiary, Electronic Data Systems Holding Corporation, a Delaware corporation (together with its subsidiaries, "EDS"), pursuant to a merger in which each outstanding share of General Motors Class E Common Stock, $0.10 par value per share (the "Class E Common Stock"), will be converted into one share of EDS Common Stock, $0.01 par value per share (the "EDS Common Stock"). As a result of the Split- Off, EDS will become an independent, publicly held company, holders of Class E Common Stock will become stockholders of EDS rather than of General Motors, and Class E Common Stock will cease to exist. All other outstanding shares of General Motors capital stock will remain outstanding, and the terms of such stock will remain essentially unchanged. EDS has filed a Registration Statement on Form S-4 (as amended and including exhibits, the "Registration Statement") with the Securities and Exchange Commission concurrently herewith in connection with the Split-Off. The cross reference sheet on the following pages, which is supplied pursuant to General Instruction F to Schedule 13E-3, shows the location in the Solicitation Statement/Prospectus that forms a part of the Registration Statement of the information required to be included in response to the items of this Transaction Statement. The information set forth in the Registration Statement, which is attached hereto as Exhibit (d)(1), is incorporated herein by reference in its entirety, and responses to each item herein are qualified in their entirety by such reference. ITEM 16. ADDITIONAL INFORMATION The information contained in the Registration Statement is incorporated herein by reference in its entirety. 1 ITEM 17. MATERIAL TO BE FILED AS EXHIBITS Exhibit (a)(1) Not Applicable. Exhibit (b)(1) Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), dated March 31, 1996, which is attached as Appendix B-1 to the Solicitation Statement/Prospectus that forms a part of the Registration Statement filed as Exhibit (d)(1) hereto. Exhibit (b)(2) Opinion of Lehman Brothers Inc. ("Lehman Brothers"), dated March 31, 1996, which is attached as Appendix B-2 to the Solicitation Statement/Prospectus that forms a part of the Registration Statement filed as Exhibit (d)(1) hereto. Exhibit (b)(3) Opinion of Morgan Stanley & Co. Incorporated ("Morgan Stanley"), dated March 31, 1996, which is attached as Appendix B-3 to the Solicitation Statement/Prospectus that forms a part of the Registration Statement filed as Exhibit (d)(1) hereto. Exhibit (b)(4) Presentation to the General Motors Board of Directors Regarding Split-Off of EDS, dated March 31, 1996, given by Merrill Lynch. Exhibit (b)(5) Presentation to the General Motors Board of Directors Concerning the Split-Off of EDS, dated March 31, 1996, given by Morgan Stanley and Lehman Brothers. Exhibit (c)(1) Merger Agreement dated as of April , 1996 between General Motors and GM Mergeco Corporation ("Mergeco"), which is attached as Appendix A to the Solicitation Statement/ Prospectus that forms a part of the Registration Statement filed as Exhibit (d)(1) hereto. Exhibit (d)(1) Registration Statement. Exhibit (e)(1) Not Applicable. Exhibit (f)(1) Not Applicable. 2 CROSS REFERENCE SHEET
CAPTION OR LOCATION IN SOLICITATION SCHEDULE 13E-3 ITEM NUMBER STATEMENT/PROSPECTUS -------------------------- ----------------------------------- 1.Issuer and Class of Security Subject to the Transaction (a)............................ Introduction; Summary--General Motors (b)............................ Introduction; Class E Common Stock-- Introduction; Solicitation of Written Consent of General Motors Common Stockholders (c)............................ Class E Common Stock--Price Range and Dividends (d)............................ Risk Factors Regarding General Motors after the Split-Off--Loss of Potential Availability of EDS Funds and Assets; Class E Common Stock--Price Range and Dividends;--Dividend Policy;-- Considerations Relating to Multi-Class Common Stock Capital Structure (e)............................ Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust (f)............................ See Annex 1 to this Transaction Statement. 2.Identity and Background......... General Motors, the person filing this Transaction Statement, is the issuer of the class of equity securities which is the subject of the Rule 13e-3 transaction. (a)............................ The persons enumerated in General Instruction C to Schedule 13E-3 (each, an "Instruction C Person") are John F. Smith, Jr., Anne L. Armstrong, John H. Bryan, Thomas E. Everhart, Charles T. Fisher, III, J. Willard Marriott, Jr., Ann D. McLaughlin, Harry J. Pearce, Edmund T. Pratt, Jr., John G. Smale, Louis W. Sullivan, Dennis Weatherstone, Thomas H. Wyman, J. Michael Losh, G. Richard Wagoner, Jr., Louis R. Hughes, J.T. Battenberg, III and C. Michael Armstrong. (b)............................ See Annex 1 to this Transaction Statement. (c)............................ See Annex 1 to this Transaction Statement. (d)............................ See Annex 1 to this Transaction Statement. (e)............................ To the best of General Motors' knowledge, during the past five years, no Instruction C Person has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (f)............................ To the best of General Motors' knowledge, during the past five years, no Instruction C Person has been party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining further violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. (g)............................ Each Instruction C Person is a U.S. citizen. 3.Past Contacts, Transactions or Negotiations (a)............................ Not Applicable (b)............................ Incorporation of Certain Documents by Reference; Special Factors--Background of the Split-Off; Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust
3
CAPTION OR LOCATION IN SOLICITATION SCHEDULE 13E-3 ITEM NUMBER STATEMENT/PROSPECTUS -------------------------- ----------------------------------- 4.Terms of Transaction (a)............................ The Split-Off; Relationship Between General Motors and EDS--Post Split-Off Arrangements; EDS Capital Stock (b)............................ Not Applicable 5.Plans or Proposals of the Issuer or Affiliate (a)............................ Not Applicable (b)............................ Not Applicable (c)............................ Not Applicable (d)............................ Not Applicable (e)............................ Not Applicable (f)............................ Not Applicable (g)............................ Not Applicable 6.Source and Amounts of Funds or Other Consideration (a)............................ Estimated Fees and Expenses (b)............................ Estimated Fees and Expenses (c)............................ Not Applicable (d)............................ Not Applicable 7.Purpose(s), Alternatives, Reasons and Effects (a)............................ Special Factors--Purposes of the Split- Off (b)............................ Special Factors--Alternatives to the Split-Off (c)............................ Special Factors--Alternatives to the Split-Off;--Background of the Split-Off (d)............................ Special Factors--Effects of the Split- Off;--Certain U.S. Federal Income Tax Considerations 8.Fairness of the Transaction (a)............................ Special Factors--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions; The Split-Off (b)............................ Special Factors--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions (c)............................ Special Factors--Requisite Vote for the Transactions; The Split-Off--Merger Agreement; Solicitation of Written Consent of General Motors Common Stockholders
4
CAPTION OR LOCATION IN SOLICITATION SCHEDULE 13E-3 ITEM NUMBER STATEMENT/PROSPECTUS -------------------------- ----------------------------------- (d)............................ Special Factors--Requisite Vote for the Transactions (e)............................ Special Factors--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions; The Split-Off (f)............................ Not Applicable 9.Reports, Opinions, Appraisals and Certain Negotiations (a)............................ Special Factors--Fairness Opinions (b)............................ Special Factors--Fairness Opinions (c)............................ Special Factors--Fairness Opinions; Appendix B--Fairness Opinions 10.Interest in Securities of the Issuer (a)............................ Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS; See also Annex 1 to this Transaction Statement. (b)............................ See Annex 1 to this Transaction Statement. 11.Contracts, Arrangements or Understandings with Respect to the Issuer's Securities....... The Split-Off--Merger Agreement 12.Present Intention and Recommendation of Certain Persons with Regard to the Transaction (a)............................ Solicitation of Written Consent of General Motors Common Stockholders. Other than as set forth in such section, General Motors has not received any notice of intent with respect to the vote on the Split-Off from any person enumerated in Item 12(a) of Schedule 13E-3. (b)............................ Special Factors--Background of the Split- Off;--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions; The Split- Off; Solicitation of Written Consent of General Motors Common Stockholders. Other than as set forth in such sections, General Motors has not received any notice that any person enumerated in Item 12(a) of Schedule 13E-3 has made any recommendation with respect to the Split-Off. 13.Other Provisions of the Transaction (a)............................ The Split-Off--No Appraisal Rights (b)............................ Not Applicable (c)............................ Not Applicable
5
CAPTION OR LOCATION IN SOLICITATION SCHEDULE 13E-3 ITEM NUMBER STATEMENT/PROSPECTUS -------------------------- ----------------------------------- 14.Financial Statements (a)............................ Incorporation of Certain Documents By Reference; Summary--Certain Per Share and Other Financial Information--GM Common Stock Historical Per Share Data; --General Motors Ratios of Earnings to Fixed Charges (b)............................ Summary--Certain Per Share and Other Financial Information--GM Common Stock Pro Forma Per Share Data;--General Motors Summary Consolidated Historical and Pro Forma Financial Data; General Motors Unaudited Pro Forma Condensed Consolidated Financial Statements 15.Persons and Assets Employed, Retained or Utilized (a)............................ Special Factors--Background of the Split- Off--Negotiating Teams; Solicitation of Written Consent of General Motors Common Stockholders (b)............................ Solicitation of Written Consent of General Motors Common Stockholders 16.Additional Information.......... The information contained in the Registration Statement is incorporated by reference herein in its entirety. 17.Material to be Filed as Exhibits (a)............................ Not Applicable (b)............................ Fairness opinions of each of Merrill Lynch, Lehman Brothers and Morgan Stanley, which are attached as Appendix B-1, B-2 and B-3, respectively, to the Solicitation Statement/Prospectus that forms a part of the Registration Statement filed as Exhibit (d)(1) hereto; Presentations to the General Motors Board of Directors given by (i) Merrill Lynch and (ii) Lehman Brothers and Morgan Stanley, which are filed as Exhibits (b)(4) and (b)(5) hereto, respectively (c)............................ Merger Agreement between General Motors and Mergeco, which is attached as Appendix A to the Solicitation Statement/Prospectus that forms a part of the Registration Statement filed as Exhibit (d)(1) hereto (d)............................ Registration Statement filed as Exhibit (d)(1) hereto (e)............................ Not Applicable (f)............................ Not Applicable
6 ANNEX 1 ITEM 1(F). ISSUER AND CLASS Since January 1, 1994, General Motors has purchased Class E Common Stock on four occasions. On February 22, 1995, General Motors purchased 106,000 shares of Class E Common Stock at a price of $38.3125 per share, which thereby represented the average purchase price for Class E Common Stock purchased by General Motors during the first quarter of 1995. On November 2, 1995, General Motors purchased (i) 25,000 shares of Class E Common Stock at a price of $48.9375 per share and (ii) 25,000 shares of Class E Common Stock at a price of $48.3125 per share, resulting in an average purchase price of $48.625 per share of Class E Common Stock purchased by General Motors during the third quarter of 1995. On April 2, 1996, General Motors purchased 11,073 shares of Class E Common Stock at a price of $53.1875 per share, which thereby represents the average purchase price for Class E Common Stock purchased by General Motors during the second quarter of 1996 through April 15, 1996. ITEM 2(B) THROUGH (D). IDENTITY AND BACKGROUND The following information with respect to principal occupation or employment and name of the corporation or other organization in which such occupation or employment is carried on and in regard to other affiliations has been furnished to General Motors by the Instruction C Persons. In addition to the affiliations mentioned on the following pages, the Instruction C Persons are active in many local and national cultural, charitable, professional, and trade organizations. ANNE L. ARMSTRONG, P.O. Box 1358, Kingsville, Texas 78364; Chairman, Board of Trustees, Center for Strategic and International Studies; former Chairman of the President's Foreign Intelligence Advisory Board and former Ambassador to Great Britain; Joined General Motors Board in 1977; Director of American Express Company, Boise Cascade Corporation, Glaxo-Wellcome and Halliburton Company; Member of the Council on Foreign Relations and Board of Overseers Hoover Institution. JOHN H. BRYAN, Sara Lee Corporation, Three First National Plaza, Chicago, Illinois 60602-4260; Chairman and Chief Executive Officer, Sara Lee Corporation, Chicago; Joined General Motors Board in 1993; Director of Amoco Corporation, First Chicago NBD Corporation and its subsidiary, First National Bank of Chicago; Member of The Business Roundtable and Vice Chairman of The Business Council; Chairman of Catalyst; Trustee of the University of Chicago and the Committee for Economic Development. THOMAS E. EVERHART, California Institute of Technology, Parsons-Oates Hall of Administration, 1201 East California Boulevard, Pasadena, California 91125; President and Professor of Electrical Engineering and Applied Physics, California Institute of Technology, Pasadena; Former Chancellor of University of Illinois, Urbana-Champaign; Joined General Motors Board in 1989; Director of Hewlett-Packard Corporation, Reveo, Inc., Corporation for National Research Initiatives, Community Television of Southern California (KCET); Member of National Academy of Engineering; Vice Chairman, Council on Competitiveness. CHARLES T. FISHER, III, 100 Renaissance Center, Detroit, Michigan 48243; Retired Chairman and President of NBD Bancorp, Inc. and its subsidiary NBD Bank, N.A., 611 Woodward Avenue, Detroit, Michigan 48226-3408; Joined General Motors Board in 1972; Director of Hughes Electronics Corporation, AMR Corporation and its subsidiary American Airlines, Inc., First Chicago NBD Corporation and its subsidiaries First National Bank of Chicago and NBD Bank (Michigan). J. WILLARD MARRIOTT, JR., Marriott International, Inc., One Marriott Drive, Washington, D.C. 20058; Chairman, President and Chief Executive Officer, Marriott International, Inc., Washington, D.C., since October 1993; Chairman, President and Chief Executive Officer, Marriott Corporation (1985-1993); Joined General Motors Board in 1989; Director of Host Marriott Corporation (formerly Marriott Corporation), Host Marriott Services Corporation, Outboard Marine Corporation, and the U.S.-Russia Business Council; Serves on Board of Trustees of National Geographic Society, Georgetown University and the Mayo Foundation; Member of The Business Council and The Business Roundtable. 7 ANN D. MCLAUGHLIN, 4320 Garfield, N.W., Washington, D.C.; Former U.S. Secretary of Labor (1987-1989); Vice Chairman, The Aspen Institute; President, Federal City Council, Washington, D.C. (1990-1995); Joined General Motors Board in 1990; Director of AMR Corporation and its subsidiary American Airlines, Inc., Federal National Mortgage Association, Harman International Industries, Host Marriott Corporation (formerly Marriott Corporation); Kellogg Company, Nordstrom, Potomac Electric Power Company, Sedgwick Group plc, Union Camp Corporation, and Vulcan Materials Company; Trustee of The Public Agenda Foundation, The Conservation Fund and Rand; Board of Overseers, Wharton School of Business, University of Pennsylvania. HARRY J. PEARCE, General Motors Corporation, 3044 West Grand Boulevard, Detroit, Michigan 48202-3091; Vice Chairman, General Motors Board since January 1, 1996, and Executive Vice President, Electronic Data Systems Corporation, Hughes Electronics Corporation, GM Locomotive Group EMD, Allison Transmission Division and Corporate Affairs since 1994, Executive Vice President and General Counsel (1992-1994), Vice President and General Counsel (1987-1992); Joined General Motors in 1985 and its Board in 1996; Member of The President's Council; Director of Hughes Electronics Corporation, Marriott International, Inc.; Member, The Conference Board, Northwestern University School of Law Visiting Committee, and Board of Visitors, United States Air Force Academy; Trustee, Howard University. EDMUND T. PRATT, JR., Astor Lane, Port Washington, New York 11050; Chairman Emeritus and currently director of Pfizer Inc., 253 East 42nd Street, New York, New York 10017; Joined General Motors Board in 1977; Director of Hughes Electronics Corporation, Chase Manhattan Corporation and its subsidiary Chase Manhattan Bank, N.A., International Paper Company, Minerals Technologies Inc. and AEA Investors, Inc.; Member of The Business Council. JOHN G. SMALE, The Procter & Gamble Company, P.O. Box 599, Cincinnati, Ohio 45201-0599; Chairman of the Executive Committee of General Motors since January 1, 1996, former Chairman, General Motors (November 2, 1992-December 31, 1995); Retired Chairman and Chief Executive of The Procter & Gamble Company; Joined General Motors Board in 1982; Member of the Executive Committee of The Business Council; Board of Governors, The Nature Conservancy; Emeritus Trustee of Kenyon College. JOHN F. SMITH, JR., General Motors Corporation, 3044 West Grand Boulevard, Detroit, Michigan 48202-3091; Chairman, General Motors since January 1, 1996, and Chief Executive Officer and President since November 2, 1992, President (April-November 1992), Vice Chairman, Board of Directors (1990-1992), Executive Vice President, International Operations (1988-1990); Joined General Motors in 1961 and its Board in 1990; Member of The President's Council; Director of Hughes Electronics Corporation, The Procter & Gamble Company; Member of The Business Roundtable, The Business Council, U.S.-Japan Business Council and the Chancellor's Executive Committee of the University of Massachusetts; Member of Board of Overseers of Memorial Sloan-Kettering Cancer Center and Member of Board of Polish-American Enterprise Fund. LOUIS W. SULLIVAN, Morehouse School of Medicine, 720 Westview Drive, S.W., Atlanta, Georgia 30310-1495; President, Morehouse School of Medicine, Atlanta, Georgia, since January 21, 1993; U.S. Secretary of Health and Human Services, 200 Independence, S.W., Washington, D.C. 20201 (1989-1993); Joined General Motors Board in 1993; Director of Georgia Pacific, 3M Corporation, Household International Inc., CIGNA Corporation, Bristol-Myers Squibb Company and Equifax Corporation. DENNIS WEATHERSTONE, J.P. Morgan & Co. Incorporated, 60 Wall Street, 21st Floor, New York, New York 10260; Retired Chairman and currently director of J.P. Morgan & Co. Incorporated and its subsidiary Morgan Guaranty Trust Company of New York; Joined General Motors Board in 1986; Director of L'Air Liquide, Merck & Co., Inc. and the Institute for International Economics; Member of The Business Council; President and trustee of the Royal College of Surgeons Foundation, Inc., New York; Trustee of the Alfred P. Sloan Foundation; Independent member of the Board of Banking Supervision of the Bank of England. THOMAS H. WYMAN, S.G. Warburg & Co., Inc., 277 Park Avenue, New York, New York 10172; Chairman, S.G. Warburg & Co. Inc., New York, and former Chairman, President and Chief Executive Officer, CBS Inc., 8 New York; Joined General Motors Board in 1985; Director of Hughes Electronics Corporation, AT&T, Zeneca Group PLC (London) and United Biscuits (Holdings) plc (Edinburgh); Member of The Business Council; Trustee Emeritus of The Ford Foundation and of The Aspen Institute; Chairman Emeritus of Amherst College. C. MICHAEL ARMSTRONG, Hughes Electronics Corporation, 7200 Hughes Terrace, Los Angeles, California 90045-0066; Chairman and Chief Executive Officer, Hughes Electronics Corporation since March 1992; Senior Vice President, International Business Machines Corporation, Old Orchard Road, Armonk, New York 10504 (1989-March 1992); Member of the President's Council. J. T. BATTENBERG, III, General Motors Corporation, 3044 West Grand Boulevard, Detroit, Michigan, 48202-3091; Executive Vice President, General Motors since July 1995 and President, Delphi Automotive Systems since July 1994, Senior Vice President (July 1994-July 1995), Vice President and Group Executive in charge of the Automotive Components Group (May 1992-July 1994), Vice President and Group Executive in charge of the Buick-Oldsmobile-Cadillac Group (June 1988-May 1992); Associated with General Motors since 1961; Member of the President's Council. LOUIS R. HUGHES, General Motors Corporation, 3044 West Grand Boulevard, Detroit, Michigan, 48202-3091; Executive Vice President, International Operations, General Motors since November 1992 and President, International Operations since September 1994, President, General Motors Europe and Vice President and Group Executive (April-November 1992), Chairman and Managing Director of Adam Opel AG (March 1989-April 1992); Associated with General Motors since 1966; Member of the President's Council. J. MICHAEL LOSH, General Motors Corporation, 3044 West Grand Boulevard, Detroit, Michigan, 48202-3091; Executive Vice President and Chief Financial Officer, General Motors since July 1994, Group Executive in charge of North American Vehicle Sales, Service, and Marketing (May 1992-July 1994), Vice President and General Manager of Oldsmobile Division (June 1989-May 1992); Associated with General Motors since 1964; Member of the President's Council. G. RICHARD WAGONER, JR., General Motors Corporation, 3044 West Grand Boulevard, Detroit, Michigan, 48202-3091; Executive Vice President, General Motors since November 1992 and President, North American Operations since July 1994, Chief Financial Officer (November 1992-July 1994), President and Managing Director of General Motors do Brasil (July 1991-November 1992), Vice President in charge of finance for General Motors Europe (June 1989-July 1991); Associated with General Motors since 1977; Member of the President's Council. ITEM 10. INTEREST IN SECURITIES OF THE ISSUER. ITEM 10(A) The following table sets forth, as of February 29, 1996, beneficial ownership of Class E Common Stock for certain Instruction C Persons and pension and profit-sharing or similar plans of General Motors (excluding its subsidiaries). Upon consummation of the Split-Off, each outstanding share of Class E Common Stock will be automatically converted into one share of EDS Common Stock.
SHARES BENEFICIALLY BENEFICIAL OWNER OWNED ---------------- ------------ J. T. Battenberg, III....................................... 1,208 J. M. Losh.................................................. 5,659 General Motors Retirement Plan for Salaried Employees..................................... 7,295,169 General Motors Savings Plans Master Trust................... 14,760,025 General Motors Canadian Savings-Stock Purchase Program...... 100,310
9 ITEM 10(B) On various dates between February 9 and April 10, 1996, certain pension and profit-sharing or similar plans of General Motors (excluding its subsidiaries) effected multiple transactions in Class E Common Stock. During such period, the General Motors Savings Plans Master Trust purchased an aggregate amount of approximately 4.5 million shares of Class E Common Stock at prices ranging from $53.75 to $56.595 per share and sold an aggregate amount of approximately 323,000 shares of Class E Common Stock at prices ranging from $53.188 to $57.75 per share. The General Motors Canadian Savings-Stock Purchase Program also purchased within such period an aggregate amount of approximately 8,200 shares of Class E Common Stock at an average price of $56.225 per share and sold an aggregate amount of approximately 680 shares of Class E Common Stock at an average price of $56.6801 per share. In addition, on February 21, 1996, the General Motors Retirement Plan for Salaried Employees sold 15,800 shares of Class E Common Stock at a price of $55.855 per share, and on February 23, 1996, the General Motors Hourly-Rate Employees Pension Plan sold 21,300 shares of Class E Common Stock at the same per share price. Since April 10, 1996, other transactions in Class E Common Stock may have been effected by certain General Motors pension and profit-sharing or similar plans in the ordinary course. 10 After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. General Motors Corporation /s/ John F. Smith, Jr. By: _________________________________ John F. Smith, Jr. Chairman, Chief Executive Officer, and President Dated: April 15, 1996 II-1 INDEX TO EXHIBITS
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION OF EXHIBIT PAGE ------- ---------------------- ------------ (a)(1) Not Applicable. (b)(1) Opinion of Merrill Lynch, dated March 31, 1996, which is attached as Appendix B-1 to the Solicitation Statement/Prospectus that forms a part of the Regis- tration Statement filed as Exhibit (d)(1) hereto. (b)(2) Opinion of Lehman Brothers, dated March 31, 1996, which is attached as Appendix B-2 to the Solicitation Statement/Prospectus that forms a part of the Regis- tration Statement filed as Exhibit (d)(1) hereto. (b)(3) Opinion of Morgan Stanley, dated March 31, 1996, which is attached as Appendix B-3 to the Solicitation Statement/Prospectus that forms a part of the Regis- tration Statement filed as Exhibit (d)(1) hereto. (b)(4) Presentation to the General Motors Board of Directors Regarding Split-Off of EDS, dated March 31, 1996, given by Merrill Lynch. (b)(5) Presentation to the General Motors Board of Directors concerning the Split-Off of EDS, dated March 31, 1996, given by Morgan Stanley and Lehman Brothers. (c)(1) Merger Agreement dated as of April , 1996 between General Motors and Mergeco, which is attached as Ap- pendix A to the Solicitation Statement/Prospectus that forms a part of the Registration Statement filed as Exhibit (d)(1) hereto. (d)(1) Registration Statement. (e)(1) Not Applicable. (f)(1) Not Applicable.
EX-99.(B)(4) 2 MERRILL LYNCH PRESENTATION TO THE BOARD Exhibit b(4) =========================================================================== Presentation to GENERAL MOTORS CORPORATION BOARD OF DIRECTORS Regarding the Split-Off of Electronic Data Systems March 31, 1996 Table of Contents =============================================================================== A. Overview of Transaction B. Changes to Terms of MSA C. Impact of Increased Price of EDS Stock Held by the GM Pension Plans D. Benefits Foregone as a Result of the Transaction ================================================================================ OVERVIEW OF TRANSACTION ================================================================================
Overview of Transaction - ---------------------------------------------------------------------------------------------------------------------------------- General Motors Corporate Structure Pre-Split-Off Post-Split-Off ----------- ---------------- ------------ ----------- ---------------- ------------ | Class E | | Class $1 2/3 | | Class H | | EDS | | Class $1 2/3 | | Class H | | Common | | Common | | Common | | Common | | Common | | Common | | Stock | | Stock | | Stock | | Stock | | Stock | | Stock | ----------- ---------------- ------------ ----------- ---------------- ------------ Dividend | | | Dividend | | | Dividend tied to | | | tied to | | | tied to EDS | | | Hughes | | | Hughes | | | | | | Earnings --------------------------------------- | --------------------------------------- Attribution | .100% 100%. 76% 24% . | | | 100%. . 76% 24% . | | . . . . | | | . . . | | . General Motors Corporation . | | | General Motors Corporation | | . . . | | | . . | --------------------------------------- | --------------------------------------- | | | | | | | | | | | | | | | | | | | | | | | | -------------- ------------- ------------ -------------- ------------- ------------ | Electronic | | General | | | | Electronic | | General | | | | Data | | Motors | | Hughes | | Data | | Motors | | Hughes | | Systems | | (Auto) | | | | Systems | | (Auto) | | | -------------- ------------- ------------ -------------- ------------- ------------ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Current MSA New MSA
Overview of Transaction (cont'd) - -------------------------------------------------------------------------------- Summary of Shareholder Considerations (Italicized Items Have Been Financially Quantified) - -------------------------------------------------------------------------------- General Motors Corporation - -------------------------------------------------------------------------------- Class $1 2/3 - -------------------------------------------------------------------------------- POSITIVES - -------------------------------------------------------------------------------- . Special Inter-Company Payment received by GM in connection with the Split-Off [Italicized in original] . Changes to terms of MSA [Italicized in original] . Class E Stock held by pension plans - reduced pension expense/funding as a result of increase in market price of shares [Italicized in original] - non-employer security/diversification . Removal of potential business conflict between EDS and GM/Hughes . Reduced goodwill amortization, if any - -------------------------------------------------------------------------------- NEGATIVES - -------------------------------------------------------------------------------- . Give up ability to control EDS . Give up potential credit and liquidation benefits from EDS ownership, if any . Give up purchase option at 20% premium to market . Separation allowance and transaction costs [Italicized in original] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class H - -------------------------------------------------------------------------------- POSITIVES - -------------------------------------------------------------------------------- . Changes to terms of MSA [Italicized in original] . Removal of potential business conflict between Hughes and EDS - -------------------------------------------------------------------------------- NEGATIVES - -------------------------------------------------------------------------------- Overview of Transaction (cont'd) - -------------------------------------------------------------------------------- Summary of Financial Implications of Transaction Benefits to General Motors
Valuation Impact to General Motors ---------------------------------------------- Factor $ in Millions % of Class E Market Value (a) ------ -------------- ----------------------------- Special Inter-Company Payment $500 1.9% MSA Modifications: Outsourcing During MSA Primary Term 0 to 270 0.0% to 1.0% Outsourcing After MSA Primary Term 280 to 740 1.0% to 2.7% Structural Cost Reductions 0 to 160 0.0% to 0.6% Terms of Payment 0 to 120 0.0% to 0.4% Separation Allowance and Transaction Costs (b) (70) to (50) (0.3)% to (0.2)% -------------- ----------------------------- Value from Negotiated Benefits $710 to $1,740 2.6% to 6.4% Increased Market Price of EDS Stock in the GM Pension Plans 260 to 550 1.0% to 2.0% -------------- ----------------------------- Total Value of Transaction Benefits $970 to $2,290 3.6% to 8.5% ============== ============================= - --------------------------- (a) Based on 483 million Class E shares outstanding at a closing stock price of $55.875 on March 26, 1996. (b) Includes the $50 million allowance to EDS under the Separation Agreement for various uncertain, contingent and disputed matters and the expenses of implementing the Transaction to be borne by General Motors.
Overview of Transaction (cont'd) - -------------------------------------------------------------------------------- Framework for Assessment of Transaction Benefits [GRAPH APPEARS HERE REFLECTING INFORMATION DESCRIBED IN TABULAR FORM BELOW]
Range of Value ------------------------ Low High --------- ---------- Value of Transaction Benefits Value from Negotiated Benefits 2.6% 6.5% Total Value of Transaction Benefits 3.6% 8.5% Value References Change of Control Transactions Recapitalizations 2.9% 11.6% Competitive Acquisitions 7.1% 23.1% Negotiated Acquisitions 1.2% 5.8%
- -------------------------------------------------------------------------------- Changes to Terms of MSA - -------------------------------------------------------------------------------- Changes to Terms of MSA =============================================================================== In assessing the value impact of the Split-Off on the MSA, a comparison must be made between the contract negotiated in the context of the Split-Off (the "New MSA") and that which would have existed in the absence of the Split-Off. Both GM and EDS agree that the MSA currently in existence (the "Current MSA") would have been modified even in the absence of the proposed Split-Off, although the extent to which it would have changed is not clear. In order to quantify the financial benefits to GM of the New MSA, each factor was considered separately to establish a range of possible changes in the absence of the Split-Off.
- ---------------------------|---------------------------------------------------------------------------------------- | Current MSA New MSA |--------------------------------------------|------------------------------------------- | | Term | Perpetual | 10 years ("Primary Term"), extendible upon | | mutual agreement | | Outsourcing (1) | None | Limited during Primary Term, unlimited | | thereafter | | Structural Cost Reductions | Existing cost-reduction targets | Generally higher targets with no sharing | with cost/profit sharing between | of deviations | GM and EDS on under-/over-achievement | | | Sector Agreements | Various expirations from 1995 to 1998 | One to three year extensions | | UPR Cost Reductions | Reviewed annually to reflect market | Pricing for certain items now determined | conditions | for next three to five years | | Terms of Payment | Zero days domestically; 35 days or more | Increased to a minimum of 35 days by 1999 | internationally | | | Scope | Substantially all data processing and | Expanded to include GM Plant Floor | telecommunications | - ---------------------------|--------------------------------------------|-------------------------------------------
- -------------------------------- (1) Throughout this presentation, the term "Outsourcing" means services formerly performed by EDS and sourced or proposed to be sourced to GM from third parties other than EDS. Impact of Outsourcing During MSA Primary Term - ------------------------------------------------------------------------------ The ability to do limited outsourcing (i.e., outsourcing away from EDS) under the New MSA to be entered into in connection with the Split-Off is intended to provide market testing of the price competitiveness of EDS services. The ability to outsource would replace the existing procedure whereby GM and EDS jointly pursue benchmarking and the Capital Stock Committee audits costs and margins realized by EDS on GM contracts as compared to other EDS commercial contracts. Outsourcing from third parties may result in direct financial benefits to GM whenever a third party provides GM with lower priced services than EDS, either because it is a more efficient supplier of services or because it is willing to work for lower profit margins. In addition, it is likely that any contract exposed to the competitive procurement process will end up being more attractively priced for GM, merely because the competitive environment will force EDS to pay special attention to its cost structure. As a result, creative new ways of performing services or redefinition of the required services to be performed may be found that reduce the cost to EDS of providing services under the contract, allowing a price reduction without necessarily affecting EDS' margins negatively. Modeling Our valuation of the financial benefits to GM derived from outsourcing has two components: . The value of the financial benefits derived from contracts outsourced ("Outsourced Contracts") is the after-tax present value of price reductions applied to the cumulative amount of spending under Outsourced Contracts during the 10-year New MSA term. . The value of the financial benefits derived from contracts exposed to outsourcing but retained by EDS ("Retained Contracts") is the after-tax present value of price reductions applied to the cumulative amount of New MSA IT spending under Retained Contracts during the Primary Term. The value to GM of the financial benefits derived from the outsourcing process is the sum of the two value sources discussed above. A portion of outsourcing benefits is allocated to Class H shareholders based on the fraction of MSA services provided to Hughes (Delco). Impact of Outsourcing During MSA Primary Term (cont'd) - ------------------------------------------------------------------------------- Key Assumptions* . Terms of the Proposed New MSA incorporated in the March 19, ----------------------------------------------------------- 1996 term sheet --------------- . GM expectations --------------- . Growth of GM IT spending: - 5% per year in volume for total North America, others as specified, resulting in an average nominal growth (with price reductions) of 2% per year. . Plant Floor is in-scope. . EDS win rate of 75% for contracts exposed to outsourcing. . All outsourced contracts expire at the end of 2005. . Financial value of outsourcing to GM ------------------------------------ . Price reductions achieved on Outsourced Contracts of 12% to 20%. . Price reductions achieved on Retained Contracts of 6% to 10%. . GM tax rate of 35%. . GM after-tax cost of capital of 11%. - ------------------- * Except if otherwise noted, based on discussions with GM management. Impact of Outsourcing During MSA Primary Term (cont'd) - ------------------------------------------------------------------------------- After-Tax Value Impact to GM To the extent that, absent the Split-Off, the MSA would have continued to cover all IT services and, accordingly, GM had no opportunity to expose any services to competitive bidding, the after-tax value impact to GM of the outsourcing provisions contained in the New MSA would have been:
Services Outsourced Services Under Retained Contracts Total Services Exposed - ------------------------------ --------------------------------- ------------------------------- Price Reduction Present Value Price Reduction Present Value Price Reduction Present Value - --------------- ------------- --------------- ------------- --------------- ------------- 12% $66 6% $99 12%/6% $165 14% 77 7% 115 14%/7% 192 16% 88 8% 132 16%/8% 220 18% 99 9% 148 18%/9% 247 20% 110 10% 164 20%/10% 274
The portion of the value to GM of services exposed during the Primary Term which is allocated to the Class H shareholders is between $1 million and $2 million. To the extent that the Current MSA would have been modified to incorporate limited outsourcing during the next ten years even without the Split-Off, the relative value impact of the New MSA would have been less. If, in the extreme, the outsourcing options in the absence of the Split-Off were the same as under the New MSA, there would be no outsourcing benefit to GM as a result of the Split-Off. Impact of Outsourcing After MSA Primary Term - ------------------------------------------------------------------------------- The financial benefits to GM of outsourcing to third parties are applicable to both the Primary Term of the New MSA and the perpetual period following the Primary Term, although such benefits are probably more significant with respect to individual contracts during the Primary Term than when contracts generally can be outsourced after the Primary Term. The value impact to GM of both the outsourcing and exposure processes are determined relative to the degree of outsourcing and exposure to outsourcing which would have existed in the absence of the Split-Off. The Current MSA does not contemplate GM purchasing IT services from any source other than EDS but may have been modified to have included limited outsourcing, similar to the New MSA, during the Primary and post-Primary Terms. Modeling Our valuation of the financial benefits to GM derived from outsourcing has two components: . The value of the financial benefits derived from Outsourced Contracts is the present value of the after-tax savings from the price reductions on such contracts. In order to compute this savings, the amount of outsourcing that would occur under the New MSA was compared to both no outsourcing and limited outsourcing in the absence of the Split-Off. . The value of the financial benefits derived from Retained Contracts is the present value of the after tax savings from the price reductions on such contracts. In order to compute this savings, the price reductions applied to the total amount of GM IT spending retained by EDS under the New MSA was compared to both no outsourcing and limited exposure to outsourcing in the absence of the Split-Off. The total value to GM of the financial benefits derived from the outsourcing process is the sum of the two value sources discussed above. The portion of outsourcing benefits attributable to Class H shareholders is allocated based on the fraction of MSA services provided to Hughes (Delco). Impact of Outsourcing After MSA Primary Term (cont'd) - ------------------------------------------------------------------------------- Key Assumptions* . GM expectations --------------- . Growth of GM IT spending after 2005 is 2% per year. . If the Split-Off occurs, the degree of outsourcing increases linearly from 6.8% in 2005 to a steady state value in the range between 20% and 40% in years after 2014. All GM IT spending is exposed to outsourcing after 2005. . In the absence of the Split-Off, two extremes were considered. - no outsourcing, and - limited outsourcing, under which the degree of outsourcing remains constant at 6.8% after 2005. 27.2% (consistent with an EDS 75% win rate) of GM's IT spending is exposed to outsourcing after 2005. . Financial value of outsourcing to GM ------------------------------------ . Price reductions achieved on Outsourced Contracts of 6% to 10%. . Price reductions achieved on Retained Contracts of 3% to 5%. . GM tax rate of 35%. . GM after-tax cost of capital of 11%. - ------------------- * Except if otherwise noted, based on discussions with GM management. Impact of Outsourcing After MSA Primary Term (cont'd) ================================================================================ (dollars in millions) After-Tax Present Value Impact to GM of a Modification from No Outsourcing to the New MSA
- ------------------------- Years 10 to 20 - ------------------------- Services Outsourced Services Under Retained Contracts Total Services Exposed - ------------------------------------- -------------------------------------- ---------------------------------------- Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing Price ------------------------ Price ------------------------- Price --------------------------- Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40% - --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------ 6% $52 $ 71 $ 90 3.0% $166 $157 $148 6/3.0% $218 $228 $238 7% 61 83 105 3.5% 194 184 173 7/3.5% 255 267 278 8% 69 95 120 4.0% 222 210 198 8/4.0% 291 305 318 9% 78 106 135 4.5% 250 236 223 9/4.5% 328 342 358 10% 87 118 150 5.0% 277 262 247 10/5.0% 364 380 397
- ------------------------- After Year 20 - ------------------------- Services Outsourced Services Under Retained Contracts Total Services Exposed - ------------------------------------- -------------------------------------- ---------------------------------------- Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing Price ------------------------ Price ------------------------- Price --------------------------- Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40% - --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------ 6% $59 $ 89 $119 3.0% $119 $104 $ 89 6/3.0% $178 $193 $208 7% 69 104 139 3.5% 139 121 104 7/3.5% 208 225 243 8% 79 119 159 4.0% 159 139 119 8/4.0% 238 258 277 9% 89 134 178 4.5% 178 156 134 9/4.5% 268 290 312 10% 99 149 198 5.0% 198 173 149 10/5.0% 297 322 347
- ------------------------- Total - ------------------------- ------------------------------------------- Services Outsourced Services Under Retained Contracts Total Services Exposed - ------------------------------------- -------------------------------------- ---------------------------------------- Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing Price ------------------------ Price ------------------------- Price --------------------------- Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40% - --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------ 6% $111 $160 $209 3.0% $285 $261 $237 6/3.0% $396 $421 $446 7% 130 187 244 3.5% 333 305 277 7/3.5% 463 492 521 8% 148 214 279 4.0% 381 349 317 8/4.0% 528 563 595 9% 167 240 313 4.5% 428 392 357 9/4.5% 596 632 670 10% 186 267 348 5.0% 475 435 396 10/5.0% 661 702 744 -------------------------------------------
The portion of the value to GM of services exposed after the Primary Term which is allocated to the Class H shareholders is between $3 million and $5 million. Impact of Outsourcing After MSA Primary Term (cont'd) - ------------------------------------------------------------------------------- (dollars in millions) After-Tax Present Value Impact to GM of a Modification from Limited Outsourcing to the New MSA
- ------------------------- Years 10 to 20 - ------------------------- Services Outsourced Services Under Retained Contracts Total Services Exposed - ------------------------------------- -------------------------------------- ---------------------------------------- Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing Price ------------------------ Price ------------------------ Price ------------------------ Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40% - --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------ 6% $ 25 $ 44 $ 63 3.0% $126 $117 $108 6/3.0% $151 $161 $171 7% 30 52 74 3.5% 148 138 127 7/3.5% 178 190 201 8% 33 59 84 4.0% 168 156 144 8/4.0% 201 215 228 9% 38 66 95 4.5% 190 176 163 9/4.5% 228 242 258 10% 42 73 105 5.0% 210 195 180 10/5.0% 252 268 285
- ------------------------- After Year 20 - ------------------------- Services Outsourced Services Under Retained Contracts Total Services Exposed - ------------------------------------- -------------------------------------- ---------------------------------------- Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing Price ------------------------ Price ------------------------ Price ------------------------ Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40% - --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------ 6% $ 39 $ 69 $ 99 3.0% $ 89 $ 74 $ 59 6/3.0% $128 $143 $158 7% 45 80 115 3.5% 103 85 68 7/3.5% 148 165 183 8% 52 92 131 4.0% 118 99 79 8/4.0% 170 191 210 9% 59 104 148 4.5% 133 111 89 9/4.5% 192 215 237 10% 65 114 164 5.0% 147 122 97 10/5.0% 212 236 261
- ------------------------- Total - ------------------------- ---------------------------------------- Services Outsourced Services Under Retained Contracts Total Services Exposed - ------------------------------------- -------------------------------------- ---------------------------------------- Steady State Outsourcing Steady State Outsourcing Steady State Outsourcing Price ------------------------ Price ------------------------ Price ------------------------ Reduction 20% 30% 40% Reduction 20% 30% 40% Reduction 20% 30% 40% - --------- ------ ------- ------- --------- ------- ------- ------- --------- ------ ------- ------ 6% $ 64 $113 $162 3.0% $215 $191 $167 6/3.0% $279 $304 $329 7% 75 132 189 3.5% 251 223 195 7/3.5% 326 355 384 8% 85 151 215 4.0% 286 255 223 8/4.0% 371 406 438 9% 97 170 243 4.5% 323 287 252 9/4.5% 420 457 495 10% 107 187 269 5.0% 357 317 277 10/5.0% 464 504 546 ----------------------------------------
The portion of the value to GM of services exposed after the Primary Term which is allocated to the Class H shareholders is between $2 million and $4 million. Impact of Structural Cost Reductions - -------------------------------------------------------------------------------- The Structural Cost Reductions ("SCRs") contemplated by the New MSA replace an existing series of cost reduction arrangements in existing sector agreements referred to as Performance Reduction Requirements ("PRRs"). The current PRR arrangements include cost/profit sharing between GM and EDS to the extent that actual cost savings fall short of or exceed the contemplated cost reductions. The cost reduction targets under the SCRs are greater than under the existing PRRs and, to the extent that the SCRs reduce GM's costs of IT services beyond that which would have been incurred without the Split-Off, GM benefits. The benefits can be of two types: lesser profit sharing with EDS and lower cost for services. The amounts of these two benefits depend on the conditions that would have existed in the absence of the Split-Off. The range of future conditions without the Split-Off that have been considered is: . Cost Reductions Achieved. Historically, the cost reductions in the sector agreements have been exceeded, producing benefits to both GM and EDS under the profit-sharing arrangements. A full range of cost reductions without the Split-Off has been considered from (i) no savings beyond PRR targets to (ii) full savings as contemplated in the SCRs. . Contractual. The existing PRRs may have been modified to include some or all of the features of the SCRs in the New MSA including changes to the cost/profit sharing. Therefore, the state of the contractual agreement without the Split-Off is considered over a spectrum between (i) the existing PRRs and (ii) the New MSA SCRs. GM expects to reinvest a substantial portion of the SCR concessions into additional IT service procurement. Such reinvestments, if any, would result in GM getting equivalent value in additional IT services from EDS and are therefore not considered to represent value gains or losses to GM. Modeling The present value of the after-tax savings to GM of the differential between (i) the SCRs mandated in the New MSA and (ii) cost savings mandated in PRRs without the Split-Off is calculated. Since part of this savings may have been retained by EDS under existing profit sharing, a range of cost savings in the absence of the Split-Off is considered. Impact of Structural Cost Reductions (cont'd) - -------------------------------------------------------------------------------- Key Assumptions* . Sector agreements are assumed, even in the absence of the Split-Off, to be renegotiated as they expire under the same terms as are included in the SCRs of the New MSA. . The PRRs which are included in the existing agreements and the SCRs which would be included in the New MSA are as follows: . Under the PRRs, contract sharing with EDS of 33-1/3% on NAO, 100% on Delphi, 50% on GMAC and 33-1/3% on other categories. . Delco is not included in the analyses because the SCRs are the same as those under existing agreements.
Cost Reductions Included SCRs Under Cumulative in Existing Agreements New MSA Differential Differential ------------------------ ----------------------- ---------------- --------------- NAO & NAO & Sharing Sharing Other Delphi GMAC Other Delphi GMAC Total to EDS Total to EDS ----- ------ ---- ----- ------ ---- ----- ------- ----- ------- 1996 $34m $7m $3m $76m $15m $9m $56m $25m $ 56m $ 25m 1997 34m 7m 3m 76m 15m 9m 56m 25m 112m 50m 1998 54m 7m 3m 76m 15m 9m 36m 18m 148m 68m ----- ------- Present Value $250m $113m After-Tax PV $163m $ 73m
- ---------------- * Except if otherwie noted, based on discussions with GM management. Impact of Structural Cost Reductions (cont'd) - -------------------------------------------------------------------------------- After-Tax Value Impact to GM To the extent that, absent the Split-Off, the MSA would have continued to operate under the existing PRRs until the expiration of the sector agreements, the after-tax value impact to GM of the SCRs provisions contained in the New MSA will be: Degree of Savings That Would Have Been Achieved Under Existing Sector Agreements: ----------------------------------------------- None Above Existing To the Same Extent Sector Agreement Targets as Under the New MSA ------------------------ -------------------- Value to GM $163m $73m To the extent that the MSA would have been modified to incorporate the SCRs contemplated in the New MSA even without the Split-Off, the relative value impact of the New MSA will be less. If, in the extreme, the MSA treatment of PRRs/SCRs in the absence of the Split-Off were the same as under the New MSA, there would be no value impact as a result of the Split-Off. UPR Cost Reductions - -------------------------------------------------------------------------------- . The prices under the existing UPR sector agreements are currently reviewed annually to reflect prevailing market conditions including annual price adjustments to reflect market prices. . The New MSA incorporates price-reduction commitments over the next five years for Information Processing Activity Charges (IPACS) and the next three years for U.S. Communications. . Prospectively, the change from spot pricing to longer-term pricing may be either a positive or a negative for GM; the change was therefore not quantified. Impact of Changes in Terms of Payment - -------------------------------------------------------------------------------- The changes in the payment terms under the New MSA may result in a transfer of value between EDS and GM, the degree of which depends on what would happen to such terms of payment were there to be no Split-Off of EDS. Modeling . An increase in days payable allows GM to retain cash that otherwise would be paid to EDS. Increases in accounts payable (as a result of increased IT spending) at a constant number of days payable similarly allows GM to retain additional cash. Conversely, a decline in days payable or revenues, relative to that which would occur in the absence of the Split-Off, will reduce the retained cash. . The benefit of the positive cash flows from increased days receivable and growing revenue, as well as a reversal of those cash flows if the terms of payment are assumed to have conformed to the New MSA in the future even in the absence of the Split-Off, can be valued by using standard present value techniques at the assumed rate of displaced GM funding. The portion of the benefits of the changed terms of payment allocated to Class H shareholders were determined based on the specific changes to Hughes (Delco) payables and projected Hughes (Delco) revenues. Key Assumptions* . Under the New MSA, payable terms will be lengthened on major sector agreements (accounting for 71% of revenues under the New MSA), relative to those under the Current MSA, resulting in the averages specified below at the beginning of the indicated years. 1996 No change 1997 15 additional days 1998 19.3 additional days 1999 to 2005 35 additional days - ------------------------ * Except if otherwise noted, based on discussions with GM management. Impact of Changes in Terms of Payment (cont'd) - -------------------------------------------------------------------------------- Key Assumptions* . MSA revenues are modeled as under the "Impact of (cont'd) Outsourcing" analysis. . The terms of payment in the absence of the Split-Off are assumed to eventually conform to those in the New MSA. The range of delay until conformity that is considered ranges from immediately to the end of the Primary Term of the New MSA (10 years). . A long-term increase in GM payables will reduce the future need for GM to access the debt and possibly the equity markets, saving GM after-tax funding at a cost of 4% to 12%. After-Tax Value Impact to GM To the extent that, absent the Split-Off, the MSA would have continued to operate under the existing terms of payment until ten years from now, the after-tax value impact to GM of the terms of payment provisions contained in the New MSA will be: Displaced After-Tax Funding Rate ------------------------------------------------------------ 4% 6% 8% 10% 12% ----------- ----------- ----------- ------------ ----------- After-Tax Value ($ millions) $64 $86 $102 $114 $123 The portion of the value to GM of extended payment terms which is allocated to Class H shareholders is about $1 million. To the extent that the Current MSA would have been modified to incorporate the terms of payment anticipated in the New MSA during the Primary Term, even without the Split-Off, the relative value impact of the New MSA will be less. If, in the extreme, the Current MSA treatment of terms of payment were to immediately be the same as under the New MSA, there would be no value impact as a result of the Split-Off. - --------------- * Except if otherwise noted, based on discussions with GM management. - -------------------------------------------------------------------------------- Impact of Increased Price of EDS Stock Held by the GM Pension Plans - -------------------------------------------------------------------------------- Impact of Increased Price of EDS Stock Held by the GM Pension Plans - -------------------------------------------------------------------------------- Price/Earnings-to-Future Growth Framework Because GM's pension plans (the "Plans") own approximately 32% of the Class E Common Stock and because any relative increase in the market price of this security will cause a decrease in GM's future pension expense and unfunded pension liability, an increase in the market price of the EDS/Class E Common Stock resulting from the Split-Off provides financial benefits to GM. Much of the benefit to EDS from the Split-Off is expected to accrue from EDS' increased ability to pursue new customer opportunities (customers who were otherwise conflicted by GM's ownership of EDS and Hughes) and strategic opportunities. Equity analysts have estimated that EDS' long-term growth rate will increase by as many as 4 percentage points as a result of these opportunities. EDS' current A1/A credit rating is expected to remain at this rating taking into account the pro forma impact of the Split-Off. Modeling . The value of Class E Common Stock or EDS Common Stock in the equity market can be modeled using the Price/Earnings-to-Growth Rate framework summarized below. P/E Ratio Price = ------------- X (Future Growth) X (Earnings) Future Growth . The above relationship is applied to two principal scenarios: one in which the Split-Off occurs and one in which it does not. The difference between the stock prices under the two principal scenarios is applied to the Plans' holdings to measure potential financial benefit to GM on an after-tax basis. A wide range of post-Split-Off possibilities is considered including a range of impacts from the MSA changes. Impact of Increased Price of EDS Stock held by the GM Pension Plans (cont'd) - -------------------------------------------------------------------------------- Price/Earnings to Future Growth Framework Key Assumptions* . Absent the Split-Off, EDS would earn $2.27 in 1996 and earnings would grow by 15% per year for the following five years(a). Margins would be constant across GM and non-GM revenues and across all future years. Non-GM revenues in 1996 would be $9,871 million(b). GM IT spending is modeled as under the "Impact of Outsourcing" analysis. . The proposed Split-Off is assumed to have the following impact on the three model components of the valuation model: . Ratio of Price/Earnings-to-Future Growth: From no change to an increase of 2%, resulting from the expected inclusion of EDS Common Stock into the S&P 500 Index. Inclusion of stock into the S&P 500 Index typically results in a 1 to 3% increase. . Earnings Growth: - reduction in the growth of EDS' GM operating income as a result of losses to outsourcing, as modeled under the "Impact of Outsourcing" analyses. - increase in the growth of EDS' non-GM operating income resulting from EDS' ability to pursue additional business and strategic opportunities not currently available (additional growth range in non- GM business of 0 to 4 percentage points). - Structural Cost Reductions are expected to be neutral to EDS' operating income growth because the cost reductions would have been incorporated by 1999, even in the absence of the Split-Off. - the increased probability (from 70% to 100%) of EDS being awarded the plant floor service contracts as a result of the incorporation of plant floor services as in scope under the New MSA. - -------------------- * Except if otherwise noted, based on discussions with GM management. (a) Based on analyst expectations as compiled by I/B/E/S, February 1996. (b) Merrill Lynch Research, November 17, 1995. Impact of Increased Price of EDS Stock Held by the GM Pension Plans (cont'd) - -------------------------------------------------------------------------------- Price/Earnings to Future Growth Framework Key Assumptions* . Earnings (using a 36% marginal EDS tax rate): (cont'd) - reduction in earnings as a result of revenue lost to outsourcing, as modeled under the "Impact of Outsourcing" analyses (assuming a constant pretax margin of 14%). - increase in EDS' non-GM earnings resulting from EDS' ability to pursue additional business and strategic opportunities (assuming a constant pretax margin of 14%) (additional growth range in non-GM business of 0 to 4 percentage points). - increase in interest expense (6% pretax) as a result of the $500 million Special Inter-Company Payment and up to 35 additional days of receivables from GM ($242 million). This additional borrowing is not expected to affect EDS' overall cost of debt. - the increased probability (from 70% to 100%) of EDS being awarded the plant floor service contracts as a result of the incorporation of plant floor services as in-scope under the New MSA (assuming pre-tax margin of 14%). - lost profit sharing from cost reductions in excess of those contemplated under existing sector agreements (from $0 to $25 million as discussed under "Impact of Structural Cost Reductions"). - the possible non-recurring charge being evaluated by EDS has not been included in this analysis because its incurrence will be independent of the Split-Off. . Increases in EDS' stock price would benefit GM through the 156 million shares held by the Hourly and Salaried Pension Plans. Such increases would reduce the need for future funding by GM. Reduction in GM's future pension funding reduces GM's future tax benefits at a marginal rate of 35%. GM's after-tax cost of capital is equal to the investment return of the GM Plans. - ---------------- * Except if otherwise noted, based on discussions with GM management. Impact of Increased Price of EDS Stock Held by the GM Pension Plans (cont'd) ================================================================================ After-Tax Value Impacts Note: Ranges indicate a range of (P/E)/Growth between no increase and a 2% expansion as a result of an S&P 500 addition.
Increase in Non-GM Revenue Growth as a Result of the Split-Off ------------------------------------------------------------------------------------------------- ---------------------------------- 0% 1% 2% 3% 4% ----------------- --------------- --------------- ----------------- ----------------- Least MSA Impact on GM (a) --------------- Increase in EDS Stock Price ($0.98) to $0.12 $2.51 to $3.68 $6.06 to $7.30 $ 9.68 to $10.99 $13.36 to $14.75 Increase in Value of Shares in Plans ($153)m to $19m $392m to $574m $946m to $1,139m $1,510m to $1,715m $2,085m to $2,301m After-Tax Pension Savings to GM ($99)m to $12m $255m to $373m $615m to $740m $ 982m to $1,115m $1,355m to $1,495m --------------- Greatest MSA Impact on GM (b) -------------- Increase in EDS Stock Price ($2.71) to ($1.64) $0.71 to $1.85 $4.20 to $5.40 $7.75 to $9.02 $11.36 to $12.70 Increase in Value of Shares in Plans ($422)m to ($256)m $112m to $288m $655m to $842m $1,209m to $1,407m $1,772m to $1,982m After-Tax Pension Savings to GM ($274)m to ($166)m $72m to $187m $426m to $548m $786m to $915m $1,152m to $1,288m -------------- -----------------------------------
- ------------------------------ (a) Based on assumptions consistent with the least amount of direct MSA benefits to GM, as summarized under Summary of Financial Implications of Transaction Benefits to General Motors. (b) Based on assumptions consistent with the greatest amount of direct MSA benefits to GM, as summarized under Summary of Financial Implications of Transaction Benefits to General Motors. Impact of Increased Price of EDS Stock Held by the GM Pension Plans (cont'd) - -------------------------------------------------------------------------------- Empirical Evidence The results from the Price/Earnings-to-Future Growth Framework can be compared to Class E price changes observed to date. Approach . A portion of the financial benefits to EDS from the Split-Off can be measured by observing the price response of Class E Common Stock to announcements regarding the proposed transaction. . The announcement that the GM Board had authorized the pursuit of the Split-Off was followed by a Class E Common Stock price increase of about $2.75 relative to comparable companies. This response is particularly strong in light of the pre-existing expectation that the Split-Off was a possibility. . The announcement that GM had received a favorable ruling from the Internal Revenue Service was followed by a Class E Common Stock price increase of about $1.50 relative to comparable companies. . Since these two announcements only contained partial incremental information about the probability of the Split- Off, the sum of the values mentioned above likely reflects less than all of the financial benefits from the Split-Off to Class E holders perceived by the market. . Such a large increase in value of new opportunities is consistent with an estimate prepared by EDS indicating synergies with values in excess of $4.8 billion available from a contemplated strategic combination. Such a strategic combination did not, however, materialize. Market Price Impact
Increase in Class E Price --------------------------------------------------- $3 $4 $5 $6 $7 ------- ------- ------- ------- ------- Increase in Market Price of Class E $1,449m $1,932m $2,415m $2,898m $3,381m After-Tax Pension Savings to GM $304m $406m $507m $608m $710m
Increased Price of Class E - -------------------------------------------------------------------------------- Daily Closing Price Performance From 7/25/95 to 8/22/95 [GRAPH APPEARS HERE REFLECTING INFORMATION DESCRIBED IN TABULAR FORM BELOW]
Data Services Index (a) Date GME Stock Price (Relative to GME) -------- --------------- ----------------------- 7/25/95 $43.00 $42.98 7/26/95 43.00 43.54 7/27/95 44.00 43.92 7/28/95 43.88 44.02 7/31/95 44.00 44.14 8/01/95 43.13 43.76 8/02/95 43.13 43.62 8/03/95 43.13 43.65 8/04/95 43.63 43.63 8/07/95 46.13 43.44 8/08/95 46.50 43.04 8/09/95 45.88 43.29 8/10/95 46.38 43.28 8/11/95 46.25 43.37 8/14/95 45.88 43.34 8/15/95 45.63 43.06 8/16/95 46.00 43.08 8/17/95 46.13 43.38 8/18/95 46.00 43.39 8/21/95 46.00 43.37 8/22/95 46.13 43.33
- ------------ (a) Data Services Index: AUD, CSC, FDC, FISV, PMS, SMED, SNDT. The composite is indexed to $43.63 on 8/4/95. Increased Price of Class E - -------------------------------------------------------------------------------- Daily Closing Price Performance From 12/15/95 to 1/12/96 [GRAPH APPEARS HERE REFLECTING INFORMATION DESCRIBED IN TABULAR FORM BELOW]
Data Services Index (a) Date GME Stock Price (Relative to GME) -------- --------------- ----------------------- 12/15/95 $50.75 $51.67 12/18/95 49.50 50.14 12/19/95 50.00 50.01 12/20/95 50.13 50.25 12/21/95 50.63 51.83 12/22/95 50.25 51.77 12/26/95 51.25 52.14 12/27/95 52.00 51.78 12/28/95 52.00 52.52 12/29/95 52.00 52.00 01/02/96 53.25 51.64 01/03/96 54.50 51.38 01/04/96 54.00 51.18 01/05/96 53.25 50.91 01/08/96 53.50 51.17 01/09/96 51.75 50.33 01/10/96 51.25 49.88 01/11/96 52.63 51.05 01/12/96 51.63 50.28
- ------------ (a) Data Services Index: AUD, CSC, FDC, FISV, PMS, SMED, SNDT. The composite is indexed to $52.00 on 12/29/95. - -------------------------------------------------------------------------------- Benefits Foregone as a Result of the Transaction - -------------------------------------------------------------------------------- Benefits Foregone as a Result of the Transaction - -------------------------------------------------------------------------------- The conversion of Class E Common Stock to EDS Common Stock in the Merger will result in GM foregoing certain financial benefits as a result of: (1) the transfer of control of EDS to the Class E holders from GM, (2) relinquishment by GM of potential credit and liquidation benefits from EDS ownership, and (3) relinquishment by GM of the right to recapitalize the Class E Common Stock. To analyze the value of the transfer of control, Merrill Lynch reviewed selected recapitalization and acquisition transactions in which control shareholders obtained or planned to obtain a premium as compared to non-controlling or public shareholders. GM has informed us that it has no business plan either to realize the liquidation value of EDS or to capture and retain any dividends paid by EDS to GM for distribution to the Class E shareholders. The credit and liquidation benefits would most likely only be pursued in the remote event of the near insolvency of GM, when no other sources of capital are available to GM. Because of the low probability of this event, the financial value of the potential credit and liquidation benefits has not been quantified. The use of GM's right to recapitalize the Class E Common Stock with Class $1-2/3 Common Stock, under current market conditions, is of little practical importance because of the very significant dilution to the Class $1-2/3 shareholders its use would cause; thus, the right has little financial value.
Benefits Foregone as a Result of the Transaction (cont'd) ================================================================================================================================= Analysis of Additional Premiums Paid for Control Stakes in Selected Transactions (a) (dollars in millions, except per share) Consideration Per Share ------------------------ Announcement High Low % Date Acquiror Target Vote Vote Premium - ------------------------ -------------------------- --------------------------- ------- ------ ------- Recapitalizations 09/30/93 Fischer & Porter Recapitalization $11.04 $8.63 28.0% 12/22/88 Bergen Brunswig Corp. Recapitalization 216.77 22.75 852.9% ----------------------------------------------------- Mean 440.4% ----------------------------------------------------- Competitive Acquisitions 11/15/88 The Merv Griffin Company Resorts International Inc. $135.00 $36.00 275.0% 04/21/86 CSX Sealand 33.44 28.00 19.4% ----------------------------------------------------- Mean 147.2% ----------------------------------------------------- Negotiated Acquisitions 11/27/95(b) Silver King Communications Home Shopping Network, Inc. $9.35 $8.50 10.0% 10/11/93(d) Bell Atlantic Tele-Communications, Inc. 33.00 30.00 10.0% 11/04/92(d) AT&T McCaw Cellular 53.44 42.00 27.2% 09/10/90 Premark International Inc. Sikes Corporation 26.78 16.40 63.3% 09/03/84 Trumps Pay 'n Save 25.00 23.50 6.4% ----------------------------------------------------- Maximum 63.3% Mean 23.4% Median 10.0% Minimum 6.4% -----------------------------------------------------
Voting Interest Economic Interest --------------- ----------------- Announcement High Low High Low Date Acquiror Target Vote Vote Vote Vote - ------------------------ -------------------------- --------------------------- ------- ------ ------- ------- Recapitalizations 09/30/93 Fischer & Porter Recapitalization 70.8% 29.2% 10.8% 89.2% 12/22/88 Bergen Brunswig Corp. Recapitalization 51.0% 49.0% 1.6% 98.4% --------------------------------------------------------------- Mean --------------------------------------------------------------- Competitive Acquisitions 11/15/88 The Merv Griffin Company Resorts International Inc. 57.0% 43.0% 11.7% 88.3% 04/21/86 CSX Sealand 39.2% 60.8% 39.2% 60.8% --------------------------------------------------------------- Mean --------------------------------------------------------------- Negotiated Acquisitions 11/27/95(b) Silver King Communications Home Shopping Network, Inc. 73.9% 26.1% 22.1% 77.9% 10/11/93(d) Bell Atlantic Tele-Communications, Inc. 62.3% 37.7% 14.2% 85.8% 11/04/92(d) AT&T McCaw Cellular 74.6% 25.4% 22.7% 77.3% 09/10/90 Premark International Inc. Sikes Corporation 51.0% 49.0% 7.5% 92.5% 09/03/84 Trumps Pay 'n Save 18.4% 81.6% 18.4% 81.6% --------------------------------------------------------------- Maximum Mean Median Minimum ---------------------------------------------------------------
Aggregate Premium Paid to High Vote Stake ------------------------ Announcement As a % of Total Dollars Date Acquiror Target Consideration (in mm) - ------------------------ -------------------------- --------------------------- --------------- ------- Recapitalizations 09/30/93 Fischer & Porter Recapitalization 2.9% $1.4 12/22/88 Bergen Brunswig Corp. Recapitalization 11.6% 65.4 ----------------------------------------------------- Mean 7.3% ----------------------------------------------------- Competitive Acquisitions 11/15/88 The Merv Griffin Company Resorts International Inc. 23.1% $70.6 04/21/86 CSX Sealand 7.1% 49.9 ----------------------------------------------------- Mean 15.1% ----------------------------------------------------- Negotiated Acquisitions 11/27/95(b) Silver King Communications Home Shopping Network, Inc. 2.2%(c) $17.0 10/11/93(d) Bell Atlantic Tele-Communications, Inc. 1.4% 263.4 11/04/92(d) AT&T McCaw Cellular 5.8% 700.0 09/10/90 Premark International Inc. Sikes Corporation 4.5% 8.9 09/03/84 Trumps Pay 'n Save 1.2% 4.2 ----------------------------------------------------- Maximum 5.8% Mean 3.0% Median 2.2% Minimum 1.2% -----------------------------------------------------
- ---------------------------- (a) This analysis takes into account solely the purchase price paid for the equity interest in the target company and does not take into account any value or detriment inherent in any strategic arrangements or other agreements that may have been entered into in connection with the transactions. (b) Stock price of Silver King Communications on 11/22/95 (before the release of any news reports on the pending acquisition) was used in calculating consideration per share. (c) Calculated on the basis of implied value for the whole company. If calculated based on actual consideration paid only, the aggregate premium is 5.1%. (d) Not consummated. EX-99.(B)(5) 3 MORGAN STANLEY AND LEHMAN BROS. PRESENTATION Exhibit b(5) GENERAL MOTORS CORPORATION ============================================================================== ============================================================================== PRESENTATION TO THE BOARD OF DIRECTORS CONCERNING THE SPLIT-OFF OF EDS MARCH 31, 1996 MORGAN STANLEY & CO. Incorporated LEHMAN BROTHERS GENERAL MOTORS CORPORATION ============================================================================== Table of Contents SECTION I INTRODUCTION SECTION II BENEFITS/DETRIMENTS ANALYSIS SECTION III EPS AND P/E MULTIPLES ANALYSES SECTION IV DCF ANALYSES SECTION V OPINIONS OF FINANCIAL ADVISORS (2) ============================================================================== SECTION I ============================================================================== (3) GENERAL MOTORS CORPORATION ============================================================================== Summary of Transaction . Merger to accomplish a tax-free split-off of Electronic Data Systems Holding Corporation - Each share of Class E Common Stock to be converted into one share of EDS Common Stock - Shareholder Rights Plan ("pill") adopted . Special Inter-Company Payment of $500MM . New Master Services Agreement for an initial term of 10 years . Separation Agreement and certain related agreements to address business, benefits, insurance, legal, tax and regulatory issues resulting from the Split-Off (4) GENERAL MOTORS CORPORATION ============================================================================== Financial Advisors' Role and Fairness Opinion . Morgan Stanley and Lehman Brothers were retained by the Board of General Motors to act as financial advisors to EDS Team in connection with the Split-Off Transactions - Provided financial advice to EDS Team - Providing fairness opinion to General Motors Board . Fairness Opinion - Based on and subject to the assumptions, limitations and other matters described in the written opinion, the financial effect of the Split-Off Transaction taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock (5) GENERAL MOTORS CORPORATION ============================================================================== Information Considered by Financial Advisors . Reviewed information and documents (both public and non-public), including - Historical and projected financial information of EDS - Selected trading data for Class E Common Stock and the common stocks of selected comparable companies - Certain documents relating to the Split-Off: the Rights Plan Agreement; the Registration Rights Agreement; the Certificate of Incorporation of General Motors relating to the Class E Stock and of EDS relating to the EDS Common Stock; draft Solicitation Statement; MSA Term Sheet; and the IRS Private Letter Ruling . Held discussions with management of EDS (and of General Motors, on selected topics) - EDS operations, financial condition, and plans - Financial projections prepared by EDS management - Benefits and detriments of the Split-Off Transactions to Class E Stockholders - Expected financial impact of the Split-Off . Expected New Market Opportunities which would become available to EDS after the Split-Off . Potential Strategic Opportunities which would become available to EDS after Split-Off - Certain terms of the MSA and the Existing MSA/(1)/, the Separation Agreement, the GM-PBGC Agreement and the impact thereof on EDS (including the EDS/GM relationship) Note: (1) The Financial Advisors have not reviewed the Master Services Agreement or the related service agreements. (6) GENERAL MOTORS CORPORATION ============================================================================== Methodologies Employed . Financial Advisors performed analysis under various approaches. These included: - BENEFITS/DETRIMENTS APPROACH . Assesses value range of each selected potential benefit and detriment resulting from the Split-Off - EPS APPROACH . Pro forma actual and estimated earnings per share and price-to- earnings multiple analyses - Comparison of hypothetical non-Split-Off ("Base Case") earnings per share with Split-Off earnings per share - Application of assumed "Split-Off Case" multiples - DISCOUNTED CASH FLOW APPROACH . Comparison of consolidated EDS projected cash flows of hypothetical Base Case with "Split-Off Case" (7) GENERAL MOTORS CORPORATION ============================================================================== Principal Assumptions or Bases of Opinion In connection with our opinion, we assumed or relied upon, among other things, the following: . Financial projections prepared by EDS management including two principal cases - Assuming a Split-Off ("Split-Off Case") - Assuming no Split-Off . EDS Management's view of the financial impact of the changes to the MSA which would have been made even in the absence of a Split-Off ("Base Case") . EDS Management's view of the financial impact of New Market Opportunities which could become available to EDS after a Split-Off as included in the projections . EDS Management's view of the value of New Strategic Opportunities associated with the Split-Off . Split-Off will be tax free pursuant to IRS ruling . No recapitalization would have been undertaken by GM to trigger the 120% redemption provision . No net payments to be made by EDS under the Separation Agreement (assuming no contingent liabilities) . In addition, we performed our analyses on the basis that, following the split-off, the EDS Common Stock will be included in the S&P 500 Index, which we believe is very likely (8) ============================================================================== SECTION II ============================================================================== (9) GENERAL MOTORS CORPORATION ============================================================================== Benefits/Detriments Approach: Summary of Selected Potential Benefits and Detriments
- ------------------------------------------------------------------------------------ POTENTIAL SPLIT-OFF BENEFITS POTENTIAL SPLIT-OFF DETRIMENTS TO CLASS E STOCKHOLDERS TO CLASS E STOCKHOLDERS - ------------------------------------------------------------------------------------ . Derivative Stock Differential . New MSA with defined term, revised payment terms and economics/(2)/ . New Market Opportunities (Automotive, Capital Services, Aerospace) . GM non-MIS business . Inclusion in the S&P 500/(1)/ . Special Intercompany Payment to GM . New Strategic Opportunities . Give up 20% redemption premium . Opportunity to receive full takeover . Transaction costs premium . More flexible access to capital markets and potentially lower cost of capital . Reduction of obligations under Separation Agreement and certain related agreements
Notes: (1) There is no guarantee that EDS will be included in the S&P 500 post- Split-Off; however, the Financial Advisors believe inclusion is very likely. (2) Hypothetical starting point used for analysis, viz. assumes significant changes in MSA absent the Split-Off Transaction. (10) GENERAL MOTORS CORPORATION ============================================================================== Benefits/Detriments Approach: Summary Valuation Ranges
MOST MOST SELECTED BENEFITS ADVERSE FAVORABLE - ----------------- ------------- --------- ($ millions) Derivative Stock Differential $ 0 - $ 172 New Market Opportunities/(1)/ 769 - 1,121 Inclusion in S&P 500 417 - 695 Separation Agreement/(2)/ 40 - 50 -------- -------- Subtotal - Selected Benefits $ 1,226 - $ 2,038 -------- -------- SELECTED DETRIMENTS - ------------------- New MSA/(1)/ $ (654) - $ (517) Non-MIS GM Business/(1)/ (167) - (133) Inter-Company Payment (500) - (500) Transaction Costs (38) - (25) -------- -------- Subtotal - Selected Detriments $(1,359) - $(1,175) -------- -------- Total - Net Benefits/(Detriments) $ (133) - $ 863 ======== ======== NEW STRATEGIC OPPORTUNITIES ....AT LEAST $500....
Note: (1) Based on 11%-13% range of discount rates. Table reflects the most adverse and most favorable cases. (2) Assumed reduction of obligations under the Separation Agreement currently valued at $40MM ; GM has agreed to fund up to $10MM NPV of additional separation costs over the next two years. (11) GENERAL MOTORS CORPORATION ============================================================================== Derivative Stock Differential (DSD) (continued) . The value of EDS Common Stock may exceed the value of Class E Stock due to enhanced rights
CLASS E STOCK EDS CAPITAL STOCK - --------------------------------------------------------------------------------------- . Right to dividends from EDS separate . Right to dividends from EDS earnings consolidated net income and surplus . Vote with GM stockholders on corporate . Vote directly on EDS corporate matters matters (reduced vote) (election of EDS Board) - Separate class vote on matters adverse to class . Liquidation rights on GM as a whole (including EDS and Hughes assets) . Liquidation value of EDS - Potential for dividend entrapment . 20% redemption premium . No redemption feature/entire control premium - ---------------------------------------------------------------------------------------
(12) GENERAL MOTORS CORPORATION ============================================================================== Derivative Stock Differential (DSD) (continued) . Financial Advisors estimated DSD employing selected analyses and precedents relating to voting, liquidation and redemption rights . DSD discount range estimated between 0% - 0.75% of EDS market value . DSD discount assessed at $0-$172 million/(1)/ Note: (1) Based on 484.3MM shares outstanding and a market price of $57 (closing price 3/29/96). The market capitalization equals $27.6 billion; at an implied 0.75% discount, the DSD would be $209 million. Further adjusted for rights held by Class E stockholders in GM $1-2/3 and Class H stocks (adjustment reduces upper end of DSD value by $37 million). (13) GENERAL MOTORS CORPORATION ============================================================================== New Market Opportunities . EDS management identified new market opportunities which are not currently available to it because of its affiliation with GM and Hughes in three areas: - Automotive - Commercial finance (due to GMAC) - Aerospace/defense . EDS management provided Financial Advisors with ten-year forecasts which quantify the earnings and cash flow impact achievable from these opportunities . Net present value of these probability-weighted cash flows was calculated by the Financial Advisors to be in the $769 million to $1,121 million range/(1)/ Note: (1) Assumes discount rates of 11%-13% and terminal value P/E multiples of 25x - 29x applied to 2005 net income. (14) GENERAL MOTORS CORPORATION ============================================================================== S&P 500 Inclusion . Financial Advisors believe it is very likely that EDS will be included in the S&P 500 Index and performed their analyses on that basis . Currently, GM Class E is by far the largest security (by market capitalization) not included in Index and if included would be ranked in the top 50 companies by market capitalization . Criteria that currently appear to be forestalling inclusion:
- ------------------------------------------------------------------------------ CRITERIA IMPACT OF SPLIT-OFF - ------------------------------------------------------------------------------ . Subsidiary status . Resolved . Trading liquidity . Will slightly improve . Percent holdings of largest shareholder . Will improve with future offerings - -----------------------------------------------------------------------------------
. EDS has been informed by S&P that the principal impediment to Index inclusion is EDS' subsidiary status . Median sustainable price impact of S&P 500 Index inclusions (since January 1993) is 2.1% (day before S&P announcement to one month after inclusion) . Financial Advisors believe range of sustainable impact is $417 - $695 million (1.5% - 2.5% of EDS' market capitalization)/(1)/ Note: (1) After first adjusting for the Derivative Stock Differential discount. (15) GENERAL MOTORS CORPORATION ============================================================================== New Master Services Agreement
"BASE CASE" "SPLIT-OFF CASE" NON-SPLIT-OFF WITH HYPOTHETICAL SPLIT-OFF WITH CHANGES CHANGES TO THE MSA/(1)/ NEGOTIATED TO THE MSA/(2)/ ------------------------------------------------------------------ MSA IMPACT ONLY 1. Term Perpetual 16.5 yrs with 2.4-year "tail" 2. Service Agreement Margins Slightly reduced from current Reduced further 3. Market Testing Resourcing None New standard 4. Resale of Structural Cost Resell - 100% Resell - 50% Reduction 5. UPR Rates Weighted historic and reduced rate Reduced rates 6. Plant Floor - incremental None Included in scope 7. Payment Terms Weighted probability of extension Lengthened term 8. Service Agreements No change from existing contract Extended
Notes: (1) Weighted average of two scenarios developed by EDS management with assumptions ranging from more to less optimistic across the respective scenarios, probability-weighted at 60% and 40%, respectively. (2) Weighted average of three scenarios developed by EDS management with assumptions ranging from more to less optimistic across the respective scenarios probability-weighted at 40%, 50% and 10%, respectively. (16) GENERAL MOTORS CORPORATION ============================================================================== New Master Services Agreement (continued) The table below summarizes the NPV difference between the hypothetical MSA which would have been implemented in the absence of a split-off/(1)/ ("Base Case") and the weighted average composite scenario/(2)/ reflecting the terms of the new MSA ("Split-Off Case").
("BASE CASE" MINUS "SPLIT-OFF CASE" NPV VARIANCE) -------------------------------------------------- MSA CONTRACT NON-MIS -------------------------------------------------- ($ millions) ($ millions) DISCOUNT RATES 11% ($654) ($167) 12% (578) (149) 13% (517) (133)
Notes: (1) Based on a weighted average of two scenarios, developed by EDS management with assumptions ranging from more to less optimistic, probability-weighted at 60% and 40% respectively. (2) Based on weighted average of three scenarios, developed by EDS management with assumptions ranging from more to less optimistic, probability-weighted at 40%, 50%, and 10% respectively. (17) GENERAL MOTORS CORPORATION ============================================================================== Summary Benefits/Detriments Approach
MOST MOST ADVERSE FAVORABLE ------------- ----------- ($ millions) SELECTED BENEFITS - ----------------- Derivative Stock Differential $ 0 $ 172 New Market Opportunities/(1)/ 769 1,121 Inclusion in S&P 500 417 695 Separation Agreement/(2)/ 40 50 -------- -------- Subtotal - Selected Benefits $ 1,226 $ 2,038 -------- -------- SELECTED DETRIMENTS - ------------------- New MSA/(1)/ $ (654) $ (517) Non-MIS GM Business/(1)/ (167) (133) Inter-Company Payment (500) (500) Transaction Costs (38) (25) -------- -------- Subtotal - Selected Detriments (1,359) (1,175) -------- -------- Total - Net Benefits/(Detriments) $ (133) $ 863 ======== ======== NEW STRATEGIC OPPORTUNITIES ....AT LEAST $500....
. Additional factors which add value but could not be quantified by the financial advisors include: - Greater flexibility in accessing capital markets and potentially reduced cost of capital - Potential ability of EDS shareholders to realize a takeover premium in a change of control transaction Notes: (1) Based on 11%-13% range of discount rates. Table reflects the most adverse and most favorable cases. (2) Assumed reduction of obligations under the Separation Agreement currently valued at $40MM; GM has agreed to fund up to $10MM of NPV of additional separation costs over the next two years. (18) GENERAL MOTORS CORPORATION ============================================================================== New Strategic Opportunities . New strategic opportunities represent the value to stockholders which results from EDS' enhanced ability to consummate large strategic alliances as a result of the split-off . Potential realizable benefits include - REDUCTION of overhead - OPERATIONAL cost savings - CROSS-SELLING of product/service offerings - NEW IT contracts - DEVELOPMENT of new products or services . EDS management estimates the incremental value of new strategic opportunities to be at least $500MM (19) ============================================================================== SECTION III ============================================================================== (20) GENERAL MOTORS CORPORATION ============================================================================== Consolidated Company Methodologies . EPS and Multiples Approaches . Discounted Cash Flow Approach . Analyses compare management projections assuming non-Split-Off scenario ("Base Case") and Split-Off scenario ("Split-Off Case") (21) GENERAL MOTORS CORPORATION =============================================================================== Underlying Financial Assumptions for DCF and EPS Approaches
"BASE CASE" "SPLIT-OFF CASE" NON-SPLIT-OFF SPLIT-OFF WITH CHANGES WITH HYPOTHETICAL CHANGES/(1)/ NEGOTIATED TO THE MSA/(2)/ -------------------------------- ---------------------------- MSA IMPACT ONLY 1. Term Perpetual 16.5 years with 2.4-year "tail" 2. Service Agreement Margins Slightly reduced from current Reduced further 3. Market Testing Resourcing None New standard 4. Resale of Structural Cost Reduction Resell--100% Resell--50% 5. UPR Rates Weighted historic and reduced rate Reduced rates 6. Plant Floor - incremental None Included in scope 7. Payment Terms Weighted probability of extension Lengthened term 8. Service Agreements No change from existing contract Extended OTHER GM BUSINESS AND BASE BUSINESS 1. GM Non-MIS Slightly reduced from current Reduced 2. Base Business Assumptions Same as Split-Off Case Same as non-Split-Off Case 3. Non-Recurring Charge/(3)/ Yes Yes 4. Special Inter-Company Payment Not applicable Yes 5. New Market Opportunities Not applicable Yes 6. Incremental Efficiencies Included Included 7. New Strategic Opportunities Not applicable Not modeled Notes: (1) Based on weighted average composite of two financial cases developed by EDS management. (2) Based on weighted average composite of three financial cases developed by EDS management. (3) Excluded from pro forma EPS data. (22)
GENERAL MOTORS CORPORATION ================================================================================ EPS and Multiples Approach . Consolidated financial projections provided by EDS Management were used to develop EPS for 1996 and 1997 on a per share basis . EDS Management developed pro forma 1995 EPS data and pro forma projected 1996 EPS data assuming the Split-Off occurred at the beginning of each year . EPS data exclude the impact of a potential non-recurring charge . Compared EPS data assuming no Split-Off (with hypothetical changes to MSA) ("Base Case") to pro forma EPS data assuming the Split-Off ("Split-Off Case") . Reviewed historical and estimated GME and comparable company P/E multiples and applied these multiples to: (i) "Base Case" EPS data and (ii) "Split- Off Case" EPS data. . Calculated the expanded P/E multiple necessary to maintain the current GME share price utilizing pro forma EPS data . Because New Strategic Opportunities are not included in the management projections, EPS approach does not separately consider the EPS impact and therefore the value of New Strategic Opportunities (23)
GENERAL MOTORS CORPORATION - ----------------------------------------------------------------------------------------------------------------------------------- Comparable Company: Multiples Considered MARKET VALUE AS A MULTIPLE ENTERPRISE VALUE AS A CURRENT OF NET INCOME/(2)/ MULTIPLE OF 1995/(3)/ STOCK ------------------------------------------- ----------------------------- PRICE/(1)/ LTM 1996E 1997E EBIT EBITDA ------------------ ------------- ------------- ------------- ------------- -------------- Automatic Data Processing Corp. $39.375 26.4x 23.0x 20.0x 18.0x 13.7x Computer Sciences Corp. 70.375 29.1 25.5 21.6 17.9 9.3 First Data Corporation/(4)/ 70.500 36.6 25.8 21.0 19.6 14.7 ---------------------------------------------------------------------------------------------------------------------- | Mean 30.7x 24.8x 20.9x 18.5x 12.5x | | | | Median 29.1 25.5 21.0 18.0 13.7 | ---------------------------------------------------------------------------------------------------------------------- GM Class E/(5)/ $57.000 29.1x 25.2x 21.8x 19.0x 11.0x Notes: (1) Closing stock prices as of March 29, 1996. (2) Based on I/B/E/S earnings estimates as of March 23, 1996 and market values calculated based on March 29, 1996 closing stock prices. (3) Based on LTM publicly available financial data. (4) Incorporates pro forma adjustments for acquisition of First Financial Management. (5) Forward multiples based on I/B/E/S median EPS estimates of $2.26 and $2.61 for 1996 and 1997, respectively.
(24) GENERAL MOTORS CORPORATION - ------------------------------------------------------------------------------- Value Implication of EPS Impact of the Split-Off . Comparing the Base Case and Split-Off Case in 1995 and 1996 (pro forma for a full-year effect) the Split-Off would result in a decrease in earnings per share of $0.10 in each year . If current EPS multiples remain unchanged, this would imply a value decline in the range of approximately $2.60-$3.00 per share; however, we believe it is likely that after the Split-Off, there would be an increase in earnings multiples reflecting elimination of the DSD, inclusion in the S&P 500 and additional growth due to new market and strategic opportunities . The figures below reflect the increase in earnings multiples which would have to be achieved to maintain pre-split-off value ("expanded multiples")
CURRENT STOCK PRICE IMPLIED EARNINGS MULTIPLES - ----------------------------------------------------------------------------------------------------- 1995 1996 --------------------------------------- --------------------------------------- PROFORMA PROFORMA STOCK PRICE PROFORMA "SPLIT-OFF PROFORMA "SPLIT-OFF (3/29/96) "BASE CASE" CASE" "BASE CASE" CASE" - ------------------- ------------------- ------------------ ------------------- ------------------ $57.000 29.8x 31.5x 25.7x 26.9x
(25) GENERAL MOTORS CORPORATION - -------------------------------------------------------------------------------- EPS Impact of Split-Off as Compared to Street Analyst Projections . The Split-Off would result in EDS reporting $0.11 and $0.13 per share lower 1996 and 1997 earnings than research analysts/(1)/ currently anticipate . The figures below reflect the increase in earnings multiples which would have to be achieved to maintain the current stock price ("expanded multiples") - If multiples do not change, this would imply a value decline in the range of approximately $2.70-$2.90 per share
1996 1997 --------------------------- -------------------------- STOCK PRICE ANALYST "SPLIT-OFF ANALYST "SPLIT-OFF (3/29/96) CONSENSUS CASE" CONSENSUS CASE" - ----------- --------- ---------- --------- ---------- $57.000 25.2x 26.5x 21.8x 23.0x
Note: (1) March 23 I/B/E/S median 1996 estimate of $2.26 and median 1997 estimate of $2.61. (26) GENERAL MOTORS CORPORATION - -------------------------------------------------------------------------------- P/E Multiple Considerations . P/E multiple expansion may potentially be derived from four sources - Elimination of the DSD - Inclusion in the S&P 500 - An enhanced growth rate from New Market Opportunities - An enhanced growth rate from New Strategic Opportunities . Some of these factors may already be incorporated in the stock price and, therefore, the current multiple may reflect many of these factors (27) ============================================================================== SECTION IV ============================================================================== (28) GENERAL MOTORS CORPORATION - -------------------------------------------------------------------------------- Consolidated Company DCF Approach . Utilizing 10-year probability adjusted financial projections developed by EDS Management, the Financial Advisors calculated a net present value of the free cash flows . Free cash flows defined as the sum of (i) net income, (ii) after-tax interest expense and (iii) non-cash expenses, less (i) capital expenditures including certain other long-term assets, (ii) increases in working capital, and (iii) changes in certain other assets and liabilities . Split-Off projections include New Market Opportunities . Terminal value multiples of 25x-29x applied to 2005 net income to assess terminal values . Free cash flows and terminal values were discounted using a discount range of 11% to 13% based on weighted average cost of capital models . Projections do not include (and therefore DCF approach does not separately consider) the cash flow contribution of the New Strategic Opportunities (29) GENERAL MOTORS CORPORATION - -------------------------------------------------------------------------------- Summary: Consolidated Company DCF Valuation Analysis . The present value of cash flows under the Split-Off case is approximately $0.8Bn to $0.9Bn less than under the Base Case, employing the same discount rate and terminal multiple across scenarios . The above range may overstate the actual differential - Analysis does not include New Strategic Opportunities in the Split-Off Case - Certain valuation discrepancies arise from differences between Discounted Cash Flow and Benefits/Detriments methodologies - Does not reflect benefit of potential multiple expansion from elimination of DSD and inclusion in S&P 500 index . If the terminal multiple applied to the Split-Off Case were one point higher than that applied to the Base, the value of the Split-Off case would increase by approximately $1.0Bn to $1.2Bn at the range of discount rates utilized (30) ============================================================================== SECTION V ============================================================================== (31) Form of Morgan Stanley Fairness Opinion March 31, 1996 General Motors Corporation General Motors Building 3044 West Grand Boulevard Detroit, Michigan 48202 Attention: Board of Directors Members of the Board: We understand that the Board of Directors (the "General Motors Board") of General Motors Corporation ("General Motors") is considering a tax-free split- off (the "Split-Off") of General Motors' wholly owned subsidiary, Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"). The Split-Off will be accomplished through a merger (the "Merger") of GM Mergeco Corporation ("Mergeco") with and into General Motors pursuant to the proposed Agreement and Plan of Merger to be entered into between General Motors and Mergeco (the "Merger Agreement"), with General Motors as the surviving corporation in the Merger. Mergeco is an indirectly wholly owned subsidiary of EDS organized for the purpose of effecting the Split-Off. In the Merger, each outstanding share of Class E Common Stock, $.10 par value per share, of General Motors ("Class E Common Stock") will be converted into one share of EDS common stock, $0.01 par value per share (the "EDS Common Stock"). There will be attached to each share of EDS Common Stock a purchase right for EDS Series A Junior Participating Preferred Stock. As a result of the Split-Off, EDS will become an independent, publicly held company, holders of the Class E Common Stock will become stockholders of EDS rather than of General Motors, and the Class E Common Stock will cease to exist. The terms and conditions of the proposed Split-Off General Motors Corporation March 31, 1996 Page 2 are set forth in more detail in the draft, dated March 27, 1996, of the joint Solicitation Statement/Prospectus of General Motors and EDS (the "Statement"). Immediately prior to and as a condition of the consummation of the Merger, EDS will contribute to Mergeco $500 million in cash (the "Special Inter-Company Payment"). As a result of the Merger, all of the assets of Mergeco, which will consist entirely of the cash contributed by EDS, will become assets of General Motors. Immediately before the Merger, General Motors and EDS will enter into a new master services agreement (the "Master Services Agreement") pursuant to which EDS will continue to serve as General Motors' principal supplier of information technology services for an initial term of ten years following the Split-Off which may be extended by agreement of the parties. The information technology and other services to be provided by EDS under the Master Services Agreement will generally be similar to those provided to General Motors under an existing master agreement between General Motors and EDS (the "Existing Master Services Agreement"). However, the Master Services Agreement will reflect certain significant changes to the pricing and terms under which such services are to be provided by EDS. Additionally, General Motors and EDS will enter into a Separation Agreement and certain related agreements, including a Tax Allocation Agreement (collectively, the "Separation Agreement"), establishing certain arrangements between General Motors and EDS deemed necessary by General Motors and EDS in order to address various business, legal and regulatory issues resulting from the Split-Off. The Merger and the related transactions, including the Special Inter-Company Payment, the Split-Off Changes (as defined below) effected pursuant to the execution and delivery of the Master Services Agreement and the execution and delivery of the Separation Agreement are collectively referred to as the "Split-Off Transactions". We have been engaged by General Motors to act as financial advisor to a team appointed by the General Motors Board (the "E Team") which has been charged with negotiating the terms and conditions of the proposed Split-Off from the perspective of the holders of the Class E Common Stock. We have been requested to render to the General Motors Board our opinion with respect to the fairness, from a financial point of view, to the holders of Class E Common Stock, of the financial effect of the Split-Off Transactions taken as a whole and in connection with such opinion to provide our financial advice to General Motors and its Board of Directors. We have not been requested to opine as to, and our opinion does not in any manner address, General Motors' General Motors Corporation March 31, 1996 Page 3 or EDS' underlying business decision to proceed with or effect the proposed Split-Off Transactions. In arriving at our opinion, we reviewed, among other things, (1) historical financial statements of EDS and certain other historical financial and operating data of EDS, (2) historical financial statements of General Motors, (3) certain publicly available information with respect to EDS and General Motors, (4) certain projected financial data with respect to EDS, both with and without giving effect to the Split-Off, prepared by EDS management, (5) reported prices and trading activity for the Class E Common Stock, (6) drafts of the Statement, (7) the terms of the Class E Common Stock as set forth in General Motors' certificate of incorporation as currently in effect, (8) the terms of the EDS Common Stock as set forth in EDS' certificate of incorporation as currently in effect, (9) the private letter ruling received by General Motors from the IRS with respect to the tax-free nature of the Split-Off, (10) a summary of terms for the Master Services Agreement provided to the General Motors Board in connection with its March 31, 1996 meeting, (11) the Registration Rights Agreement, dated March 12, 1995 between General Motors and the Trustees of the General Motors Hourly Plan Pension Trust and (12) the Shareholder Rights Agreement between EDS and Bank of New York dated as of March 12, 1996. In addition, we have held discussions with management of EDS, and in certain cases management of General Motors, with respect to, among other things, (1) the operations and financial condition of EDS and the plans of EDS management with respect to the business and affairs of EDS both prior to and after the Split-Off, (2) the projected financial data for EDS prepared by EDS management, (3) the benefits and detriments to EDS of ownership by General Motors, (4) the expected impact of the Split-Off Transactions on EDS' operations and the financial and strategic flexibility of EDS, and the new business opportunities available to EDS, after the Split-Off, (5) certain terms of (A) the Agreement, dated March 3, 1995, between General Motors and the Pension Benefit Guaranty Corporation (the "GM-PBGC Agreement"), (B) the Existing Master Services Agreement and the proposed Master Services Agreement, and certain other information technology services agreements to be entered into in connection with the Master Services Agreement, and (C) the proposed Separation Agreement, and (6) the effect of the Master Services Agreement (including the related changes to the terms of the underlying services agreements, and certain other information technology services agreements to be entered into in connection with the Master Services Agreement, to the extent that they relate to the financial effect of the Master Services Agreement as projected by EDS management) and the Separation General Motors Corporation March 31, 1996 Page 4 Agreement on the business, results of operations and financial condition of EDS and on the business relationship between General Motors and EDS (including, but not limited to, their relationship as customer and vendor, respectively). In addition, we undertook such other studies, analyses and investigations as we deemed appropriate for purposes of rendering our opinion. In arriving at our opinion, we have assumed and relied upon the accuracy and completeness of all of the financial and other information used by us without assuming any responsibility for independent verification of such information and have further relied upon the assurances of management of EDS and General Motors that they are not aware of any facts that would make such information inaccurate or misleading. With respect to the projected financial data of EDS prepared by EDS management (which reflect, among other things, with respect to periods following the Split-Off, estimates of the expected value of certain benefits to be derived by EDS from the Split-Off), upon the advice of EDS management and with your consent we have assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of EDS management as to the expected future prospects and financial performance of EDS, and we have relied on such projections in rendering our opinion. With respect to the estimates prepared by EDS management of the value of certain benefits and detriments of the Split-Off to EDS, with your consent, we have relied on such estimates and assumed that they were reasonably prepared and reflected the best currently available judgments of EDS management as to such benefits and detriments. We also took into account and considered your determination, as described in the Statement, that a split-off of EDS would be proposed only in a transaction that would not result in the recapitalization of shares of Class E Common Stock into Common Stock, $1-2/3 par value, of General Motors at a 120% exchange ratio as provided for under certain circumstances under the terms of General Motors' certificate of incorporation. Furthermore, we believe that following the Split-Off, the EDS Common Stock would very likely be included in the Standard and Poor's 500 Index, and we have rendered our opinion on that basis. In arriving at our opinion, we have not conducted a physical inspection of the properties and facilities of EDS and have not made or obtained any evaluations or appraisals of the assets or liabilities of EDS. You have not authorized us to solicit, and we have not solicited, any indications of interest from any third party with respect to the purchase of all or a part of EDS, its business or the Class E Common Stock. We have not been asked to, and we do not, express an opinion as to the prices at which EDS Common Stock will actually trade General Motors Corporation March 31, 1996 Page 5 following the Merger and we can provide no assurance that the trading price of a share of EDS Common Stock following the Split-Off will be equal to or in excess of the trading price of a share of Class E Common Stock prior to the Split-Off. Our opinion necessarily is based upon market, economic and other conditions as they exist on, and can be evaluated as of, the date of this letter. In connection with the review of the financial effect on EDS of the Master Services Agreement, both EDS management and General Motors management advised us that certain changes would have been made to the Existing Master Services Agreement commencing in 1996 even in the absence of the Split-Off. EDS management identified to us those changes that EDS management believed would have been made to the Existing Master Services Agreement commencing in 1996 even in the absence of the Split-Off, the financial effect of which, as projected by EDS management, would begin to impact EDS in 1996 and continue over time. The changes to the Existing Master Services Agreement which would have been made in the absence of the Split-Off are referred to herein as the "Base Changes." Under different base cases identified by EDS management, the Base Changes assumed to occur vary to the extent they reflect different assumptions regarding certain rate reductions and changes in payment terms. General Motors management advised us that General Motors management believed that changes that differ from or are in addition to the Base Changes identified by EDS management, which changes, taken as a whole, would have been more favorable to General Motors and less favorable to EDS than the Base Changes identified by EDS management, would have been made to the Existing Master Services Agreement even in the absence of the Split-Off. No assurances can be given as to exactly which changes to the Existing Master Services Agreement would have been implemented absent the Split- Off or which changes might be implemented in the future if the Split-Off is not consummated. In considering the fairness, from a financial point of view, to holders of Class E Common Stock of the financial effect of the Split-Off Transactions taken as a whole, we have considered, among other things, (1) the $500 million Special Inter-Company Payment which was recommended to the General Motors Board by the Capital Stock Committee on March 22, 1996 and is proposed to be approved as of the date hereof in connection with the Split-Off Transactions, (2) the allowance of $50 million provided to EDS under the Separation Agreement (and in rendering our opinion, with your consent, we assumed that a substantial amount of such allowance will be used for General Motors Corporation March 31, 1996 Page 6 the benefit of EDS under the Separation Agreement), (3) that EDS management has estimated that, as a result of the allowance identified in the immediately preceding clause, there will be no net payments made by EDS to General Motors under the terms of the Separation Agreement (other than payments, if any, to be made under the provisions thereof with respect to indemnification obligations or the allocation of contingent liabilities, to which we gave no effect in rendering this opinion), (4) the financial effect on EDS, as projected by EDS management, of the changes other than the Base Changes (such changes being referred to herein as the "Split-Off Changes") effected pursuant to the Master Services Agreement, (5) the financial effect, as projected by EDS management, of projected declines following the Split-Off in sales of certain goods and services provided by EDS to General Motors and its affiliates other than under the Existing Master Services Agreement or the Master Services Agreement, as the case may be, (6) transaction costs, estimated by EDS management and (7) certain estimated benefits of the Split-Off to EDS or holders of Class E Common Stock, including (A) the Derivative Stock Differential (as defined in the Statement), (B) the value of the inclusion of the EDS Common Stock in the Standard & Poor's 500 Index, (C) the value to EDS of the removal of certain limitations on EDS' ability to participate in major strategic alliances (including among others, mergers and acquisitions which can be effected using EDS Common Stock), which was estimated by EDS management to be at least $500 million and (D) the present value to EDS of projected new business growth and customer relationships, which was estimated by EDS management. Accordingly, to the extent described herein, we took into account and considered certain benefits as estimated by EDS management that may be realized by EDS as a result of the opportunity to pursue the business purposes of the Split-Off. At the request of the E Team, and with your consent, we have assumed that the Base Changes would have been made to the Existing Master Services Agreement in 1996 even in the absence of the Split-Off (or any other change in the nature of General Motors' ownership of EDS), and that the financial effect thereof would begin in 1996 and continue over time as reflected in the projections prepared by EDS management and therefore, in performing our analyses in connection with rendering this opinion, at the request of the E Team and with your consent, we did not address, and gave no effect to, the financial effect on EDS or holders of Class E Common Stock of the Base Changes effected pursuant to the Master Services Agreement. Based on information regarding the historical financial and operating results of EDS and discussions with EDS management, if neither the Base Changes nor any other significant General Motors Corporation March 31, 1996 Page 7 modifications to the terms of the Existing Master Services Agreement would have been made in the absence of a Split-Off, then the decrement in the present value of cash flows attributable to goods and services projected by EDS management to be provided to General Motors and its affiliates in accordance with the terms of the Existing Master Services Agreement (both under analyses performed on a consolidated company basis for EDS (including goods and services provided to General Motors and its affiliates and to all other customers) and under analyses performed on a basis reflecting only goods and services provided to General Motors and affiliates under the terms of the Existing Master Services Agreement) resulting from changes to the Existing Master Services Agreement arising as a result of the Split-Off would have been significantly larger than under the analyses we have conducted. At the request of the E Team and with your consent, we did not consider, and gave no effect to, contingent liabilities or indemnification obligations of EDS arising under the Separation Agreement or otherwise in connection with the Split-Off. At the request of the E Team, upon the advice of General Motors management and its legal and accounting advisors, and with your consent, we also assumed that the proposed Merger would be tax free to the holders of Class E Common Stock receiving EDS Common Stock in the Merger and that the Unconditional Releases under the GM-PBGC Agreement would become effective as of the effectiveness of the Merger. Based upon and subject to the foregoing, we are of the opinion as of the date hereof that, the financial effect of the Split-Off Transactions taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock. We have been engaged by General Motors to act as financial advisor to the E Team in connection with the Split-Off. We have been advised by you that it is intended that our fee will be paid by EDS. A significant portion of our fee is contingent on consummation of the Split-Off. In addition, General Motors has agreed to indemnify us for certain liabilities that may arise out of the rendering of this opinion. In addition, certain senior personnel providing financial advice to the E Team and involved in rendering this opinion represented General Motors in connection with its acquisition of EDS and the related creation and issuance of the Class E Common Stock. In March 1996, two of the senior investment bankers actively involved in the transaction for Lehman Brothers in its capacity as financial advisor to the E Team joined Morgan Stanley, at which time Morgan Stanley also began advising the E Team. Since such time as Morgan Stanley also began acting in this capacity, it and Lehman Brothers have General Motors Corporation March 31, 1996 Page 8 performed their services in cooperation, both relying to a significant degree on the work performed by the same individuals. However, we have performed our own independent internal review and analysis in arriving at this opinion. In the ordinary course of our business, we actively trade in the debt and equity securities of General Motors, including the Class E Common Stock, for our own account and for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities. This opinion is for the use and benefit of the Board of Directors of General Motors, the Capital Stock Committee of the Board of Directors of General Motors, the E Team and the Board of Directors of EDS and is rendered to the General Motors Board in connection with its consideration of the Split-Off Transactions. This opinion is not intended to be and does not constitute a recommendation to any holder of Class E Common Stock, or any other class of capital stock of General Motors, as to whether such stockholder should consent to the Transactions (as defined in the Statement). Very truly yours, MORGAN STANLEY & CO. INCORPORATED By: _________________________________ Managing Director LEHMAN BROTHERS March 31, 1996 General Motors Corporation General Motors Building 3044 West Grand Boulevard Detroit, Michigan 48202 Attention: Board of Directors Members of the Board: We understand that the Board of Directors (the "General Motors Board") of General Motors Corporation ("General Motors") is considering a tax-free split-off (the "Split-Off") of General Motors' wholly owned subsidiary, Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"). The Split-Off will be accomplished through a merger (the "Merger") of GM Mergeco Corporation ("Mergeco") with and into General Motors pursuant to the proposed Agreement and Plan of Merger to be entered into between General Motors and Mergeco (the "Merger Agreement"), with General Motors as the surviving corporation in the Merger. Mergeco is an indirectly wholly owned subsidiary of EDS organized for the purpose of effecting the Split-Off. In the Merger, each outstanding share of Class E Common Stock, $0.10 par value per share, of General Motors ("Class E Common Stock") will be converted into one share of EDS common stock, $0.01 par value per share (the "EDS Common Stock"). There will be attached to each share of EDS Common Stock a purchase right for EDS Series A Junior Participating Preferred Stock. As a result of the Split-Off, EDS will become an independent, publicly held company, holders of the Class E Common Stock will become stockholders of EDS rather than of General Motors, and the Class E Common Stock will cease to exist. The terms and conditions of the proposed Split-Off are set forth in more detail in the draft, dated March 27, 1996, of the joint Solicitation Statement/Prospectus of General Motors and EDS (the "Statement"). Immediately prior to and as a condition of the consummation of the Merger, EDS will contribute to Mergeco $500 million in cash (the "Special Inter-Company Payment"). As a result of the Merger, all of the assets of Mergeco, which will consist entirely of the cash contributed by EDS, will become assets of General Motors. Immediately before the Merger, General Motors and EDS will enter into a new master services agreement (the "Master Services Agreement") pursuant to which EDS will continue to serve as General Motors' principal supplier of information technology services for an initial term of ten years following the Split-Off, which may be extended by agreement of the parties. The information technology and other services to be provided by EDS under the Master Services Agreement will generally be similar to those provided to General Motors under an existing master agreement between General Motors and EDS (the "Existing Master Services Agreement"). However, the Master Services Agreement will reflect certain significant changes to the pricing and terms under which such services are to LEHMAN BROTHERS INC 3 WORLD FINANCIAL CENTER NEW YORK, NY 10285-1000 General Motors Corporation March 31, 1996 Page 2 be provided by EDS. Additionally, General Motors and EDS will enter into a Separation Agreement and certain related agreements, including a Tax Allocation Agreement (collectively, the "Separation Agreement"), establishing certain arrangements between General Motors and EDS deemed necessary by General Motors and EDS in order to address various business, legal and regulatory issues resulting from the Split-Off. The Merger and the related transactions, including the Special Inter-Company Payment, the Split-Off Changes (as defined below) effected pursuant to the execution and delivery of the Master Services Agreement and the execution and delivery of the Separation Agreement are collectively referred to as the "Split-Off Transactions". We have been engaged by General Motors to act as financial advisor to a team appointed by the General Motors Board (the "E Team") which has been charged with negotiating the terms and conditions of the proposed Split-Off from the perspective of the holders of the Class E Common Stock. We have been requested to render to the General Motors Board our opinion with respect to the fairness, from a financial point of view, to the holders of Class E Common Stock, of the financial effect of the Split-Off Transactions taken as a whole and in connection with such opinion to provide our financial advice to General Motors and its Board of Directors. We have not been requested to opine as to, and our opinion does not in any manner address, General Motors' or EDS' underlying business decision to proceed with or effect the proposed Split-Off Transactions. In arriving at our opinion, we reviewed, among other things, (1) historical financial statements of EDS and certain other historical financial and operating data of EDS, (2) historical financial statements of General Motors, (3) certain publicly available information with respect to EDS and General Motors, (4) certain projected financial data with respect to EDS, both with and without giving effect to the Split-Off, prepared by EDS management, (5) reported prices and trading activity for the Class E Common Stock, (6) drafts of the Statement, (7) the terms of the Class E Common Stock as set forth in General Motors' certificate of incorporation as currently in effect, (8) the terms of the EDS Common Stock as set forth in EDS' certificate of incorporation as currently in effect, (9) the private letter ruling received by General Motors from the IRS with respect to the tax-free nature of the Split-Off, (10) a summary of terms for the Master Services Agreement provided to the General Motors Board in connection with its March 31, 1996 meeting, (11) the Registration Rights Agreement, dated March 12, 1995 between General Motors and the Trustees of the General Motors Hourly Plan Pension Trust and (12) the Shareholder Rights Agreement between EDS and Bank of New York dated as of March 12, 1996. In addition, we have held discussions with management of EDS, and in certain cases management of General Motors, with respect to, among other things, (1) the operations and financial condition of EDS and the plans of EDS management with respect to the business and affairs of EDS both prior to and after the Split-Off, (2) the projected financial data for EDS prepared by EDS management, (3) the benefits and detriments to EDS of ownership by General Motors, (4) the expected impact of the Split-Off Transactions on EDS' operations and the financial and strategic flexibility of EDS, and the new business opportunities available to EDS, after the Split-Off, (5) certain terms of (A) the Agreement, dated March 3, 1995, between General Motors and the Pension Benefit Guaranty Corporation (the "GM-PBGC Agreement"), (B) the Existing Master Services Agreement and the proposed Master Services Agreement, and certain other information General Motors Corporation March 31, 1996 Page 3 technology services agreements to be entered into in connection with the Master Services Agreement, and (C) the proposed Separation Agreement, and (6) the effect of the Master Services Agreement (including the related changes to the terms of the underlying services agreements, and certain other information technology services agreements to be entered into in connection with the Master Services Agreement, to the extent that they relate to the financial effect of the Master Services Agreement as projected by EDS management) and the Separation Agreement on the business, results of operations and financial condition of EDS and on the business relationship between General Motors and EDS (including, but not limited to, their relationship as customer and vendor, respectively). In addition, we undertook such other studies, analyses and investigations as we deemed appropriate for purposes of rendering our opinion. In arriving at our opinion, we have assumed and relied upon the accuracy and completeness of all of the financial and other information used by us without assuming any responsibility for independent verification of such information and have further relied upon the assurances of management of EDS and General Motors that they are not aware of any facts that would make such information inaccurate or misleading. With respect to the projected financial data of EDS prepared by EDS management (which reflect, among other things, with respect to periods following the Split-Off, estimates of the expected value of certain benefits to be derived by EDS from the Split-Off), upon the advice of EDS management and with your consent we have assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of EDS management as to the expected future prospects and financial performance of EDS, and we have relied on such projections in rendering our opinion. With respect to the estimates prepared by EDS management of the value of certain benefits and detriments of the Split-Off to EDS, with your consent, we have relied on such estimates and assumed that they were reasonably prepared and reflected the best currently available judgments of EDS management as to such benefits and detriments. We also took into account and considered your determination, as described in the Statement, that a split-off of EDS would be proposed only in a transaction that would not result in the recapitalization of shares of Class E Common Stock into Common Stock, $1-2/3 par value, of General Motors at a 120% exchange ratio as provided for under certain circumstances under the terms of General Motors' certificate of incorporation. Furthermore, we believe that following the Split-Off, the EDS Common Stock would very likely be included in the Standard and Poor's 500 Index, and we have rendered our opinion on that basis. In arriving at our opinion, we have not conducted a physical inspection of the properties and facilities of EDS and have not made or obtained any evaluations or appraisals of the assets or liabilities of EDS. You have not authorized us to solicit, and we have not solicited, any indications of interest from any third party with respect to the purchase of all or a part of EDS, its business or the Class E Common Stock. We have not been asked to, and we do not, express an opinion as to the prices at which EDS Common Stock will actually trade following the Merger and we can provide no assurance that the trading price of a share of EDS Common Stock following the Split-Off will be equal to or in excess of the trading price of a share of Class E Common Stock prior to the Split-Off. Our opinion necessarily is based upon market, economic and other conditions as they exist on, and can be evaluated as of, the date of this letter. General Motors Corporation March 31, 1996 Page 4 In connection with the review of the financial effect on EDS of the Master Services Agreement, both EDS management and General Motors management advised us that certain changes would have been made to the Existing Master Services Agreement commencing in 1996 even in the absence of the Split-Off. EDS management identified to us those changes that EDS management believed would have been made to the Existing Master Services Agreement commencing in 1996 even in the absence of the Split-Off, the financial effect of which, as projected by EDS management, would begin to impact EDS in 1996 and continue over time. The changes to the Existing Master Services Agreement which would have been made in the absence of the Split-Off are referred to herein as the "Base Changes." Under different base cases identified by EDS management, the Base Changes assumed to occur vary to the extent they reflect different assumptions regarding certain rate reductions and changes in payment terms. General Motors management advised us that General Motors management believed that changes that differ from or are in addition to the Base Changes identified by EDS management, which changes, taken as a whole, would have been more favorable to General Motors and less favorable to EDS than the Base Changes identified by EDS management, would have been made to the Existing Master Services Agreement even in the absence of the Split-Off. No assurances can be given as to exactly which changes to the Existing Master Services Agreement would have been implemented absent the Split-Off or which changes might be implemented in the future if the Split-Off is not consummated. In considering the fairness, from a financial point of view, to holders of Class E Common Stock of the financial effect of the Split-Off Transactions taken as a whole, we have considered, among other things, (1) the $500 million Special Inter-Company Payment which was recommended to the General Motors Board by the Capital Stock Committee on March 22, 1996 and is proposed to be approved as of the date hereof in connection with the Split-Off Transactions, (2) the allowances of $50 million provided to EDS under the Separation Agreement (and in rendering our opinion, with your consent, we assumed that a substantial amount of such allowance will be used for the benefit of EDS under the Separation Agreement), (3) that EDS management has estimated that, as a result of the allowance identified in the immediately preceding clause, there will be no net payments made by EDS to General Motors under the terms of the Separation Agreement (other than payments, if any, to be made under the provisions thereof with respect to indemnification obligations or the allocation of contingent liabilities, to which we gave no effect in rendering this opinion), (4) the financial effect on EDS, as projected by EDS management, of the changes other than the Base Changes (such changes being referred to herein as the "Split-Off Changes") effected pursuant to the Master Services Agreement, (5) the financial effect, as projected by EDS management, of projected declines following the Split-Off in sales of certain goods and services provided by EDS to General Motors and its affiliates other than under the Existing Master Services Agreement or the Master Services Agreement, as the case may be, (6) transaction costs, estimated by EDS management and (7) certain estimated benefits of the Split-Off to EDS or holders of Class E Common Stock, including (A) the Derivative Stock Differential (as defined in the Statement), (B) the value of the inclusion of the EDS Common Stock in the Standard & Poor's 500 Index, (C) the value to EDS of the removal of certain limitations on EDS' ability to participate in major strategic alliances (including among General Motors Corporation March 31, 1996 Page 5 other, mergers and acquisitions which can be effected using EDS Common Stock), which was estimated by EDS management to be at least $500 million and (D) the present value to EDS of projected new business growth and customer relationships, which was estimated by EDS management. Accordingly, to the extent described herein, we took into account and considered certain benefits as estimated by EDS management that may be realized by EDS as a result of the opportunity to pursue the business purposes of the Split-Off. At the request of the E Team, and with your consent, we have assumed that the Base Changes would have been made to the Existing Master Services Agreement in 1996 even in the absence of the Split-Off (or any other change in the nature of General Motors' ownership of EDS), and that the financial effect thereof would begin in 1996 and continue over time as reflected in the projections prepared by EDS management and therefore, in performing our analyses in connection with rendering this opinion, at the request of the E Team and with your consent, we did not address, and gave no effect to, the financial effect on EDS or holders of Class E Common Stock of the Base Changes effected pursuant to the Master Services Agreement. Based on information regarding the historical financial and operating results of EDS and discussions with EDS management, if neither the Base Changes nor any other significant modifications to the terms of the Existing Master Services Agreement would have been made in the absence of a Split-Off, then the decrement in the present value of cash flows attributable to goods and services projected by EDS management to be provided to General Motors and its affiliates in accordance with the terms of the Existing Master Services Agreement (both under analyses performed on a consolidated company basis for EDS (including goods and services provided to General Motors and its affiliates and to all other customers) and under analyses performed on a basis reflecting only goods and services provided to General Motors and affiliates under the terms of the Existing Master Services Agreement) resulting from changes to the Existing Master Services Agreement arising as a result of the Split-Off would have been significantly larger than under the analyses we have conducted. At the request of the E Team and with your consent, we did not consider, and gave no effect to, contingent liabilities or indemnification obligations of EDS arising under the Separation Agreement or otherwise in connection with the Split-Off. At the request of the E Team, upon the advice of General Motors management and its legal and accounting advisors, and with your consent, we also assumed that the proposed Merger would be tax free to the holders of Class E Common Stock receiving EDS Common Stock in the Merger and that the Unconditional Releases under the GM-PBGC Agreement would become effective as of the effectiveness of the Merger. Based upon and subject to the foregoing, we are of the opinion as of the date hereof that, the financial effect of the Split-Off Transactions taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock. We have been engaged by General Motors to act as financial advisor to the E Team in connection with the Split-Off. We have been advised by you that it is intended that our fee will be paid by EDS. A significant portion of our fee is contingent on consummation of the Split-Off. In addition, General Motors has agreed to indemnify us for certain liabilities that may arise out of the rendering of this opinion. We also have performed various investment banking General Motors Corporation March 31, 1996 Page 6 services for each of General Motors and EDS in the past (including representation of General Motors and EDS in connection with the 1995 contribution by General Motors of approximately 173 million shares of Class E Common Stock to the General Motors Hourly Plan Special Trust) and have received customary fees for such services. In March 1996, two of the senior investment bankers actively involved in the transaction for Lehman Brothers in its capacity as financial advisor to the E Team joined Morgan Stanley, at which time Morgan Stanley also began advising the E Team. Since such time, Lehman Brothers and Morgan Stanley have performed their services in cooperation, both relying to a significant degree on the due diligence of those two individuals. However, Lehman Brothers has performed its own independent internal review and analysis in arriving at this opinion. In the ordinary course of our business, we actively trade in the debt and equity securities of General Motors, including the Class E Common Stock, for our own account and for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities. This opinion is for the use and benefit of the Board of Directors of General Motors, the Capital Stock Committee of the Board of Directors of General Motors, the E Team and the Board of Directors of EDS and is rendered to the General Motors Board in connection with its consideration of the Split-Off Transactions. This opinion is not intended to be and does not constitute a recommendation to any holder of Class E Common Stock, or any other class of capital stock of General Motors, as to whether such stockholder should consent to the Transactions (as defined in the Statement). Very truly yours, LEHMAN BROTHERS EX-99.(D)(1) 4 EDS' FORM S-4 REGISTRATON STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 1996 REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 --------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 --------------- ELECTRONIC DATA SYSTEMS HOLDING CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) STATE OF DELAWARE 75-2548221 7374 (STATE OR OTHER (I.R.S. EMPLOYER IDENTIFICATION NO.) JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER) INCORPORATION OR ORGANIZATION) 5400 LEGACY DRIVE, PLANO, TEXAS 75024-3105; (214) 604-6000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) --------------- JOSEPH M. GRANT CHIEF FINANCIAL OFFICER ELECTRONIC DATA SYSTEMS HOLDING CORPORATION 5400 LEGACY DRIVE PLANO, TEXAS 75024-3105 (214) 604-6000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES TO: WARREN G. ANDERSEN ANDREW M. D. GILBERT ROBERT S. OSBORNE, GENERAL MOTORS BAKER FRIEDLANDER P.C. CORPORATION BAKER & BOTTS, ELECTRONIC DATA KIRKLAND & ELLIS 3031 WEST GRAND L.L.P. SYSTEMS 200 EAST RANDOLPH BOULEVARD 2001 ROSS HOLDING DRIVE DETROIT, MICHIGAN AVENUE CORPORATION CHICAGO, ILLINOIS 48202-3091 DALLAS, TEXAS 5400 LEGACY 60601-6636 75201-2916 DRIVE PLANO, TEXAS 75024-3105 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the requisite consents are obtained pursuant to the solicitation by General Motors Corporation referred to in this Registration Statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE - ----------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.01 per share(1) 485,732,594 shares $52.875(2) $25,683,110,907.75(2) $8,856,245.14 - -----------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- (1) There are also being registered hereunder an equal number of Series A Junior Participating Preferred Stock purchase rights, which are currently attached to and transferable only with the shares of Common Stock registered hereby. (2) Estimated in accordance with Rule 457(c) and (f), solely for the purpose of determining the registration fee, on the basis of the average of the high and low prices reported on the New York Stock Exchange Composite Tape on April 12, 1996 for Class E Common Stock of General Motors Corporation, which will be converted into Common Stock of Electronic Data Systems Holding Corporation on a one-for-one basis pursuant to the merger described in this Registration Statement. --------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-4.
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS ----------------------- --------------------------------- A. INFORMATION ABOUT THE TRANSACTION 1.Forepart of the Registration Statement and Outside Front Cover Page of Prospectus...... Outside Front Cover Page 2.Inside Front and Outside Back Cover Pages of Prospectus..... Inside Front Cover Page; Table of Contents; Outside Back Cover Page 3.Risk Factors, Ratio of Earnings to Fixed Charges and Other Summary; Risk Factors Regarding EDS after Information................... the Split-Off; Risk Factors Regarding General Motors after the Split-Off; Risk Factors Regarding Non-Consummation of the Split-Off 4.Terms of the Transaction........ Special Factors; The Split-Off; EDS Capital Stock; Comparison of Class E Common Stock and EDS Common Stock 5.Pro Forma Financial Information. General Motors Unaudited Pro Forma Condensed Consolidated Financial Statements; EDS Unaudited Pro Forma Condensed Consolidated Financial Statements 6.Material Contacts with the Company Being Acquired........ Special Factors; Relationship Between General Motors and EDS 7.Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters.................. Not Applicable 8.Interests of Named Experts and Counsel....................... Not Applicable 9.Disclosure of Commission Position on Indemnification for Securities Act Liabilities................... Not Applicable B. INFORMATION ABOUT THE REGISTRANT 10.Information with Respect to S-3 Registrants................... Not Applicable 11.Incorporation of Certain Information by Reference...... Not Applicable 12.Information with Respect to S-2 or S-3 Registrants............ Not Applicable 13.Incorporation of Certain Information by Reference...... Not Applicable 14.Information with Respect to Registrants other Than S-2 or Outside Front Cover Page; Summary; Plans S-3 Registrants............... and Proposals of EDS; EDS Selected Consolidated Financial Information; EDS Management's Discussion and Analysis of Financial Condition and Results of Operations; Business of EDS; Appendix C: EDS Consolidated Financial Statements
i C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED 15.Information with Respect to S-3 Incorporation of Certain Documents by Companies...................... Reference; Summary; Class E Common Stock 16.Information with Respect to S-2 or S-3 Companies............... Not Applicable 17.Information with Respect to Companies Other Than S-2 or S-3 Companies...................... Not Applicable D. VOTING AND MANAGEMENT INFORMATION 18.Information if Proxies, Consents or Authorizations are to be Outside Front Cover Page; Summary; EDS Solicited...................... Management and Executive Compensation; Solicitation of Written Consent of General Motors Common Stockholders; Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS 19.Information if Proxies, Consents or Authorizations are not to be Solicited or in an Exchange Offer.......................... Not Applicable
ii GENERAL MOTORS CORPORATION April , 1996 To Our Common Stockholders: The enclosed materials seek your approval of a proposal to split off Electronic Data Systems Holding Corporation ("EDS") from General Motors Corporation ("General Motors" or "GM") on a tax-free basis for U.S. federal income tax purposes. EDS is currently a wholly owned subsidiary of General Motors that indirectly holds all of the capital stock of Electronic Data Systems Corporation. As part of the split-off of EDS from General Motors (the "Split-Off"), each outstanding share of General Motors Class E Common Stock will be converted into one share of EDS Common Stock. Following the Split-Off, EDS will be an independent, publicly held company, with approximately 485 million shares of its Common Stock traded on the New York Stock Exchange. All other shares of General Motors capital stock will remain outstanding, and the terms of such stock will remain essentially unchanged. The conversion of all outstanding shares of Class E Common Stock into shares of EDS Common Stock on a one-for-one basis will be accomplished through a merger (the "Merger") of General Motors with GM Mergeco Corporation, an indirect wholly owned subsidiary of EDS organized for this purpose ("Mergeco"), pursuant to a merger agreement between General Motors and Mergeco (the "Merger Agreement"). Immediately prior to the Merger, EDS will contribute to Mergeco $500 million in cash (the "Special Inter-Company Payment"). As a result of the Merger, all of Mergeco's assets, which will consist entirely of the cash contributed by EDS, will become assets of General Motors. Furthermore, as a result of the Merger, the General Motors Restated Certificate of Incorporation will be amended to delete provisions regarding the Class E Common Stock (including provisions that require Class E Common Stock to be recapitalized into $1 2/3 Common Stock at a 120% exchange ratio upon a disposition by GM of substantially all of the business of EDS and under certain other circumstances) and to make certain other changes. Immediately before the Merger, General Motors and EDS will enter into a new Master Service Agreement (the "Master Services Agreement") and certain related agreements pursuant to which EDS will continue to serve as General Motors' principal supplier of information technology ("IT") services on a world-wide basis for an initial term of 10 years following the Split-Off, which may be extended by agreement of the parties. The IT services to be provided by EDS under the Master Services Agreement will generally be similar to those provided to General Motors under the existing agreements and arrangements between the parties. However, the Master Services Agreement provides that certain significant changes will be made to the pricing and terms of services currently provided by EDS to General Motors. The General Motors Board of Directors (the "GM Board") believes that such changes are necessary (i) in light of the fact that, after the Split-Off, EDS will no longer be a subsidiary of General Motors and the Capital Stock Committee of the GM Board (the "Capital Stock Committee") will no longer be able to monitor the IT service arrangements between the parties, (ii) to reflect the evolutionary nature of the General Motors-EDS customer relationship and the IT services industry and (iii) to provide additional assurances to General Motors, as EDS' largest customer, that the IT services performed by EDS will remain competitive. The GM Board has determined that ownership of EDS is not necessary for GM to execute its IT strategy or to ensure the security of its computer data and other information. Furthermore, the GM Board has determined that there are certain actual and potential conflicts between the business of EDS and the other businesses of General Motors. The Split-Off is intended to address such conflicts in a manner that is beneficial from the standpoint of all stockholders of General Motors and to allow the boards and management of GM and EDS to increase their focus on their respective business operations. Approximately one-third of the outstanding Class E Common Stock is held by a trust under the General Motors Hourly-Rate Employees Pension Plan. Accordingly, after the Split-Off, so long as such pension plan holds any EDS Common Stock, any appreciation or depreciation in the value of such stock will affect the level of General Motors' pension expense and unfunded pension liability. The Split-Off is intended to accomplish at least three business objectives from the perspective of EDS and holders of Class E Common Stock: (i) to remove limitations on EDS' ability to participate in major strategic alliances (including mergers and acquisitions which can be effected using EDS Common Stock); (ii) to remove limitations on EDS' ability to obtain additional business from and establish new customer relationships with companies that compete with General Motors or its subsidiaries; and (iii) to enhance EDS' access to the capital necessary for investment in its future growth. General Motors has received a ruling from the Internal Revenue Service to the effect that the Split-Off will be treated as a tax-free exchange under Section 355 of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, for U.S. federal income tax purposes, no gain or loss will be recognized by either General Motors or the holders of Class E Common Stock on the exchange of EDS Common Stock for Class E Common Stock pursuant to the Split-Off. The Capital Stock Committee, which consists entirely of independent directors, has had a significant role on behalf of the GM Board in developing and reviewing the terms of the Split-Off and related transactions to ensure the fairness of such transactions to all classes of General Motors common stock. In taking action with respect to the Split-Off, the GM Board and the Capital Stock Committee considered, among other things, the process of arm's length negotiation established by the GM Board in order to develop the terms of the Split-Off, the one-for-one ratio for converting shares of Class E Common Stock into shares of EDS Common Stock, the opportunity to accomplish the purposes of the Split-Off described above, the amount of the Special Inter-Company Payment and the terms of the Master Services Agreement. The GM Board and the Capital Stock Committee also considered (i) the opinion, dated March 31, 1996, of Merrill Lynch, Pierce, Fenner & Smith Incorporated to the GM Board that, as of that date and on the basis of and subject to the assumptions, limitations and other matters set forth therein, the Financial Effects of the Transactions (as defined in such opinion) are fair, from a financial point of view, to General Motors and, accordingly, to General Motors' common stockholders after consummation of the Merger, namely the holders of the $1 2/3 Common Stock and the Class H Common Stock and (ii) the opinion of each of Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated, each dated March 31, 1996, to the GM Board to the effect that, as of such date, based on and subject to the assumptions, limitations and other matters set forth therein, the financial effect of the Split-Off Transactions (as defined in each such opinion) taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock. BASED ON THE FOREGOING, THE GM BOARD HAS DETERMINED THAT THE SPLIT-OFF AND RELATED TRANSACTIONS ARE IN THE BEST INTERESTS OF, AND FAIR TO, GENERAL MOTORS AND EACH CLASS OF GM COMMON STOCKHOLDERS. THE GM BOARD HAS UNANIMOUSLY APPROVED THE SPLIT-OFF AND RELATED TRANSACTIONS AND RECOMMENDS THAT GENERAL MOTORS COMMON STOCKHOLDERS APPROVE THE SPLIT-OFF AND RELATED TRANSACTIONS BY EXECUTING AND RETURNING THE ENCLOSED CONSENT. In lieu of a special meeting of General Motors common stockholders, action on the Split-Off and related transactions will be taken by written consent. The Split-Off will be consummated on a date to be determined by General Motors, which date is expected to be as soon as practicable after consents from the number of General Motors common stockholders required to approve the Split-Off and related transactions are received by General Motors (but no sooner than 20 business days after the date of mailing of this Solicitation Statement/Prospectus). Consummation of the Split-Off and related transactions is conditioned upon, among other things, receiving the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. In connection with the Split-Off, you are also being asked to approve the 1996 Incentive Plan of EDS (the "Amended EDS Incentive Plan"), which amends and restates EDS' existing stock incentive plan in order, among other things, to provide that awards made thereunder will be in the form of EDS Common Stock rather than Class E Common Stock. Approval of the Amended EDS Incentive Plan by the common stockholders of 2 General Motors is being sought to ensure that the deductibility by EDS, for U.S. federal income tax purposes, of certain performance-based awards made under the plan will not be limited by Section 162(m) of the Code. Approval of the Amended EDS Incentive Plan is independent of approval of the Split-Off and will require the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, and (ii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. THE AMENDED EDS INCENTIVE PLAN HAS BEEN APPROVED BY THE GM BOARD AND RATIFIED AND APPROVED BY THE EDS BOARD OF DIRECTORS. THE GM BOARD RECOMMENDS THAT GENERAL MOTORS COMMON STOCKHOLDERS APPROVE THE AMENDED EDS INCENTIVE PLAN BY EXECUTING AND RETURNING THE ENCLOSED CONSENT. We urge you to read the enclosed material carefully and request that you complete, date, sign and return the enclosed consent as soon as possible. Your consent is important regardless of the number of shares you own. Sincerely yours, John F. Smith, Jr. Chairman, Chief Executive Officer, and President 3 ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ PRELIMINARY SOLICITATION STATEMENT/PROSPECTUS DATED APRIL 16, 1996 SUBJECT TO COMPLETION GENERAL MOTORS CORPORATION ELECTRONIC DATA SYSTEMS HOLDING CORPORATION 3044 WEST GRAND BOULEVARD 5400 LEGACY DRIVE DETROIT, MICHIGAN 48202-3091 PLANO, TEXAS 75024-3105 (313) 556-5000 (214) 604-6000 ----------- SOLICITATION OF WRITTEN CONSENT LOGO OF GENERAL MOTORS CORPORATION COMMON STOCKHOLDERS LOGO ----------- ----------- PROSPECTUS OF ELECTRONIC DATA SYSTEMS HOLDING CORPORATION ----------- INTRODUCTION This Solicitation Statement/Prospectus is being furnished to stockholders of General Motors Corporation, a Delaware corporation ("General Motors" or "GM"), who hold shares of its Common Stock, $1 2/3 par value per share (the "$1 2/3 Common Stock"), its Class E Common Stock, $0.10 par value per share (the "Class E Common Stock"), or its Class H Common Stock, $0.10 par value per share (the "Class H Common Stock"), in order to secure their consent to a proposal by General Motors to effect a tax-free (for U.S. federal income tax purposes) split-off (the "Split-Off") of General Motors' wholly owned subsidiary, Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"), which indirectly owns all of the capital stock of Electronic Data Systems Corporation and which will be renamed "Electronic Data Systems Corporation" immediately prior to the consummation of the Split-Off. As a result of the Split-Off, (i) EDS will become an independent, publicly held company, with approximately 485 million shares of EDS Common Stock (as defined below) traded on the New York Stock Exchange, (ii) holders of the Class E Common Stock will become stockholders of EDS rather than of General Motors, and (iii) Class E Common Stock will cease to exist. All other outstanding shares of GM capital stock will remain outstanding, and the terms of such stock will remain essentially unchanged. The Split-Off will be accomplished through a merger (the "Merger") of GM Mergeco Corporation ("Mergeco"), with and into General Motors pursuant to the Agreement and Plan of Merger, dated April , 1996 (the "Merger Agreement"), between General Motors and Mergeco, a copy of which is attached hereto as Appendix A. Mergeco is an indirect wholly owned subsidiary of EDS organized for the purpose of effecting the Split-Off. In the Merger, each outstanding share of Class E Common Stock will be converted into one share of EDS common stock, $0.01 par value per share (the "EDS Common Stock"). General Motors will be the surviving corporation of the Merger. The Merger Agreement also provides for the deletion from General Motors' Restated Certificate of Incorporation, as amended (the "General Motors Certificate of Incorporation"), of provisions regarding the Class E Common Stock (including the provisions that require Class E Common Stock to be recapitalized into $1 2/3 Common Stock at a 120% exchange ratio upon a disposition by General Motors of substantially all of the business of EDS and under certain other circumstances) and certain other changes as described herein. General Motors, not EDS, is the issuer of Class E Common Stock. Dividends on the Class E Common Stock are payable under the General Motors Certificate of Incorporation only to the extent of (i) the paid-in surplus of General Motors attributable to the Class E Common Stock plus (ii) a portion of the earnings of General Motors attributable to EDS since the date of General Motors' acquisition of the business of EDS and allocated to the amounts available for the payment of dividends on the Class E Common Stock in accordance with the formula specified in the General Motors Certificate of Incorporation. For a description of dividend, voting and liquidation rights and recapitalization provisions of the Class E Common Stock, see "Class E Common Stock." EDS is the issuer of the EDS Common Stock, and thus, following the Split-Off, former holders of Class E Common Stock will no longer own an interest (incident to such holdings) in General Motors' equity or assets, but will instead own an equity interest in EDS. For a description of the EDS Common Stock, see "EDS Capital Stock" and "Comparison of Class E Common Stock and EDS Common Stock." i Immediately prior to and as a condition of the consummation of the Merger, EDS will contribute to Mergeco $500 million in cash (the "Special Inter- Company Payment"). As a result of the Merger, all of the assets of Mergeco, which will consist entirely of the cash contributed by EDS, will become assets of General Motors. In determining the amount of the Special Inter-Company Payment, the GM Board gave consideration to, among other things, the fact that in the Separation Agreement (as hereinafter defined) GM would provide EDS a $50.0 million allowance relating to the resolution of various uncertain, contingent or other matters arising out of the separation of GM and EDS. The Special Inter-Company Payment was included as one of the terms of the Split- Off in order to enable the General Motors Board of Directors (the "GM Board") to determine that the Split-Off is fair to all classes of General Motors common stockholders. Immediately before the Merger, General Motors and EDS will enter into a new Master Service Agreement (the "Master Services Agreement") and certain related agreements pursuant to which EDS will continue to serve as General Motors' principal supplier of information technology ("IT") services on a world-wide basis for an initial term of 10 years following the Split-Off, which may be extended by mutual agreement of the parties. The IT services to be provided by EDS under the Master Services Agreement will generally be similar to those provided to General Motors under the existing agreements and arrangements between the parties. However, the Master Services Agreement provides that certain significant changes will be made to the pricing and terms of services currently provided by EDS to General Motors. The GM Board believes that such changes are necessary (i) in light of the fact that, after the Split-Off, EDS will no longer be a subsidiary of General Motors and the Capital Stock Committee of the GM Board (the "Capital Stock Committee") will no longer be able to monitor the IT service arrangements between the parties, (ii) to reflect the evolutionary nature of the General Motors-EDS customer relationship and the IT services industry and (iii) to provide additional assurances to General Motors, as EDS' largest customer, that the IT services performed by EDS will remain competitive. Additionally, as a condition of the consummation of the Merger, General Motors and EDS will enter into a Separation Agreement and certain related agreements (collectively, the "Separation Agreement"), including an Amended and Restated Agreement for the Allocation of United States Federal, State and Local Income Tax (the "Tax Allocation Agreement"), establishing certain arrangements between General Motors and EDS deemed necessary in order to deal with various business, legal and regulatory issues following the Split-Off. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--Separation Agreement." The Split-Off and related transactions, including the consummation of the Merger, the making of the Special Inter-Company Payment, the execution and delivery of the Master Services Agreement (and certain other IT service agreements to be entered into in connection therewith) and the Separation Agreement and the consummation of the other transactions and events contemplated by the Merger Agreement, are collectively referred to herein as the "Transactions." See "The Split-Off" and "Relationship Between General Motors and EDS--Post-Split-Off Arrangements." The GM Board has determined that ownership of EDS is not necessary for GM to execute its IT strategy or to ensure the security of its computer data and other information. Furthermore, the GM Board has determined that there are certain actual and potential conflicts between the business of EDS and the other businesses of General Motors. The Split-Off is intended to address such conflicts in a manner that is beneficial from the standpoint of all stockholders of GM and to allow the boards and management of GM and EDS to increase their focus on their respective business operations. Approximately one-third of the outstanding Class E Common Stock is held by the General Motors Special Hourly Employees Pension Trust (together with any sub-trusts thereunder, the "GM Hourly Plan Special Trust") under the General Motors Hourly-Rate Employees Pension Plan (the "GM Hourly Plan"). Accordingly, after the Split-Off, so long as the GM Hourly Plan Special Trust holds any EDS Common Stock, any appreciation or depreciation in the value of such stock will affect the level of General Motors' pension expense and unfunded pension liability, which are actuarially determined and computed in accordance with generally accepted accounting principles. The Split-Off is intended to accomplish at least three business objectives from the perspective of EDS and holders of Class E Common Stock: (i) to remove limitations on EDS' ability to participate in major strategic alliances (including mergers and acquisitions which can be effected using EDS Common Stock); (ii) to remove limitations on EDS' ability to obtain additional business from and establish new customer relationships with ii companies that compete with General Motors or its subsidiaries; and (iii) to enhance EDS' access to the capital necessary for investment in its future growth. Pursuant to this Solicitation Statement/Prospectus, General Motors is requesting the common stockholders of General Motors to approve the Transactions, including the adoption of the Merger Agreement. Consummation of the Transactions is conditioned upon, among other things, receiving the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. Assuming the Transactions are consummated, a letter of transmittal will be sent to all current holders of Class E Common Stock, who will then be deemed to be holders of EDS Common Stock, with instructions for surrendering their certificates evidencing shares of Class E Common Stock in exchange for certificates representing an equal number of shares of EDS Common Stock. HOLDERS OF CLASS E COMMON STOCK CERTIFICATES SHOULD NOT SURRENDER THOSE CERTIFICATES UNTIL THEY HAVE RECEIVED SUCH LETTER OF TRANSMITTAL. General Motors has received a ruling from the Internal Revenue Service (the "IRS") to the effect that the Split-Off will be treated as a tax-free exchange under Section 355 of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, for U.S. federal income tax purposes, no gain or loss will be recognized by either General Motors or the holders of Class E Common Stock on the exchange of EDS Common Stock for Class E Common Stock pursuant to the Split-Off. Current Treasury Regulations require each General Motors stockholder who receives EDS Common Stock pursuant to the Split-Off to attach to such stockholder's federal income tax return for the year in which the Split-Off occurs a detailed statement setting forth such data as may be appropriate in order to show the applicability of Section 355 of the Code to the Split-Off. At the time that the letter of transmittal is sent to all current holders of Class E Common Stock, General Motors will provide such information to each holder of Class E Common Stock receiving EDS Common Stock in the Split-Off in order to enable each such holder to comply with such regulations. See "Special Factors--Certain U.S. Federal Income Tax Considerations." General Motors is also requesting the common stockholders of General Motors, pursuant to this Solicitation Statement/Prospectus, to approve the 1996 Long- Term Incentive Plan of EDS (the "Amended EDS Incentive Plan"), which amends and restates the existing 1984 EDS Stock Incentive Plan (the "Existing EDS Incentive Plan") in order, among other things, to provide that awards made thereunder will be in the form of EDS Common Stock rather than Class E Common Stock. The Amended EDS Incentive Plan has been approved by the GM Board and has been ratified and approved by the EDS Board of Directors (the "EDS Board"). Approval of the Amended EDS Incentive Plan by the common stockholders of General Motors is being sought to ensure that the deductibility by EDS, for U.S. federal income tax purposes, of certain performance-based awards made under the Amended EDS Incentive Plan will not be limited by Section 162(m) of the Code. Approval of the Amended EDS Incentive Plan is independent of approval of the Transactions and will require the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, and (ii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. For a description of the Amended EDS Incentive Plan and the Existing EDS Incentive Plan, see "EDS Management and Executive Compensation--Amended EDS Incentive Plan" and "--Existing EDS Incentive Plan." This Solicitation Statement/Prospectus also constitutes a prospectus of EDS under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the shares of EDS Common Stock to be distributed in exchange for Class E Common Stock in the Split-Off. Application has been made to list the EDS Common Stock on the New York Stock Exchange (the "NYSE"), and such application has been granted pending notice of issuance. EDS Common Stock will trade under the symbol "EDS." iii FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE SPLIT-OFF, SEE "RISK FACTORS REGARDING EDS AFTER THE SPLIT-OFF" ON PAGE 19, "RISK FACTORS REGARDING GENERAL MOTORS AFTER THE SPLIT-OFF" ON PAGE 24 AND "RISK FACTORS REGARDING NON-CONSUMMATION OF THE SPLIT-OFF" ON PAGE 26. All information in this Solicitation Statement/Prospectus concerning General Motors has been furnished by General Motors, and all information concerning EDS and the Amended EDS Incentive Plan has been furnished by EDS. This Solicitation Statement/Prospectus is dated April , 1996 and was mailed to General Motors common stockholders within three weeks from such date. ---------------- NEITHER THE TRANSACTIONS NOR THE SECURITIES TO BE ISSUED PURSUANT TO THIS SOLICITATION STATEMENT/PROSPECTUS HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS PASSED UPON THE FAIRNESS OR MERITS OF THE TRANSACTIONS OR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS SOLICITATION STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. iv AVAILABLE INFORMATION General Motors is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information (including certain information relating to EDS) with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by General Motors with the Commission can be inspected, and copies may be obtained, at the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, as well as at the following Regional Offices of the Commission: Seven World Trade Center, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Reports, proxy statements and other information concerning General Motors (which also contain information concerning EDS) can also be inspected at the offices of the NYSE, 11 Wall Street, New York, New York 10005, where the Class E Common Stock, Class H Common Stock and $1 2/3 Common Stock of General Motors are listed, and at the offices of the following other stock exchanges where the $1 2/3 Common Stock is listed in the United States: the Chicago Stock Exchange, Inc., One Financial Place, 440 S. LaSalle Street, Chicago, Illinois 60605; the Pacific Stock Exchange, Inc., 233 South Beaudry Avenue, Los Angeles, California 90012 and 301 Pine Street, San Francisco, California 94104; and the Philadelphia Stock Exchange, Inc., 1900 Market Street, Philadelphia, Pennsylvania 19103. Reports, proxy statements, and other information concerning General Motors (which also contain information concerning EDS) can also be obtained electronically through a variety of databases, including, among others, the Commission's Electronic Data Gathering And Retrieval ("EDGAR") program, Knight-Ridder Information, Inc., Federal Filings/Dow Jones and Lexis/Nexis. EDS has filed a Registration Statement on Form S-4 (as amended and including exhibits, the "Registration Statement") with the Commission under the Securities Act with respect to the shares of EDS Common Stock to be distributed in exchange for Class E Common Stock in the Split-Off. General Motors has also filed a Schedule 13E-3 Transaction Statement (as amended and including exhibits, the "Schedule 13E-3") under the Exchange Act with respect to certain of the Transactions. Pursuant to the rules and regulations of the Commission, this Solicitation Statement/Prospectus omits certain information contained in the Registration Statement and the Schedule 13E-3. Such information can be inspected at and obtained from the Commission and the NYSE in the manner set forth above. For further information pertaining to General Motors, EDS, the Class E Common Stock and the EDS Common Stock, reference is made to the Registration Statement and the Schedule 13E-3. Statements contained herein concerning any document filed as an exhibit to the Registration Statement or the Schedule 13E-3 are not necessarily complete and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement or the Schedule 13E-3. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents, which have been filed by General Motors with the Commission, are incorporated herein by reference: 1. Annual Report on Form 10-K for the year ended December 31, 1995 (as amended and including exhibits, the "GM 1995 Form 10-K"); and 2. Current Reports on Form 8-K dated January 29, February 26 and March 12, 1996. All documents filed by General Motors with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Solicitation Statement/Prospectus and prior to the consummation of the Transactions shall be deemed to be incorporated by reference in this Solicitation Statement/Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Solicitation Statement/Prospectus to the extent that a statement contained herein or in any other v subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Solicitation Statement/Prospectus. THIS SOLICITATION STATEMENT/PROSPECTUS INCORPORATES AND MAY INCORPORATE DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS, OTHER THAN THE EXHIBITS THERETO, ARE AVAILABLE WITHOUT CHARGE FROM GENERAL MOTORS TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER TO WHOM THIS SOLICITATION STATEMENT/PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON TO GENERAL MOTORS CORPORATION, ROOM 11-243, GENERAL MOTORS BUILDING, 3044 WEST GRAND BOULEVARD, DETROIT, MICHIGAN 48202-3091 (TELEPHONE NUMBER (313) 556-2044). IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE WITHIN 15 BUSINESS DAYS OF THE DATE OF MAILING OF THIS SOLICITATION STATEMENT/PROSPECTUS. UNTIL 25 DAYS AFTER THE DATE OF MAILING OF THIS SOLICITATION STATEMENT/PROSPECTUS, ALL DEALERS EFFECTING TRANSACTIONS IN EDS COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. vi TABLE OF CONTENTS
PAGE ---- Introduction............................................................. i Available Information.................................................... v Incorporation of Certain Documents by Reference.......................... v Summary.................................................................. 1 Introduction............................................................ 1 General Motors.......................................................... 1 EDS..................................................................... 2 The Transactions........................................................ 2 Amended EDS Incentive Plan.............................................. 11 Certain Per Share and Other Financial Information....................... 13 General Motors Summary Consolidated Historical and Pro Forma Financial Data................................................................... 15 EDS Summary Consolidated Historical and Pro Forma Financial Data........ 17 Risk Factors Regarding EDS after the Split-Off........................... 19 Dividend Policy......................................................... 19 Increased Leverage; No Assurance of Access to Capital................... 19 No Prior Public Market for EDS Common Stock; No Assurance as to Market Price.................................................................. 19 Dependence on Major Customer; Changes in Pricing and Terms.............. 20 Significant Stockholder................................................. 21 No Assurance of Strategic Alliances and Other Business Opportunities.... 21 Termination of Subsidiary Relationship with General Motors.............. 22 Certain Limitations on Changes in Control of EDS........................ 22 Forward-Looking Information May Prove Inaccurate........................ 23 Risk Factors Regarding General Motors after the Split-Off................ 24 Reduction in General Motors' Consolidated Net Worth, Assets and Certain Ratios................................................................. 24 Loss of Potential Availability of EDS Funds and Assets.................. 24 Effect of Split-Off on GM Pension Expense and Unfunded Pension Liability.............................................................. 25 Loss of Ownership Interest in IT Provider............................... 25 Forward-Looking Information May Prove Inaccurate........................ 25 Risk Factors Regarding Non-Consummation of the Split-Off................. 26 Business Conflicts and Objectives....................................... 26 Changes in Terms of Existing IT Services Agreements..................... 26 Special Factors.......................................................... 27 Purposes of the Split-Off............................................... 27 Alternatives to the Split-Off........................................... 28 Effects of the Split-Off................................................ 29 Background of the Split-Off............................................. 31 Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions........................................... 47 Fairness Opinions....................................................... 48 Requisite Vote for the Transactions..................................... 65 Certain U.S. Federal Income Tax Considerations.......................... 65 GM-PBGC Agreement....................................................... 66 Certain Litigation...................................................... 67 The Split-Off............................................................ 69 General................................................................. 69 Merger Agreement........................................................ 70 No Appraisal Rights..................................................... 71 Stock Exchange Listings for EDS Common Stock............................ 72 Accounting Treatment.................................................... 72 Certain U.S. Federal Income Tax Considerations.......................... 72 Regulatory Requirements................................................. 72 Relationship Between General Motors and EDS.............................. 73 Pre-Split-Off Relationship.............................................. 73 Post-Split-Off Arrangements............................................. 74 Plans and Proposals of EDS............................................... 81 EDS Dividend Policy..................................................... 81 EDS Unaudited Pro Forma Consolidated Capitalization...................... 82 General Motors Unaudited Pro Forma Condensed Consolidated Financial Statements.............................................................. 83 EDS Unaudited Pro Forma Condensed Consolidated Financial Statements...... 86 EDS Selected Consolidated Financial Information.......................... 89 EDS Management's Discussion and Analysis of Financial Condition and Results of Operations................................................... 90 Business of EDS.......................................................... 97 General................................................................. 97 Strategy................................................................ 97 Services................................................................ 98 Business Areas.......................................................... 98 Acquisitions and Strategic Alliances.................................... 100 Revenues................................................................ 100 Services for General Motors............................................. 100 Backlog................................................................. 101 Competition............................................................. 101 Employees............................................................... 102
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PAGE ---- Patents, Proprietary Rights and Licenses................................ 102 Regulation.............................................................. 102 Real Property........................................................... 102 Legal Proceedings....................................................... 103 EDS Management and Executive Compensation................................ 104 Directors and Executive Officers........................................ 104 Director Compensation................................................... 107 Executive Compensation.................................................. 108 Amended EDS Incentive Plan.............................................. 108 Existing EDS Incentive Plan............................................. 115 EDS Retirement Plan..................................................... 119 Stock Purchase Plan..................................................... 120 Change of Control Employment Agreements................................. 121 Compensation Committee Interlocks and Insider Participation............. 122 Indemnification Agreements.............................................. 122 Class E Common Stock..................................................... 124 Introduction............................................................ 124 Price Range and Dividends............................................... 124 Dividend Policy......................................................... 124 Voting Rights........................................................... 126 Liquidation Rights...................................................... 126 Recapitalization........................................................ 126 Subdivision or Combination.............................................. 127 Considerations Relating to Multi-Class Common Stock Capital Structure... 127 EDS Capital Stock........................................................ 128 EDS Common Stock........................................................ 128 EDS Preferred Stock..................................................... 128 EDS Rights Agreement.................................................... 129 Limitation on EDS Directors' Liability.................................. 131 Section 203 of the Delaware General Corporation Law..................... 132 Limitations on Changes in Control....................................... 132 EDS Transfer Agent and Registrar........................................ 133 Comparison of Class E Common Stock and EDS Common Stock.................. 134 General................................................................. 134 Dividend Policy......................................................... 134 Voting Rights........................................................... 134 Liquidation Rights...................................................... 134 Recapitalization........................................................ 135 Certain Limitations on Changes in Control of EDS........................ 135 Solicitation of Written Consent of General Motors Common Stockholders.... 136 Matters to be Considered................................................ 136 Action by Written Consent............................................... 137 Consents................................................................ 138 Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS.......................................................... 140 General Motors.......................................................... 140 EDS...................................................................... 143 GM Hourly Plan Special Trust............................................ 143 Estimated Fees and Expenses.............................................. 146 Legal Matters............................................................ 146 Experts.................................................................. 146
Merger Appendix A-- Agreement... A-1 Fairness Appendix B-- Opinions Merrill Lynch Fairness Appendix B-1-- Opinion..... B-1 Lehman Brothers Fairness Appendix B-2-- Opinion..... B-5 Morgan Stanley Fairness Appendix B-3-- Opinion..... B-10 EDS Consolidated Financial Appendix C-- Statements.. Independent Auditors' Report...... C-1 EDS Consolidated Financial Statements and Notes Thereto..... C-2 Amended EDS Incentive Appendix D-- Plan........ D-1
viii SUMMARY The following summary is qualified in its entirety by the more detailed information contained elsewhere or incorporated by reference in this Solicitation Statement/Prospectus and the Appendices hereto. General Motors stockholders are urged to read this Solicitation Statement/Prospectus and the Appendices hereto in their entirety. Unless the context otherwise requires, all references in this Solicitation Statement/Prospectus to General Motors include General Motors and its subsidiaries (including EDS to the extent that such references relate to periods prior to the Split-Off). Electronic Data Systems Holding Corporation currently owns all of the capital stock of Electronic Data Systems Intermediate Corporation, which in turn owns all of the capital stock of Electronic Data Systems Corporation. Immediately prior to the Split-Off, (i) Electronic Data Systems Intermediate Corporation will be merged with and into Electronic Data Systems Holding Corporation and (ii) Electronic Data Systems Corporation will be merged with and into Electronic Data Systems Holding Corporation and, pursuant to such merger, Electronic Data Systems Holding Corporation will be renamed "Electronic Data Systems Corporation." Unless the context otherwise requires, all references in this Solicitation Statement/Prospectus to EDS give effect to the transactions described in the preceding sentence and include Electronic Data Systems Corporation and its subsidiaries. The share numbers in this Solicitation Statement/Prospectus reflect all stock dividends and subdivisions or combinations of General Motors capital stock prior to the date hereof. INTRODUCTION This Solicitation Statement/Prospectus is being furnished in connection with the solicitation by the GM Board of the written consent of General Motors common stockholders approving the Transactions, including the adoption of the Merger Agreement. Pursuant to the Merger, each outstanding share of Class E Common Stock will be converted into one share of EDS Common Stock. In lieu of a special meeting of stockholders, action on the Transactions will be taken by written consent. The Transactions will be consummated on a date to be determined by GM, which is expected to be as soon as practicable after the requisite consents thereto are received from holders of $1 2/3 Common Stock, Class E Common Stock and Class H Common Stock, provided that the conditions to the consummation of the Merger set forth in the Merger Agreement have been satisfied or waived and the Merger Agreement has not been terminated. The Transactions will in any event not be consummated sooner than 20 business days after the date of mailing of this Solicitation Statement/Prospectus to GM's common stockholders. See "--Vote Required for Approval; Voting Securities Owned by Certain Persons" and "The Split-Off." This Solicitation Statement/Prospectus is also being furnished by General Motors to obtain the approval by the General Motors common stockholders of the Amended EDS Incentive Plan, which amends and restates the Existing EDS Incentive Plan in order, among other things, to provide that awards made thereunder will be in the form of EDS Common Stock rather than Class E Common Stock. Approval of the Amended EDS Incentive Plan by the common stockholders of General Motors is being sought to ensure that the deductibility by EDS, for U.S. federal income tax purposes, of certain performance-based awards made under the Amended EDS Incentive Plan will not be limited by Section 162(m) of the Code. See "--Amended EDS Incentive Plan--Stockholder Approval; Vote Required," "EDS Management and Executive Compensation--Amended EDS Incentive Plan" and "--Existing EDS Incentive Plan." This Solicitation Statement/Prospectus also constitutes a prospectus of EDS under the Securities Act with respect to shares of EDS Common Stock to be distributed in exchange for Class E Common Stock in the Split-Off. GENERAL MOTORS The major portion of General Motors' operations is derived from the automotive products industry, consisting of the design, manufacture, assembly and sale of automobiles, trucks and related parts and accessories. Primarily through its wholly owned subsidiaries, EDS, General Motors Acceptance Corporation ("GMAC") and 1 Hughes Electronics Corporation ("Hughes"), General Motors also manufactures products and provides services in other industry segments. General Motors' principal executive offices are located at 3044 West Grand Boulevard, Detroit, Michigan 48202-3091 (Telephone Number (313) 556-5000). EDS EDS is a world leader in applying information technology, with over 30 years of experience in using advanced computer and communications technologies to meet its clients' business needs. EDS' total revenues in 1995 were $12.4 billion, of which approximately $3.9 billion was attributable to the performance of IT and other services on behalf of General Motors and its affiliates. As of December 31, 1995, EDS employed approximately 96,000 persons and served clients in the United States and approximately 40 other countries. See "Business of EDS." EDS' principal executive offices are located at 5400 Legacy Drive, Plano, Texas 75024-3105 (Telephone Number (214) 604-6000). THE TRANSACTIONS Purposes of the Split-Off The GM Board has determined that ownership of EDS is not necessary for GM to execute its IT strategy or to ensure the security of its computer data and other information. Furthermore, the GM Board has determined that there are certain actual and potential conflicts between the business of EDS and the other businesses of General Motors. The Split-Off is intended to address such conflicts in a manner that is beneficial from the standpoint of all stockholders of General Motors and to allow the boards and management of GM and EDS to increase their focus on their respective business operations. Approximately one-third of the outstanding Class E Common Stock is held by the GM Hourly Plan Special Trust. Accordingly, after the Split-Off, so long as the GM Hourly Plan Special Trust holds any EDS Common Stock, any appreciation or depreciation in the value of such stock will affect the level of General Motors' pension expense and unfunded pension liability, which are actuarially determined and computed in accordance with generally accepted accounting principles. The Split-Off is intended to accomplish at least three business objectives from the perspective of EDS and holders of Class E Common Stock: (i) to remove limitations on EDS' ability to participate in major strategic alliances (including mergers and acquisitions which can be effected using EDS Common Stock); (ii) to remove limitations on EDS' ability to obtain additional business from and establish new customer relationships with companies that compete with General Motors or its subsidiaries; and (iii) to enhance EDS' access to the capital necessary for investment in its future growth. See "Special Factors--Purposes of the Split-Off." Effects of the Split-Off As a result of the Split-Off, EDS will become an independent, publicly held company. In addition, holders of the Class E Common Stock will become stockholders of EDS rather than of General Motors, and the Class E Common Stock will cease to exist. The Split-Off will not result in the recapitalization of Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio as currently provided in the General Motors Certificate of Incorporation upon a disposition by General Motors of substantially all of the business of EDS and under certain other circumstances. Holders of EDS Common Stock will have no rights comparable to such recapitalization rights of holders of Class E Common Stock. See "Comparison of Class E Common Stock and EDS Common Stock." All other outstanding shares of GM capital stock will remain outstanding after the Split- Off, and the terms of such stock will remain essentially unchanged. No dividend or other distribution will be made on any GM capital stock in connection with the Split-Off. See "Special Factors--Effects of the Split-Off." The Merger The Split-Off will be accomplished through the consummation of the Merger of Mergeco with and into General Motors pursuant to the Merger Agreement. Mergeco is an indirect wholly owned subsidiary of EDS organized for the purpose of effecting the Split-Off. Pursuant to the Merger, among other things, (i) Mergeco 2 will be merged with and into General Motors, with General Motors being the surviving corporation, (ii) each outstanding share of Class E Common Stock will be automatically converted into one share of EDS Common Stock and (iii) provisions in the General Motors Certificate of Incorporation regarding the Class E Common Stock will be deleted and certain other provisions therein, including provisions with respect to the General Motors Preferred Stock (the "Preferred Stock"), will be amended. There are currently no shares of Preferred Stock outstanding. The changes to the General Motors Certificate of Incorporation relating to the Preferred Stock will allow the GM Board to determine the specific rights, preferences and limitations of any series of Preferred Stock if and when issued in the discretion of the GM Board and will cause the Preferred Stock to assume the characteristics of "blank-check" preferred stock, which the General Motors Preference Stock already possesses. Such changes include the deletion of a restrictive covenant limiting the payment of cash dividends on classes of General Motors stock other than the Preferred Stock based on a net quick assets test, the removal of a restriction on the placing of liens on General Motors property, the elimination of certain voting rights of the Preferred Stock and the deletion of a specified liquidation price of $100 per share of Preferred Stock. See "The Split-Off-- Merger Agreement--Effect of the Merger." The consummation of the Merger is subject to certain conditions set forth in the Merger Agreement. The Merger Agreement may be terminated under certain circumstances set forth therein, including by General Motors at any time prior to the effective date of the Merger in the event that the GM Board concludes that termination would be in the best interests of General Motors and its stockholders. See "The Split-Off--Merger Agreement." Special Inter-Company Payment Immediately prior to and as a condition of the consummation of the Merger, EDS will contribute to Mergeco the Special Inter-Company Payment in the amount of $500 million in cash. As a result of the Merger, all of the assets of Mergeco, which will consist entirely of the cash contributed by EDS, will become assets of General Motors. In determining the amount of the Special Inter-Company Payment, the GM Board gave consideration to, among other things, the fact that in the Separation Agreement GM would provide EDS a $50.0 million allowance relating to the resolution of various uncertain, contingent or other matters arising out of the separation of GM and EDS. The Special Inter-Company Payment was included as one of the terms of the Split-Off in order to enable the GM Board to determine that the Split-Off is fair to all classes of General Motors common stockholders. IT Services Agreements Immediately prior to and as a condition of the consummation of the Merger, General Motors and EDS will enter into the new Master Services Agreement, which will serve as a framework for the negotiation and operation of service agreements between GM and EDS related to certain "in-scope" IT services to be provided by EDS to General Motors on a worldwide basis after the Split-Off (collectively, together with the Master Services Agreement, the "IT Services Agreements"). The Master Services Agreement contemplates that EDS will continue to serve as GM's principal supplier of IT services for an initial term of ten years, which may be extended by agreement of the parties, and that the IT services to be provided by EDS after the Split-Off will generally be similar to those provided to General Motors under the existing Master Agreement (the "Existing Master Services Agreement"), which currently serves as a framework for individual services agreements between GM and EDS (collectively, together with the Existing Master Services Agreement, the "Existing IT Services Agreements"). Under the IT Services Agreements, EDS will provide to General Motors certain plant floor automation services in North America which had previously been provided by EDS and other vendors under a variety of agreements. IT services that will be considered to be "in-scope" for purposes of the Master Services Agreement accounted for approximately $3.4 billion of approximately $3.9 billion in the aggregate of revenues received by EDS from GM in 1995. The balance of EDS' 1995 revenues from GM was attributable to goods and services provided to GM by EDS which would have been outside the scope of the Master Services Agreement. Following the Split-Off, the parties expect that EDS will continue to provide "out-of-scope" goods and services to GM under various types of contractual agreements other than the Master Services Agreement. The IT Services Agreements provide that certain of the Existing IT Services Agreements applicable to particular units, sectors or other organizations within General Motors will be extended for additional terms of 3 between approximately one and three years beyond their current expiration dates. The IT Services Agreements also provide that certain significant changes will be made to the pricing and terms of services provided by EDS. Among other things, the parties have agreed that the rates charged by EDS to General Motors for certain information processing activities and communications services will be reduced and that the parties will work together to achieve targets for increased structural cost reductions. General Motors will also be given the right to competitively bid and, subject to certain restrictions, outsource a limited portion of its IT service requirements to third party providers. In addition, commencing in 1997, the payment terms relating to IT services provided by EDS will be revised over a two-year period to extend the due dates for payments from General Motors. The Master Services Agreement provides for termination in the event of material default by either party, non-payment by GM, the insolvency of either party and certain changes in control of EDS. The GM Board believes that the changes reflected in the Master Services Agreement are necessary (i) in light of the fact that, after the Split-Off, EDS will no longer be a subsidiary of General Motors and the Capital Stock Committee will no longer be able to monitor the IT service arrangements between the parties, (ii) to reflect the evolutionary nature of the General Motors-EDS customer relationship and the IT services industry and (iii) to provide additional assurances to General Motors, as EDS' largest customer, that the IT services performed by EDS will remain competitive. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements." Negotiating Teams In order to ensure that the terms of the Split-Off would be fair to all classes of GM common stockholders, the GM Board determined that it was appropriate to institute a process of arm's-length negotiation between separate teams acting on behalf of each of the groups of GM stockholders that could be deemed to have divergent interests in the Split-Off. Accordingly, in August 1995, the GM Board appointed two management negotiating teams. One team, which consisted of executive officers of General Motors (the "GM Team"), was charged with negotiating recommended terms of the Split-Off from the perspective of the holders of $1 2/3 Common Stock and the Class H Common Stock. The other team, which consisted of executive officers of EDS (the "EDS Team"), was charged with negotiating recommended terms of the Split-Off from the perspective of the holders of Class E Common Stock. The GM Team and the EDS Team negotiated the terms of the IT Services Agreements and the Separation Agreement, the amount of the Special Inter-Company Payment and the other material terms of the Transactions and recommended such terms to the Capital Stock Committee and the GM Board. Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated The GM Board has received an opinion from Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), dated March 31, 1996 (the "Merrill Lynch Fairness Opinion"), that, as of that date and on the basis of and subject to the assumptions, limitations and other matters set forth therein, the Financial Effects of the Transactions (as defined in the Merrill Lynch Fairness Opinion) are fair, from a financial point of view, to General Motors and, accordingly, to General Motors' common stockholders after consummation of the Merger, namely the holders of the $1 2/3 Common Stock and the Class H Common Stock. The Merrill Lynch Fairness Opinion, which sets forth the assumptions made, the matters considered and the limits on the review undertaken by Merrill Lynch, is attached as Appendix B-1 to this Solicitation Statement/Prospectus and should be read in its entirety. For information relating to the Merrill Lynch Fairness Opinion, see "Special Factors--Fairness Opinions--Merrill Lynch Fairness Opinion." Fairness Opinions of Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated The GM Board has received a written opinion from each of Lehman Brothers Inc. ("Lehman Brothers") and Morgan Stanley & Co. Incorporated ("Morgan Stanley," and together with Lehman Brothers, the "EDS Team Financial Advisors"), each dated March 31, 1996 (the "Lehman Brothers and Morgan Stanley Fairness Opinions"), to the effect that, as of that date and on the basis of and subject to the assumptions, limitations and other matters set forth therein, the financial effect of the Split-Off Transactions (as defined in the Lehman 4 Brothers and Morgan Stanley Fairness Opinions) taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock. Assumptions made, matters considered and limits on the review undertaken by Lehman Brothers and Morgan Stanley, respectively, are set forth in the Lehman Brothers and Morgan Stanley Fairness Opinions, which are attached as Appendix B-2 and B-3, respectively, to this Solicitation Statement/Prospectus and should be read in their entirety. For information relating to the Lehman Brothers and Morgan Stanley Fairness Opinions, including a discussion of certain of the factors considered by EDS Team Financial Advisors in reaching their respective opinions, see "Special Factors--Fairness Opinions--EDS Team Financial Advisors Fairness Opinions." Advantages and Disadvantages of the Split-Off to the Holders of $1 2/3 Common Stock and Class H Common Stock Factors considered by the Capital Stock Committee and the GM Board to have a positive effect on the holders of the $1 2/3 Common Stock include the removal of certain existing and potential business conflicts between EDS and certain other GM business units; any decrease in GM's pension expense and funding obligations that may be caused by any appreciation resulting from the Split-Off in the EDS Common Stock to be owned by the pension plans for GM's hourly-rate and salaried employees; the receipt of the Special Inter-Company Payment; the terms of the new IT Services Agreements; and the elimination of the potential recapitalization of the Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio upon a disposition by GM of substantially all of the business of EDS. Certain of these factors, including the removal of potential business conflicts between EDS and Hughes and, with respect to Delco Electronics Corporation ("Delco"), the terms of the new IT Services Agreements, were also considered to have a positive effect on the holders of Class H Common Stock. The factors considered by the Capital Stock Committee and the GM Board to have a negative effect on the holders of the $1 2/3 Common Stock include the loss of ownership of its IT provider, EDS, the possible effect of the Split-Off on GM's credit rating and credit profile and the loss of the ability of General Motors to elect to recapitalize shares of Class E Common Stock as shares of $1 2/3 Common Stock. See "Special Factors--Background of the Split-Off--March 3, 1996 Capital Stock Committee Meeting," "--March 22, 1996 Capital Stock Committee Meeting," "--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions" and "--Fairness Opinions." Advantages and Disadvantages of the Split-Off to the Holders of Class E Common Stock Factors considered by the Capital Stock Committee and the GM Board to have a positive effect on the holders of the Class E Common Stock included the benefits of owning an equity security like EDS Common Stock rather than Class E Common Stock, which is a derivative or "tracking" security; the removal of constraints on EDS' ability, as a subsidiary of GM, to participate in strategic alliances, including the ability to use EDS Common Stock in large acquisitions; the availability of new market opportunities and increased growth potential for EDS; lower cost of and better access to capital for EDS; the possibility that EDS Common Stock would be included in the Standard & Poor's 500 Index after the Split-Off; the release of EDS from certain liabilities relating to GM's U.S. pension plans; and the potential of holders of EDS Common Stock to realize premiums over prevailing market prices in connection with certain corporate transactions, including tender offers and other change of control transactions. The factors considered by the Capital Stock Committee and the GM Board to have a negative effect on the holders of Class E Common Stock were the payment of the Special Inter-Company Payment; the terms of the new IT Services Agreements; and the loss of the right to recapitalization of the Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio upon a disposition by GM of substantially all of the business of EDS and under certain other circumstances. See "Special Factors--Background of Split-Off--March 3, 1996 Capital Stock Committee Meeting," "--March 22, 1996 Capital Stock Committee Meeting," "-- Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions" and "--Fairness Opinions." Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions The Capital Stock Committee, which consists entirely of independent directors, has unanimously recommended that the GM Board proceed with the Transactions as being in the best interests of, and fair to, 5 General Motors and each class of GM common stockholders. Based upon, among other things, the GM Board's review and consideration of the terms and conditions of the Transactions and related matters, including the process of arm's-length negotiation established by the GM Board in order to develop the terms of the Split-Off, the oversight of such process and the GM/EDS relationship by the Capital Stock Committee and its recommendation, the reports and recommendations of the GM Team, the EDS Team and GM executive management, and the Merrill Lynch Fairness Opinion and the Lehman Brothers and Morgan Stanley Fairness Opinions, the GM Board has determined that the Transactions are in the best interests of, and fair to, General Motors and each class of GM common stockholders. Accordingly, the GM Board has unanimously approved the Transactions and recommends that General Motors common stockholders execute consents approving the Transactions, including the adoption of the Merger Agreement. For a description of the factors considered by the Capital Stock Committee and the GM Board in reaching their respective determinations, see "Special Factors--Background of the Split-Off" and "--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions." Vote Required for Approval; Voting Securities Owned by Certain Persons Consummation of the Transactions is conditioned upon, among other things, receiving the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. For purposes of the vote described in clause (i) above, and as provided for in the General Motors Certificate of Incorporation, holders of $1 2/3 Common Stock will be entitled to one vote per share, holders of Class E Common Stock will be entitled to one-eighth of a vote per share and holders of Class H Common Stock will be entitled to one-half of a vote per share. See "Solicitation of Written Consent of General Motors Common Stockholders." As of the Record Date, directors and executive officers of General Motors together held less than 1% of the outstanding shares of each class of GM common stock. As of the Record Date, pension, savings and incentive plans of General Motors (excluding its subsidiaries), including the GM Hourly Plan Special Trust, together beneficially owned approximately 14% of the $1 2/3 Common Stock outstanding, approximately 36% of the Class E Common Stock outstanding and approximately 5% of the Class H Common Stock outstanding. As of the Record Date, persons expected to be directors and executive officers of EDS upon consummation of the Split-Off together held less than 1% of the outstanding shares of each class of GM common stock. See "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS." Risk Factors Regarding EDS after the Split-Off Holders of Class E Common Stock will receive shares of EDS Common Stock in the Split-Off and should therefore be aware of certain risk factors with respect to an investment in EDS Common Stock, including that (i) the EDS Board may consider and implement after the Split-Off a dividend policy for EDS Common Stock that is different than the dividend policy that the GM Board has maintained with respect to the Class E Common Stock; (ii) it is anticipated that EDS may incur substantially more debt after the Split-Off than it has had while a subsidiary of GM and will borrow approximately $500 million to finance the Special Inter-Company Payment; (iii) there is currently no public market for EDS Common Stock and no assurance can be given that the trading price of a share of EDS Common Stock after the Split-Off will be equal to or greater than the trading price of a share of Class E Common Stock prior to the Split-Off; (iv) although the percentage of EDS' total revenues attributable to GM and its affiliates has decreased significantly in recent years, GM will continue to account for a substantial portion of EDS' revenues upon consummation of the Split-Off; (v) the GM Hourly Plan Special Trust will hold approximately 31% of the outstanding EDS Common Stock immediately after the consummation of the Split-Off; (vi) there can be no assurance that the Split-Off will enable EDS to enter into major strategic 6 alliances and take advantage of other growth opportunities or otherwise achieve the business objectives described herein; (vii) after the Split-Off, EDS may no longer be able to benefit from General Motors' worldwide network of business relationships with companies and government contacts; and (viii) the Restated Certificate of Incorporation of EDS (after giving effect to the Split-Off, the "EDS Certificate of Incorporation") and the EDS Bylaws (after giving effect to the Split-Off, the "EDS Bylaws"), as well as the EDS Rights Agreement (as hereinafter defined) and the provisions of certain other agreements, could have the effect of delaying, deferring or preventing a change in control of EDS after the Split-Off. See "Risk Factors Regarding EDS after the Split-Off." Risk Factors Regarding General Motors after the Split-Off Holders of $1 2/3 Common Stock and Class H Common Stock should be aware of certain risk factors, including that after the Split-Off, (i) GM will no longer own the outstanding stock of EDS and, accordingly, its balance sheet and income statement will no longer reflect the assets and operations of EDS; (ii) General Motors will no longer be able to consider the use of EDS funds and assets for GM's other businesses or corporate needs and the holders of $1 2/3 Common Stock and Class H Common Stock will lose their rights to share in the distribution of EDS' equity and assets upon the liquidation of General Motors; (iii) so long as the GM Hourly Plan Special Trust holds any EDS Common Stock, any appreciation or depreciation in the value of such stock will affect the level of GM's pension expense and unfunded pension liability; and (iv) GM will no longer have an ownership interest in its principal IT provider, and its rights with respect to IT services provided by EDS will be derived solely by contract. See "Risk Factors Regarding General Motors after the Split-Off." Risk Factors Regarding Non-Consummation of the Split-Off Holders of all classes of General Motors common stock should be aware of certain factors if the Split-Off is not consummated, including that (i) there are certain actual and potential conflicts between the businesses of EDS and the other businesses of General Motors, as well as certain business objectives of EDS, that would need to be addressed in a different manner if EDS were to remain a subsidiary of General Motors, and there can be no assurance that the GM Board will be able to address these conflicts and objectives in a manner that will not have an adverse effect on the business, financial condition or results of operations of EDS or General Motors or on the market price of any class of GM common stock, and (ii) GM management has advised EDS management that, if the Split-Off is not consummated, General Motors would seek substantial changes to the Existing IT Services Agreements, including implementation of substantially all of the changes reflected in the IT Services Agreements, although no agreement has been reached between GM and EDS regarding the terms on which EDS will provide IT services to GM if the Split-Off is not consummated, and the Existing IT Services Agreements will remain in effect until GM and EDS agree to changes or the GM Board, upon recommendation of the Capital Stock Committee, determines that particular changes should be made and that such changes are fair to all classes of GM common stockholders. No Appraisal Rights General Motors stockholders will not be entitled to any appraisal rights in connection with the Transactions. See "The Split-Off--No Appraisal Rights." 7 Summary Comparison of Class E Common Stock and EDS Common Stock The following is a summary comparison of the terms of the outstanding Class E Common Stock and the EDS Common Stock proposed to be distributed in the Split- Off. For more detailed information regarding the terms of the Class E Common Stock and EDS Common Stock, see "Class E Common Stock," "EDS Capital Stock" and "Comparison of Class E Common Stock and EDS Common Stock." CLASS E COMMON STOCK EDS COMMON STOCK GENERAL............. Holders of Class E Common Holders of EDS Common Stock Stock are stockholders of will be stockholders of EDS, General Motors, not of which will no longer be a EDS, and have an interest subsidiary of General Motors, in the equity and assets and will have an equity in- of General Motors, which terest in EDS. EDS is a Dela- includes 100% of the ware corporation. stock of EDS. General Mo- tors is a Delaware corpo- ration. DIVIDEND POLICY..... Under the General Motors Under Delaware law and the Certificate of Incorpora- EDS Certificate of Incorpora- tion, dividends on Class tion, dividend policy with E Common Stock may be de- respect to the EDS Common clared and paid only to Stock will be determined by the extent of the sum of the EDS Board. EDS management (i) the paid in surplus intends to recommend to the of General Motors attrib- EDS Board at its first meet- utable to the Class E ing following consummation of Common Stock plus (ii) an the Split-Off that EDS con- allocated portion of the tinue to pay quarterly divi- earnings of General Mo- dends through 1996 in an tors attributable to EDS, amount equal to $0.15 per determined as described share. The EDS Board will not herein under "Class E be required to follow such Common Stock" (the recommendation by EDS manage- "Available Separate Con- ment. The EDS Board will be solidated Net Income" of free to adopt such dividend EDS). The current divi- policy as it deems appropri- dend policy of the GM ate and, during or after Board is to pay dividends 1996, to change its dividend on Class E Common Stock, policies and practices from when, as and if declared time to time and to decrease by the GM Board, at an or increase the dividends annual rate equal to ap- paid on the EDS Common Stock proximately 30% of the on the basis of EDS' finan- Available Separate Con- cial condition, earnings and solidated Net Income of capital requirements and EDS for the prior year. other factors the EDS Board may deem relevant. VOTING RIGHTS....... Holders of Class E Common Holders of EDS Common Stock Stock are entitled to will be entitled to cast one cast one-eighth of a vote vote per share on all matters per share on all matters submitted to a vote of the submitted to a vote of common stockholders of EDS. the common stockholders of General Motors and, with specified excep- tions, such holders vote together as a single class with the holders of $1 2/3 Common Stock and Class H Common Stock on all matters based on their respective voting rights as set forth in the General Motors Cer- tificate of Incorpora- tion. 8 CLASS E COMMON STOCK EDS COMMON STOCK LIQUIDATION RIGHTS.. Upon the liquidation, Upon the liquidation, disso- dissolution or winding up lution or winding up of EDS, of General Motors, after after the preferential or the holders of GM Pre- participating amounts to ferred Stock (if any) and which the holders of EDS Pre- GM Preference Stock re- ferred Stock (if any) are en- ceive the full preferen- titled have been paid or set tial amounts to which aside for payment, holders of they are entitled, hold- EDS Common Stock will be en- ers of Class E Common titled to receive any assets Stock will be entitled to available for distribution to share in the distribution stockholders. of the remaining avail- able assets of General Motors with all other holders of GM common stock in proportion to their respective liquida- tion units. Holders of Class E Common Stock are entitled to a number of liquidation units equal to approximately one- eighth per share, com- pared to approximately one per share for holders of $1 2/3 Common Stock and approximately one- half per share for hold- ers of Class H Common Stock. RECAPITALIZATION All outstanding shares of Holders of EDS Common Stock RIGHTS.............. Class E Common Stock may will have no rights compara- be recapitalized as ble to those of holders of shares of $1 2/3 Common Class E Common Stock with re- Stock (i) at any time af- spect to the potential recap- ter December 31, 1995, in italization of Class E Common the sole discretion of Stock into $1 2/3 Common the GM Board (provided, Stock at a 120% exchange ra- that during each of the tio. Holders of EDS Common five full fiscal years Stock will, however, have the preceding the recapitali- potential to realize premiums zation, the aggregate over prevailing market prices cash dividends on Class E for EDS Common Stock in con- Common Stock have been no nection with certain corpo- less than a specified rate transactions, including percentage of the Avail- tender offers for EDS Common able Separate Consoli- Stock and change in control dated Net Income of EDS transactions involving EDS, for the prior fiscal although there can be no as- year) and (ii) automati- surance in this regard. cally, if at any time General Motors disposes of substantially all of the business of EDS. In the event of any such re- capitalization, each holder of Class E Common Stock would receive shares of $1 2/3 Common Stock having a market value, as of a specified date, equal to 120% of the market value of such holder's Class E Common Stock on such date. As a result of the Merger, the General Motors Certifi- cate of Incorporation will be amended so that the Split-Off will not result in any such recap- italization. 9 CLASS E COMMON STOCK EDS COMMON STOCK CERTAIN LIMITATIONS ON CHANGES IN CONTROL............. The EDS Certificate of Incor- poration and the EDS Bylaws The holders of Class E contain certain provisions, Common Stock are not sub- such as a "fair price" provi- ject to provisions compa- sion, which could have the rable to the "fair price" effect of delaying, deferring provision in the EDS Cer- or preventing a change in tificate of Incorporation control of EDS and of limit- or the provisions of the ing any opportunity to real- EDS Rights Agreement. ize premiums over prevailing market prices for EDS Common Stock in connection there- with. In addition, the Rights Agreement (the "EDS Rights Agreement") to which EDS is a party provides for preferred stock purchase rights that could have the same effect. One such right will be at- tached to each share of EDS Common Stock distributed upon conversion of a share of Class E Common Stock in the Split-Off. LISTING............. The Class E Common Stock Application has been made to is listed and traded on list the EDS Common Stock on the NYSE. the NYSE, and such applica- tion has been granted pending notice of issuance. Certain U.S. Federal Income Tax Considerations General Motors has received a ruling (the "Tax Ruling") from the IRS to the effect that the Split-Off will be treated as a tax-free exchange under Section 355 of the Code. Accordingly, for U.S. federal income tax purposes, no gain or loss will be recognized by either General Motors or holders of Class E Common Stock on the exchange of EDS Common Stock for Class E Common Stock pursuant to the Split-Off. The Tax Ruling is based on certain factual representations and assumptions, however, and does not address U.S. state or local or non-U.S. tax consequences or the tax consequences of transactions (if any) effectuated prior to or after the Split-Off. If any such factual representations or assumptions are incorrect or untrue in any material respect, the Tax Ruling may be invalidated. Current Treasury Regulations require each General Motors stockholder who receives EDS Common Stock pursuant to the Split-Off to attach to such stockholder's federal income tax return for the year in which the Split-Off occurs a detailed statement setting forth such data as may be appropriate in order to show the applicability of Section 355 of the Code to the Split-Off. At the time that the letter of transmittal is sent to all current holders of Class E Common Stock, General Motors will provide such information to each holder of Class E Common Stock receiving EDS Common Stock in the Split-Off in order to enable each such holder to comply with such regulations. For a more detailed discussion of the federal income tax consequences of the Split-Off to General Motors and its stockholders, see "Special Factors--Certain U.S. Federal Income Tax Considerations." GM--PBGC Agreement GM expects that, effective upon consummation of the Split-Off, the U.S. Pension Benefit Guaranty Corporation (the "PBGC") will release EDS and its subsidiaries from all existing and potential liabilities relating to General Motors' U.S. pension plans under Title IV of the Employee Retirement Income Security Act of 1974, 10 as amended ("ERISA"), pursuant to the procedures set forth in an agreement dated March 3, 1995 between General Motors and the PBGC (as amended, the "GM- PBGC Agreement"). The PBGC has executed appropriate release instruments and has delivered them to an escrow agent for delivery to GM and EDS following consummation of the Split-Off. The GM-PBGC Agreement was entered into in connection with the March 1995 contribution by GM to the GM Hourly Plan of 173.2 million shares of Class E Common Stock and $4 billion in cash. See "Special Factors--Effects of the Split-Off" and "--GM-PBGC Agreement." Certain Litigation Two purported class actions relating to the Split-Off, the consolidated action Solomon v. General Motors Corporation, et al. and TRV Holding Company v. General Motors Corporation, et al., and Ward, et al., as Trustees for the Eisenberg Children's Irrevocable Trust II v. General Motors Corporation, et al., have been filed against General Motors and its directors in Delaware Chancery Court. Both of the complaints seek injunctive relief against the Split-Off, and the Solomon/TRV complaints seek monetary damages in addition. See "Special Factors--Certain Litigation." General Motors believes that the suits are without merit and intends to defend against them vigorously. Regulatory Requirements GM and EDS believe that no material U.S. federal or other regulatory requirements remain to be complied with by GM or EDS, and no material approvals thereunder must be obtained by GM or EDS, in order to consummate the Split-Off. However, there may be certain regulatory (e.g., securities and competition) requirements to be complied with and approvals to be obtained by GM and EDS outside of the United States in connection with the consummation of the Split- Off. GM and EDS are currently working together to evaluate and comply in all material respects with such requirements and to obtain all such approvals, and do not anticipate that any such foreign requirements will hinder, delay or restrict in any material respect consummation of the Transactions. See "The Split-Off--Regulatory Requirements." AMENDED EDS INCENTIVE PLAN General The Amended EDS Incentive Plan is intended to amend and restate the Existing EDS Incentive Plan in order, among other things, to provide that awards made thereunder will be in the form of EDS Common Stock rather than Class E Common Stock. Awards to employees of EDS under the Amended EDS Incentive Plan may be made in the form of stock options, stock appreciation rights, restricted or non-restricted stock or units denominated in stock, cash awards, performance awards or any combination of the foregoing. Awards to nonemployee directors of EDS under such plan will be in the form of grants of stock options and restricted stock. The aggregate number of shares of EDS Common Stock that will be available for grant under the Amended EDS Incentive Plan (in addition to shares that are subject to outstanding awards at the time of consummation of the Split-Off) will be 60,000,000, which is approximately 35% less than the number of shares of Class E Common Stock that are currently available for grant under the Existing EDS Incentive Plan. The Amended EDS Incentive Plan will be administered by the Compensation and Benefits Committee of the EDS Board. Stockholder Approval; Vote Required Approval of the Amended EDS Incentive Plan by the common stockholders of General Motors is being sought to ensure that the deductibility by EDS, for U.S. federal income tax purposes, of certain performance-based awards made under the Amended EDS Incentive Plan will not be limited by Section 162(m) of the Code. Approval of the Amended EDS Incentive Plan is independent of the vote on the Transactions and will require the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, and (ii) 11 a majority of the outstanding shares of Class E Common Stock, voting as a separate class. See "Solicitation of Written Consent of General Motors Common Stockholders." Effectiveness of Plan If the Amended EDS Incentive Plan is approved by the stockholders of General Motors, it will become effective in its entirety upon consummation of the Split-Off. If the Amended EDS Incentive Plan is not approved by the stockholders of General Motors, the Existing EDS Incentive Plan will remain in effect (with certain modifications intended to reflect, among other things, the assumption of such plan by EDS upon the consummation of the Split-Off) and the Amended EDS Incentive Plan will become effective upon the consummation of the Split-Off to the extent that it relates to nonemployee directors of EDS but will not become effective to the extent that it relates to employees of EDS. See "EDS Management and Executive Compensation--Amended EDS Incentive Plan" and "--Existing EDS Incentive Plan." 12 CERTAIN PER SHARE AND OTHER FINANCIAL INFORMATION The following table presents selected historical and pro forma per share data for all three classes of GM common stock and selected pro forma per share data for the EDS Common Stock. The historical per share data as of and for the year ended December 31, 1995 have been derived from General Motors' Consolidated Financial Statements and should be read in conjunction with such Consolidated Financial Statements (including the notes thereto) and Management's Discussion and Analysis in the GM 1995 Form 10-K, which is incorporated herein by reference, including the information with respect to EDS in Exhibit 99(a) thereto. The pro forma per share data for all three classes of GM common stock and the EDS Common Stock as of and for the year ended December 31, 1995 give effect to the Transactions and have been derived from, and should be read in conjunction with, the financial data set forth under "General Motors Unaudited Pro Forma Condensed Consolidated Financial Statements" and "EDS Unaudited Pro Forma Condensed Consolidated Financial Statements." The pro forma per share data for all three classes of GM common stock and the EDS Common Stock are not necessarily indicative of future operating results. GM COMMON STOCK HISTORICAL PER SHARE DATA
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995 ------------------------- $1 2/3 PAR VALUE CLASS E CLASS H --------- ------- ------- Book value per share (a)........................ $24.37 $3.11 $12.20 Cash dividends per share........................ 1.10 0.52 0.92 Earnings per share attributable to common stocks............................... 7.21 1.96 2.77
GM COMMON STOCK PRO FORMA PER SHARE DATA(B)
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995 ------------------------- $1 2/3 PAR VALUE CLASS E CLASS H --------- ------- ------- Book value per share (a)........................ $22.30 $-- $11.15 Earnings per share attributable to common stocks............................... 7.41 -- 2.77
EDS COMMON STOCK PRO FORMA PER SHARE DATA (C)
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995 ---------------------------- Book value per share (d)..................... $9.16 Earnings per share........................... 1.64
- -------- (a) Determined based on the liquidation rights with respect to the assets of General Motors associated with the three classes of General Motors common stock. For a description of such liquidation rights, see "Class E Common Stock." (b) Pro forma amounts reflect the removal of the assets and liabilities of EDS, the impact of the IT Services Agreements, the Special Inter-Company Payment and other items related to the Split-Off and the reclassification of EDS' operating results to income from discontinued operations. (c) Pro forma amounts include adjustments to reflect the impact of the IT Services Agreements, the Special Inter-Company Payment (including, with respect to EDS Common Stock, the financing thereof) and other items related to the Split-Off. For certain information regarding the anticipated 1996 financial impact of the Transactions on EDS, see "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations." (d) Calculated by dividing book value of the net assets of EDS by the number of shares of EDS Common Stock expected to be outstanding upon consummation of the Split-Off. 13 On August 4, 1995, the last trading day before General Motors announced that it intended to pursue a split-off of EDS through which EDS would become an independent, public company, the closing price of the Class E Common Stock, as reported on the NYSE Composite Tape, was $43 5/8, and the aggregate market value of the outstanding Class E Common Stock was approximately $19.1 billion. On such date, the closing price of the $1 2/3 Common Stock and the Class H Common Stock, as reported on the NYSE Composite Tape, was $48 1/4 and $41 7/8, respectively, and the aggregate market value of the outstanding $1 2/3 Common Stock and the outstanding Class H Common Stock was approximately $36.1 billion and $4.0 billion, respectively. On December 29, 1995, the last trading day before General Motors announced that it had received the Tax Ruling, the closing price of the Class E Common Stock, as reported on the NYSE Composite Tape, was $52, and the aggregate market value of the outstanding Class E Common Stock was approximately $22.8 billion. On such date, the closing price of the $1 2/3 Common Stock and the Class H Common Stock, as reported on the NYSE Composite Tape, was $52 7/8 and $49 1/8, respectively, and the aggregate market value of the outstanding $1 2/3 Common Stock and the outstanding Class H Common Stock was approximately $39.8 billion and $4.8 billion, respectively. On March 29, 1996, the last trading day before General Motors announced that the GM Board had approved the Transactions, the closing price of the Class E Common Stock, as reported on the NYSE Composite Tape, was $57, and the aggregate market value of the outstanding Class E Common Stock was approximately $27.7 billion. On such date, the closing price of the $1 2/3 Common Stock and the Class H Common Stock, as reported on the NYSE Composite Tape, was $53 1/4 and $63 1/4, respectively, and the aggregate market value of the outstanding $1 2/3 Common Stock and the outstanding Class H Common Stock was approximately $40.3 billion and $6.2 billion, respectively. GENERAL MOTORS RATIOS OF EARNINGS TO FIXED CHARGES (UNAUDITED) The following table presents GM's historical and pro forma ratio of earnings to fixed charges for the periods indicated. The historical ratio of earnings to fixed charges for the years ended December 31, 1995 and 1994 have been derived from General Motors' Consolidated Financial Statements and should be read in conjunction with such Consolidated Financial Statements (including the notes thereto) and Management's Discussion and Analysis in the GM 1995 Form 10-K, which is incorporated herein by reference, including the information with respect to EDS in Exhibit 99(a) thereto. The GM pro forma ratio of earnings to fixed charges for the year ended December 31, 1995 gives effect to the Transactions and has been derived from and should be read in conjunction with the financial data set forth under "General Motors Unaudited Pro Forma Condensed Consolidated Financial Statements." The GM pro forma ratio of earnings to fixed charges is not necessarily indicative of future operating results.
YEARS ENDED DECEMBER 31, ---------------------------------------------------------------------------- PRO FORMA 1995 1995 1994 --------- ---- ---- 2.42 2.52 2.51
For purposes of computing the ratio of earnings to fixed charges, "earnings" consist of consolidated income before cumulative effect of accounting change plus income taxes and fixed charges included in net income after eliminating the amortization of capitalized interest and the undistributed earnings of affiliates; "fixed charges" consist of interest and related charges on debt, that portion of rentals deemed to be interest, and interest capitalized in the period. For purposes of computing the pro forma ratio of earnings to fixed charges, "earnings" consist of pro forma income from continuing operations before cumulative effect of accounting change plus pro forma income taxes and pro forma fixed charges included in pro forma income from continuing operations after eliminating the pro forma amortization of capitalized interest and the pro forma undistributed earnings of affiliates; pro forma "fixed charges" consist of pro forma interest and related charges on debt, that portion of pro forma rentals deemed to be interest, and pro forma interest capitalized in the period. 14 GENERAL MOTORS SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA The following General Motors summary consolidated historical financial data have been derived from General Motors' Consolidated Financial Statements. Such data should be read in conjunction with General Motors' Consolidated Financial Statements (including the notes thereto) and Management's Discussion and Analysis in the GM 1995 Form 10-K, which is incorporated herein by reference, including the information with respect to EDS in Exhibit 99(a) thereto. The General Motors summary consolidated historical financial data as of and for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 have been derived from General Motors' Consolidated Financial Statements, which have been audited by Deloitte & Touche LLP, independent auditors. The summary consolidated financial data presented with GMAC on an equity basis as of and for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 are unaudited. The General Motors unaudited summary consolidated pro forma financial data as of and for the year ended December 31, 1995 give effect to the Transactions and have been derived from, and should be read in conjunction with, the financial data set forth under "General Motors Unaudited Pro Forma Condensed Consolidated Financial Statements." Pro forma data are not necessarily indicative of future financial position or operating results.
AS OF AND FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------------ PRO FORMA 1995(A) 1995(B) 1994(C) 1993 1992(D) 1991(E) ---------- ---------- ---------- ---------- ---------- ---------- (IN MILLIONS) OPERATING RESULTS Total net sales and revenues.............. $160,272.5 $168,828.6 $154,951.2 $138,219.5 $132,242.2 $123,108.8 ---------- ---------- ---------- ---------- ---------- ---------- Costs and expenses..... 151,763.5 159,052.3 146,597.9 134,694.2 134,338.3 126,180.3 Special provision for scheduled plant closings and other restructurings........ -- -- -- 950.0 1,237.0 2,820.8 ---------- ---------- ---------- ---------- ---------- ---------- Total costs and expenses............ 151,763.5 159,052.3 146,597.9 135,644.2 135,575.3 129,001.1 ---------- ---------- ---------- ---------- ---------- ---------- Income (Loss) from continuing operations before cumulative effect of accounting changes............... 6,134.5 6,932.5 5,658.7 2,465.8 (2,620.6) (4,992.0) ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss)...... $ 6,982.7 $ 6,880.7 $ 4,900.6 $ 2,465.8 $(23,498.3) $ (4,452.8) ========== ========== ========== ========== ========== ========== BALANCE SHEET DATA Cash and marketable securities............ $ 16,517.6 $ 16,642.9 $ 16,075.6 $ 17,962.7 $ 15,107.7 $ 10,192.4 ---------- ---------- ---------- ---------- ---------- ---------- Total assets........... 208,006.5 217,123.4 198,598.7 188,200.9 190,196.0 184,074.6 ---------- ---------- ---------- ---------- ---------- ---------- Notes and loans payable............... 81,221.7 83,323.5 73,730.2 70,441.2 82,592.3 94,022.1 ---------- ---------- ---------- ---------- ---------- ---------- Stockholders' equity... 18,748.7 23,345.5 12,823.8 5,597.5 6,225.6 27,327.6 ---------- ---------- ---------- ---------- ---------- ---------- Cumulative Amount Available for Payment of Dividends (f) Class E Common Stock.. $ -- $ 10,672.1 $ 3,752.1 $ 3,243.8 $ 2,546.4 $ 1,753.0 Class H Common Stock.. 2,909.5 2,909.5 2,169.3 1,886.7 1,582.9 1,218.5 $1 2/3 Par Value Common Stock......... 18,496.7 12,474.7 9,013.8 4,870.0 3,487.7 23,264.1 ---------- ---------- ---------- ---------- ---------- ---------- Total................ $ 21,406.2 $ 26,056.3 $ 14,935.2 $ 10,000.5 $ 7,617.0 $ 26,235.6 ========== ========== ========== ========== ========== ==========
15
AS OF AND FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------------ PRO FORMA 1995(A) 1995(B) 1994(C) 1993 1992(D) 1991(E) ---------- ---------- ---------- ---------- ---------- ---------- (IN MILLIONS) GM OPERATIONS WITH GMAC ON AN EQUITY BASIS: OPERATING RESULTS Total net sales and revenues.............. $143,753.7 $152,614.5 $141,576.0 $125,252.7 $118,571.6 $109,156.9 ---------- ---------- ---------- ---------- ---------- ---------- Costs and expenses..... 138,146.9 145,630.5 134,815.3 122,812.1 121,420.0 112,719.3 Special provision for scheduled plant closings and other restructurings........ -- -- -- 950.0 1,237.0 2,820.8 ---------- ---------- ---------- ---------- ---------- ---------- Total costs and expenses.............. 138,146.9 145,630.5 134,815.3 123,762.1 122,657.0 115,540.1 ---------- ---------- ---------- ---------- ---------- ---------- Income (Loss) from continuing operations before cumulative effect of accounting changes............... 6,134.5 6,932.5 5,651.3 2,465.8 (2,903.2) (4,660.5) ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss)...... $ 6,982.7 $ 6,880.7 $ 4,900.6 $ 2,465.8 $(23,498.3) $ (4,452.8) ========== ========== ========== ========== ========== ========== BALANCE SHEET DATA Cash and marketable securities............ $ 10,740.8 $ 10,866.1 $ 10,976.4 $ 10,485.0 $ 7,960.8 $ 4,419.4 ---------- ---------- ---------- ---------- ---------- ---------- Total assets........... 126,062.4 135,243.3 126,334.9 120,980.5 121,356.2 104,797.5 ---------- ---------- ---------- ---------- ---------- ---------- Long-term debt and capitalized leases.... 6,467.0 6,134.0 6,218.7 6,383.6 7,055.4 6,699.1 ---------- ---------- ---------- ---------- ---------- ---------- Stockholders' equity... 18,748.7 23,345.5 12,823.8 5,597.5 6,225.6 27,327.6 ---------- ---------- ---------- ---------- ---------- ----------
- -------- (a) The unaudited summary consolidated pro forma financial data give effect to the removal of assets and liabilities of EDS; the reclassification of EDS' operating results to income from discontinued operations; the receipt by GM of the Special Inter-Company Payment; adjustments to costs and expenses to reflect communication and information processing charges under the terms of the IT Services Agreements and additional selling, general, and administrative costs incurred as a result of the Split-Off; and income tax expense on the pro forma adjustments calculated at 38%. (b) In November 1995, the Emerging Issues Task Force of the Financial Accounting Standards Board reached a consensus on its Issue No. 95-1, "Revenue Recognition on Sales with a Guaranteed Minimum Resale Value." Adoption of this consensus, effective January 1, 1995, resulted in an unfavorable cumulative effect of $51.8 million, or $0.07 per share, attributable to $1 2/3 Common Stock. (c) Effective January 1, 1994, GM adopted Statement of Financial Accounting Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits." The unfavorable cumulative effect of adopting SFAS No. 112 was $758.1 million, or $751.3 million, or $1.05 per share, attributable to $1 2/3 Common Stock and $6.8 million, or $0.08 per share, attributable to Class H Common Stock. (d) GM adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1992. The unfavorable cumulative effect of adopting SFAS No. 106 was $20,687.3 million, or $33.38 per share, attributable to $1 2/3 Common Stock and $150.4 million, or $2.08 per share, attributable to Class H Common Stock. Also, effective January 1, 1992, Hughes Aircraft Company changed its revenue recognition policy for certain commercial businesses. The unfavorable effect of this change on 1992 earnings was $32.8 million, or $0.05 per share, attributable to $1 2/3 Common Stock, and $7.2 million, or $0.10 per share, attributable to Class H Common Stock. (e) Effective January 1, 1991, accounting procedures were changed to include in inventory general purpose spare parts previously charged directly to expense. The effect of this change on 1991 earnings was a favorable adjustment of $302.7 million, or $0.50 per share, attributable to $1 2/3 Common Stock, and $3.8 million, or $0.04 per share, attributable to Class H Common Stock. Also, GM adopted SFAS No. 109, "Accounting for Income Taxes," effective January 1, 1991. The favorable (unfavorable) cumulative effect of adopting SFAS No. 109 was $230.5 million, or $0.38 per share, attributable to $1 2/3 Common Stock, ($6.1) million, or ($0.03) per share, attributable to Class E Common Stock, and $8.3 million, or $0.09 per share, attributable to Class H Common Stock. (f) Amount of funds legally available as of such date for the payment of dividends on each class of GM common stock under the General Motors Certificate of Incorporation. 16 EDS SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA The following EDS summary consolidated historical financial data have been derived from EDS' Consolidated Financial Statements. Such data should be read in conjunction with EDS' Consolidated Financial Statements (including the notes thereto), which are included as Appendix C to this Solicitation Statement/Prospectus, and "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations." The EDS summary consolidated historical financial data as of and for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 have been derived from EDS' Consolidated Financial Statements, which have been audited by KPMG Peat Marwick LLP, independent auditors. The EDS unaudited summary consolidated pro forma financial data as of and for the year ended December 31, 1995 give effect to the Transactions and have been derived from, and should be read in conjunction with, the financial data set forth under "EDS Unaudited Pro Forma Condensed Consolidated Financial Statements." Pro forma data are not necessarily indicative of future financial position or operating results.
AS OF AND FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------------------ PRO FORMA 1995(A) 1995 1994 1993 1992 1991(B) --------- -------- --------- --------- --------- --------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) OPERATING RESULTS Systems and other contracts revenues General Motors and affiliates............ $ 3,715.3 $3,891.1 $ 3,547.2 $ 3,323.7 $ 3,348.5 $ 3,362.2 Outside customers...... 8,531.0 8,531.0 6,412.9 5,183.6 4,806.7 3,666.3 --------- -------- --------- --------- --------- --------- Total revenues......... 12,246.3 12,422.1 9,960.1 8,507.3 8,155.2 7,028.5 --------- -------- --------- --------- --------- --------- Costs and expenses Cost of revenues....... 9,604.6 9,601.6 7,529.4 6,390.6 6,205.8 5,415.1 Selling, general, and administrative........ 1,299.0 1,291.5 1,187.1 1,005.4 969.3 761.9 --------- -------- --------- --------- --------- --------- Total costs and expenses.............. 10,903.6 10,893.1 8,716.5 7,396.0 7,175.1 6,177.0 --------- -------- --------- --------- --------- --------- Operating income........ 1,342.7 1,529.0 1,243.6 1,111.3 980.1 851.5 Interest and other income, net............ (97.0) (62.0) 40.6 20.0 20.7 42.2 --------- -------- --------- --------- --------- --------- Income before income taxes.................. 1,245.7 1,467.0 1,284.2 1,131.3 1,000.8 893.7 Provision for income taxes.................. 450.7 528.1 462.3 407.3 365.3 330.7 Cumulative effect of accounting change(b)... -- -- -- -- -- (15.5) --------- -------- --------- --------- --------- --------- Net Income/Separate Consolidated Net Income (c)(d)................. $ 795.0 $ 938.9 $ 821.9 $ 724.0 $ 635.5 $ 547.5 ========= ======== ========= ========= ========= ========= Average number of shares of Class E Common Stock outstanding (Numerator) (d).................... -- 404.6 260.3 243.0 209.1 195.3 Class E Dividend Base (Denominator) (d)...... -- 483.7 481.7 480.6 479.3 478.1 Available Separate Consolidated Net Income (d).................... -- $ 795.5 $ 444.4 $ 367.2 $ 278.4 $ 223.6 Earnings per share attributable to Class E Common Stock (d).............. -- 1.96 1.71 1.51 1.33 1.14 Dividends per share of Class E Common Stock (d).................... -- 0.52 0.48 0.40 0.36 0.32 Weighted average number of EDS common shares outstanding............ 483.6 -- -- -- -- -- Net income per share.... $ 1.64 -- -- -- -- -- BALANCE SHEET DATA Cash and marketable securities............. $ 638.6 $ 638.6 $ 757.8 $ 607.5 $ 587.9 $ 415.8 Current assets.......... 4,368.1 4,381.5 3,354.1 2,506.8 2,157.0 1,945.6 Total assets (c)(e)..... 10,785.8 10,832.4 8,786.5 6,942.1 6,123.5 5,703.2 Current liabilities..... 3,296.4 3,261.4 2,873.2 2,160.4 1,903.1 2,396.7 Long-term debt.......... 2,352.8 1,852.8 1,021.0 522.8 561.1 281.9 Stockholders' equity (e)(f)................. 4,430.2 4,978.5 4,232.5 3,617.4 3,063.4 2,610.3 OTHER DATA Depreciation and amortization........... $ 1,107.8 $1,107.8 $ 771.1 $ 626.8 $ 603.2 $ 524.4 Expenditures for property and equipment.......... 1,261.5 1,261.5 1,186.0 816.4 639.0 673.2
17 - -------- (a) Pro forma amounts include adjustments to reflect the impact of the IT Services Agreements, the Special Inter-Company Payment (and the financing thereof) and other items related to the Split-Off. For certain information regarding the anticipated 1996 financial impact of the Transactions, see "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations." (b) Effective January 1, 1991, GM and its affiliates (including EDS) adopted SFAS No. 109, "Accounting for Income Taxes." The cumulative effect of this accounting change at January 1, 1991 was a charge of $15.5 million, of which $6.1 million, or $0.03 per share, was attributable to Class E Common Stock. (c) Separate Consolidated Net Income and Total assets exclude the effects of purchase accounting adjustments relating to General Motors' 1984 acquisition of EDS. (d) Calculated for purposes related to the Class E Common Stock, which will be converted into EDS Common Stock on a one-for-one basis pursuant to the Split-Off. (e) Holders of Class E Common Stock have no direct rights in the equity or assets of EDS, but rather have rights in the equity and assets of General Motors (which include 100% of the stock of EDS). (f) General Motors' equity in its indirect wholly owned subsidiary, EDS (excluding the effects of purchase accounting adjustments relating to General Motors' 1984 acquisition of EDS). 18 RISK FACTORS REGARDING EDS AFTER THE SPLIT-OFF Holders of Class E Common Stock will receive shares of EDS Common Stock in the Split-Off and should therefore consider carefully, in addition to the other information set forth in this Solicitation Statement/Prospectus, the following factors. DIVIDEND POLICY The payment of dividends on the Class E Common Stock is subject to the policies and practices of the GM Board. The current dividend policy of the GM Board is to pay quarterly dividends on the Class E Common Stock, when, as and if declared by the GM Board, at an annual rate equal to approximately 30% of the Available Separate Consolidated Net Income of EDS for the prior year. Under the current policies and practices of the GM Board, the quarterly dividend paid on each share of Class E Common Stock was $0.13 per share during 1995. In February 1996, the GM Board increased the quarterly dividend on Class E Common Stock to $0.15 per share. The GM Board reserves the right to reconsider from time to time its policies and practices regarding dividends on Class E Common Stock and to increase or decrease the dividends paid on Class E Common Stock on the basis of General Motors' consolidated financial position, including liquidity, and other factors, including the earnings and consolidated financial position of EDS. See "Class E Common Stock." Following the Split-Off, the dividend policy and practices with respect to the EDS Common Stock will be as determined and as may be changed from time to time by the EDS Board, not the GM Board. Under Delaware law and the EDS Certificate of Incorporation, the EDS Board is not required to declare dividends on the EDS Common Stock. EDS management intends to recommend to the EDS Board at its first meeting following consummation of the Split-Off that EDS continue to pay quarterly dividends through 1996 in an amount equal to $0.15 per share. The EDS Board will not be required to follow such recommendation by EDS management. The EDS Board will be free to adopt such dividend policy as it deems appropriate and, during or after 1996, to change its dividend policies and practices from time to time and to decrease or increase the dividends paid on the EDS Common Stock on the basis of EDS' financial condition, earnings and capital requirements and other factors the EDS Board may deem relevant. See "Plans and Proposals of EDS--EDS Dividend Policy." INCREASED LEVERAGE; NO ASSURANCE OF ACCESS TO CAPITAL After the Split-Off, it is expected that EDS may over time incur substantially more debt than it has while a subsidiary of GM. EDS expects that it will borrow approximately $500 million under its existing commercial paper and committed credit facilities to finance the Special Inter-Company Payment. In addition, EDS' financial leverage is expected to increase in the future as it borrows additional funds to meet its growing capital needs. EDS management believes that EDS' stable revenues should permit it to sustain a higher debt to equity ratio than that which it currently maintains as a subsidiary of GM and that such a higher level of debt will be necessary to provide EDS with the capital it needs to fund future growth. The degree to which EDS is leveraged, however, could under certain circumstances limit its financial and operating flexibility. To the extent that EDS is more highly leveraged following the Split-Off, EDS may also be required to pay higher interest rates on its outstanding borrowings. Furthermore, although General Motors and EDS believe that the Split-Off will enhance EDS' access to the capital necessary for investment in its business growth, there can be no assurance in this regard. See "Special Factors--Purposes of the Split-Off" and "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources." NO PRIOR PUBLIC MARKET FOR EDS COMMON STOCK; NO ASSURANCE AS TO MARKET PRICE Although the Class E Common Stock (which is a stock of General Motors designed to provide holders with financial returns based on the performance of EDS) has been traded publicly since its initial issuance in 1984, there has been no public market for the EDS Common Stock since such time. Because, among other things, EDS Common Stock will be a security of EDS (rather than a security of GM), with different terms than the Class E Common Stock (including no rights comparable to the potential recapitalization of Class E Common Stock into 19 $1 2/3 Common Stock at a 120% exchange ratio under certain circumstances), there can be no assurance that the public market for EDS Common Stock will be similar to the public market for Class E Common Stock. See "EDS Capital Stock" and "Comparison of Class E Common Stock and EDS Common Stock." Based on the one-for-one exchange ratio for the Split-Off, approximately 485 million shares of EDS Common Stock will be issued and outstanding immediately after the Split- Off, which shares have been approved for listing on the NYSE subject to notice of issuance. Based on the ownership of Class E Common Stock on the Record Date, immediately after the Split-Off, shares of EDS Common Stock will be broadly distributed among numerous individual and institutional holders, and approximately 149.5 million shares will be held by the GM Hourly Plan Special Trust. Ultimately, the value of each share of EDS Common Stock will be principally determined in the trading markets and could be influenced by many factors, including the terms and conditions of the Split-Off, operations of EDS, the growth and expansion of EDS' business, investors' expectations of EDS' prospects, trends and uncertainties affecting the IT industry as a whole, issuances and repurchases of EDS Common Stock, and general economic and other conditions. See "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations." There can be no assurance that the trading value of each share of EDS Common Stock immediately after the Split-Off will be consistent with the trading value of each share of Class E Common Stock immediately before the Split-Off. The trading value of EDS Common Stock could be higher or lower than the trading value of Class E Common Stock, and GM and EDS are unable to estimate whether such difference (whether favorable or unfavorable) will be material to holders of EDS Common Stock. DEPENDENCE ON MAJOR CUSTOMER; CHANGES IN PRICING AND TERMS Although the percentage of EDS' total revenues attributable to GM and its affiliates has decreased significantly in recent years as a result of the revenue growth of EDS' non-GM business, General Motors continues to account for a substantial portion of EDS' revenues. During the year ended December 31, 1995, the portion of EDS' revenues (excluding interest and other income) attributable to the performance of IT and other services on behalf of General Motors and its affiliates was approximately 31%. The loss of General Motors as an ongoing major customer of EDS would have a material adverse effect on EDS. Immediately prior to the Merger, General Motors and EDS will enter into the Master Services Agreement and certain other related IT Services Agreements. The IT services to be provided by EDS under the IT Services Agreements will generally be similar to those provided to General Motors under the Existing IT Services Agreements. However, unlike the Existing Master Services Agreement (which does not have a fixed term, but provides that it may be terminated by either party in the event of the sale of all or substantially all of the assets or stock of EDS to a non-GM entity), the Master Services Agreement provides for an initial term of 10 years from the date upon which the Split-Off is consummated, which may be extended by agreement of the parties. Furthermore, the Master Services Agreement will provide General Motors with termination rights under certain circumstances, including upon the occurrence of certain changes in control of EDS. In addition, the IT Services Agreements provide that certain significant changes will be made to the pricing and terms of services provided by EDS. Among other things, the parties have agreed that the rates charged by EDS to General Motors for certain information processing activities and communication services will be reduced and that the parties will work together to achieve targets for increased structural cost reductions. General Motors will also be given the right to competitively bid and, subject to certain restrictions, outsource a limited portion of its IT service requirements to third party providers. In addition, commencing in 1997, the payment terms relating to IT services provided by EDS will be revised over a two-year period to extend the due dates for payments from General Motors. The GM Board believes that such changes are necessary (i) in light of the fact that, after the Split-Off, EDS will no longer be a subsidiary of General Motors and the Capital Stock Committee will no longer be able to monitor the IT service arrangements between the parties, (ii) to reflect the evolutionary nature of the General Motors-EDS customer relationship and the IT services industry and (iii) to provide additional assurances to General Motors, as EDS' largest customer, that the IT services performed by EDS will remain competitive. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements." 20 Based on currently available information and assuming that the IT Services Agreements had been effective as of January 1, 1996, EDS believes that revenues generated from services performed for General Motors in 1996 would be slightly lower than those generated from such services in 1995. Additionally, EDS expects that the changes reflected in the IT Services Agreements could reduce its 1996 earnings per share by as much as $0.07 to $0.14. The long-term impact of the terms of the IT Services Agreements cannot be precisely quantified at present, although such terms may have an adverse effect on operating margins unless EDS is able to effect reductions in the costs of providing services to General Motors. Although EDS plans to implement certain cost reduction measures, there can be no assurance as to the extent, if any, to which such measures will mitigate the possible adverse impact on its operating margins. In general, there can be no assurance that the terms of the IT Services Agreements would not have a material adverse effect in the long term on the results of operations of EDS. See "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business of EDS--Revenues." SIGNIFICANT STOCKHOLDER As of the Record Date, the GM Hourly Plan Special Trust owned approximately 149.5 million shares of Class E Common Stock and, assuming none of such shares are sold, upon consummation of the Split-Off, will own approximately 31% of the outstanding EDS Common Stock. United States Trust Company of New York and its affiliate, U.S. Trust Company of California, N.A. (together, the "GM Hourly Plan Trustees"), as the independent trustees of the GM Hourly Plan Special Trust, have the authority and discretion to cause the GM Hourly Plan Special Trust to hold such shares of Class E Common Stock (and following the Split-Off, of EDS Common Stock) or to sell all or any portion thereof from time to time as they deem appropriate. The shares owned by the GM Hourly Plan Special Trust are subject to certain agreements that restrict the transferability of such shares and that provide certain registration rights with respect thereto. GM and EDS have been advised that, in order to discharge their fiduciary duties, the GM Hourly Plan Trustees continually look for attractive opportunities to sell a portion of their holdings of Class E Common Stock (and following the Split-Off, EDS Common Stock). There can be no assurance as to the timing or size of any offerings of shares owned by the GM Hourly Plan Special Trust since, subject to the terms of the agreements referred to above, the GM Hourly Plan Trustees have the right to sell such shares at any time. The sale of shares by the GM Hourly Plan Special Trust will depend on, among other things, market conditions, the price of, and demand for, such shares, and other factors outside the control of EDS. Although the GM Hourly Plan Trustees have notified GM and EDS of their intent to manage the disposition of shares of EDS Common Stock in a manner consistent with maintaining an orderly market for the EDS Common Stock, there can be no assurance in this regard and sales of substantial amounts of EDS Common Stock by the GM Hourly Plan Special Trust could adversely affect the then prevailing market price for the EDS Common Stock and could impair EDS' ability to raise additional capital through the sale of equity securities. The GM Hourly Plan Trustees have the authority and discretion to direct the voting and exercise of all other rights relating to the shares of Class E Common Stock (and after the Split-Off, of EDS Common Stock) held by the GM Hourly Plan Special Trust. Although the GM Hourly Plan Trustees have stated that such stock was not acquired for such purpose, the level of such ownership will give the GM Hourly Plan Special Trust sufficient voting power to influence the direction and policies of EDS, the election of the EDS Board and the outcome of any other corporate action requiring stockholder approval. As described below under "--Certain Limitations on Changes in Control of EDS," the GM Hourly Plan Special Trust is a party to certain agreements which restrict its ability to transfer shares of Class E Common Stock (and EDS Common Stock after the Split-Off) and to vote in favor of certain business combinations involving EDS. See "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust." NO ASSURANCE OF STRATEGIC ALLIANCES AND OTHER BUSINESS OPPORTUNITIES The Split-Off is intended, among other things, to remove limitations on EDS' ability to participate in major strategic alliances and to obtain additional business that are believed to result from EDS' status as a subsidiary of General Motors. EDS is not currently a party to any agreement or understanding with respect to any material 21 strategic alliance or business combination. Although General Motors and EDS believe that the Split-Off will enhance EDS' ability to enter into major strategic alliances and take advantage of other growth opportunities, no assurance can be given in this regard. Furthermore, there can be no assurance as to whether and to what extent any of the business objectives of the Split- Off will be achieved if the Split-Off is consummated. See "Special Factors-- Purposes of the Split-Off." The ability of EDS to enter into and consummate business combinations will be limited by the matters described below under "-- Certain Limitations on Changes in Control of EDS." TERMINATION OF SUBSIDIARY RELATIONSHIP WITH GENERAL MOTORS As a subsidiary of General Motors, EDS has been able to benefit since 1984 from General Motors' extensive network of business relationships with companies and government contacts around the world. EDS has drawn on this resource in developing its own contacts and relationships. After the Split-Off, EDS will be a stand-alone, public company and thus will no longer be able to benefit from General Motors' relationships to the same extent that it could as a wholly owned subsidiary of GM. CERTAIN LIMITATIONS ON CHANGES IN CONTROL OF EDS The EDS Certificate of Incorporation and the EDS Bylaws contain certain provisions, such as a "fair price" provision applicable to certain business combinations, a provision prohibiting stockholder action by written consent unless such action is unanimous, and provisions limiting the ability of stockholders to call special stockholder meetings, which are not found in the General Motors Certificate of Incorporation or General Motors By-Laws and which could have the effect of delaying, deferring or preventing a change in control of EDS, even if such a change would be favorable to the interests of EDS' stockholders, and of limiting any opportunity to realize premiums over prevailing market prices for EDS Common Stock in connection therewith. The EDS Rights Agreement, which also has no equivalent at General Motors, could have the same effect. See "EDS Capital Stock" and "Comparison of Class E Common Stock and EDS Common Stock." As noted above, as of the Record Date, the GM Hourly Plan Special Trust owned approximately 31% of the outstanding Class E Common Stock. The GM Hourly Plan Special Trust is a party to the Registration Rights Agreement (as defined herein), which contains certain restrictions on its ability to transfer the shares of Class E Common Stock held by it (including by tendering into any tender offer), which restrictions will continue to apply to its holdings of EDS Common Stock after consummation of the Split-Off. General Motors and the GM Hourly Plan Special Trust are also parties to the Transfer Agreement (as defined herein), which is intended to preserve the tax-free status of the Split-Off and which contains restrictions on the ability of the GM Hourly Plan Special Trust to transfer Class E Common Stock and to vote in favor of certain business combinations involving EDS, which restrictions will apply to the EDS Common Stock for a period generally of two years after the Split-Off. The contractual restrictions to which the shares of EDS Common Stock owned by the GM Hourly Plan Special Trust are subject could have the effect of making more difficult or discouraging certain change in control transactions involving EDS, including tender offers for EDS Common Stock, that could give the holders of EDS Common Stock the opportunity to realize a premium over the then prevailing market price of such stock. See "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust." In addition, in order to preserve the tax-free status of the Split-Off, under the Separation Agreement, EDS will be prohibited, until after the two-year anniversary of the consummation of the Split-Off and unless certain conditions are satisfied, from entering into (i) certain secondary capital stock transactions whereby a person would acquire, from holders of outstanding shares of EDS capital stock, a number of shares of EDS capital stock that would comprise more than 15% of the number of issued and outstanding shares of EDS Common Stock; or (ii) any other transaction that would be reasonably likely to jeopardize the tax-free status of the Split-Off. In addition, the Separation Agreement will prohibit EDS, until after the six-month anniversary of the consummation of the Split-Off, from entering into any transaction that would result in any person acquiring from EDS a number of shares of EDS capital stock that, when aggregated with all other shares of EDS capital stock then owned by 22 such person, would constitute more than 20% of the total combined voting power of EDS voting stock or 20% of the total number of outstanding shares of any class or series of EDS non-voting stock. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--Separation Agreement." The Master Services Agreement will also provide General Motors with certain termination rights upon the occurrence of certain changes in control of EDS. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements." FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE This Solicitation Statement/Prospectus contains certain forward-looking statements and information relating to EDS that are based on the beliefs of GM or EDS management as well as assumptions made by and information currently available to GM or EDS management. When used in this document, the words "anticipate," "believe," "estimate" and "expect" and similar expressions, as they relate to GM, EDS or GM or EDS management, are intended to identify forward-looking statements. Such statements reflect the current views of GM or EDS with respect to future events and are subject to certain risks, uncertainties and assumptions, including the risk factors described in this Solicitation Statement/Prospectus. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. Neither GM nor EDS intends to update these forward-looking statements. 23 RISK FACTORS REGARDING GENERAL MOTORS AFTER THE SPLIT-OFF Holders of $1 2/3 Common Stock and Class H Common Stock should consider carefully, in addition to the other information set forth in this Solicitation Statement/Prospectus, the following factors. REDUCTION IN GENERAL MOTORS' CONSOLIDATED NET WORTH, ASSETS AND CERTAIN RATIOS Following the Split-Off, General Motors will no longer own all the outstanding shares of EDS and, accordingly, General Motors' balance sheet will reflect decreased stockholders' equity and liabilities as well as decreased assets, resulting in an overall reduction in General Motors' consolidated net worth of approximately $5 billion. General Motors also expects that, as a result of the Split-Off, certain GM financial ratios on a consolidated basis (including gross margin percentage, operating margin percentage and net margin percentage) will decrease, since the business of EDS is generally a higher margin business than GM's other businesses. See "General Motors Unaudited Pro Forma Condensed Consolidated Financial Statements." LOSS OF POTENTIAL AVAILABILITY OF EDS FUNDS AND ASSETS Under the General Motors Certificate of Incorporation, the portion of General Motors' consolidated earnings attributable to EDS that is included in the amount available for the payment of dividends on the Class E Common Stock is determined by a fraction, the numerator of which is a number equal to the weighted average number of shares of Class E Common Stock outstanding during each quarterly accounting period and the denominator of which was 484.4 million for the first quarter of 1996; provided that such fraction shall never be greater than one. The denominator is adjusted from time to time as deemed appropriate by the GM Board to reflect subdivisions and combinations of the Class E Common Stock and certain transfers of capital to or from EDS. The denominator is sometimes referred to herein as the Class E Dividend Base. See "Class E Common Stock--Dividend Policy." Under the current dividend policies and practices of General Motors, General Motors pays dividends to holders of Class E Common Stock in an aggregate amount approximately equal to the product of the aggregate dividends received from EDS multiplied by the fraction described above. For the first quarter of 1996, the fraction described above was 463.2 million/484.4 million, or approximately 0.96. Approximately 44.7 million shares of Class E Common Stock were issued between January 1 and February 22, 1996 upon conversion of approximately 3.2 million shares of General Motors Series C Convertible Preference Stock (the "Series C Preference Stock"). The remaining 6,784 outstanding shares of Series C Preference Stock were redeemed on February 22, 1996 for $3.6 million. After giving effect for a full quarter to the issuance of such shares upon conversion (rather than for the portion of the quarter during which such shares were outstanding), such fraction would be approximately equal to one. Thus, under General Motors' current dividend policies and practices and assuming that the Split-Off did not occur, General Motors would not (unless such policies and practices were changed in the sole discretion of the GM Board) retain a significant portion, if any, of the cash received as dividends from EDS for other corporate purposes, since such cash would instead be paid as dividends to holders of Class E Common Stock. After the Split-Off, General Motors will no longer be the sole stockholder of EDS, and any dividends declared by EDS will be paid directly to the holders of EDS Common Stock. Accordingly, GM will no longer be able to consider using the funds generated by EDS to fund GM's other businesses or corporate needs, including in periods of economic downturn, rather than paying dividends to the holders of Class E Common Stock. Any use by General Motors of funds generated by EDS for purposes other than paying dividends to holders of Class E Common Stock would take place only after due consideration by the Capital Stock Committee and the GM Board of the best interests of the holders of each class of its common stock, the best interests of all of its common stockholders and the fiduciary duties owed by the GM Board to the holders of each class of its common stock. In addition, as a result of the Split-Off, holders of $1 2/3 Common Stock and Class H Common Stock will lose their rights to share (in proportion to their respective liquidation units as set forth in the General Motors Certificate of Incorporation) in the distribution of EDS' equity and assets upon the liquidation of General Motors. 24 EFFECT OF SPLIT-OFF ON GM PENSION EXPENSE AND UNFUNDED PENSION LIABILITY Approximately one-third of the outstanding Class E Common Stock is currently held by the GM Hourly Plan Special Trust. Accordingly, after the Split-Off, so long as the GM Hourly Plan Special Trust holds any EDS Common Stock, any appreciation or depreciation in the value of EDS Common Stock will affect the level of General Motors' pension expense and unfunded pension liability, which are actuarially determined and computed in accordance with generally accepted accounting principles. LOSS OF OWNERSHIP INTEREST IN IT PROVIDER After the Split-Off, General Motors will no longer have an ownership interest in its principal IT provider and the Capital Stock Committee will no longer monitor the terms on which EDS provides IT services to General Motors. Rather, following the Split-Off, all General Motors' rights concerning EDS' provision of IT services to it will be purely contractual in nature and governed by the IT Services Agreements and any other service contracts that may be entered into between General Motors and EDS. The GM Board has determined, however, that continued ownership of EDS is not necessary for GM to execute its IT strategy or to ensure the security of its computer data and other information. See "Special Factors--Background of the Split-Off." FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE This Solicitation Statement/Prospectus contains certain forward-looking statements and information relating to GM that are based on the beliefs of GM management as well as assumptions made by and information currently available to GM management. When used in this document, the words "anticipate," "believe," "estimate" and "expect" and similar expressions, as they relate to GM or GM management, are intended to identify forward-looking statements. Such statements reflect the current view of GM with respect to future events and are subject to certain risks, uncertainties and assumptions, including the risk factors described in this Solicitation Statement/ Prospectus. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. GM does not intend to update these forward-looking statements. 25 RISK FACTORS REGARDING NON-CONSUMMATION OF THE SPLIT-OFF Holders of all classes of General Motors common stock should consider carefully, in addition to the other information in this Solicitation Statement/Prospectus, the following factors. BUSINESS CONFLICTS AND OBJECTIVES The GM Board has determined that there are certain actual and potential conflicts between the businesses of EDS and the other businesses of General Motors and that it is likely that these conflicts will continue and intensify over time. The GM Board believes that the Split-Off would resolve these business conflicts and enhance certain additional EDS business objectives more effectively than any of the other available alternatives. See "Special Factors-- Alternatives to the Split-Off." However, if the Split-Off is not consummated, the GM Board will need to consider alternative means of addressing these conflicts and objectives. There can be no assurance that the GM Board will be able to address these conflicts and objectives in a manner that will not have an adverse effect on the business, financial condition or results of operations of EDS or General Motors or on the market price of any class of GM common stock. CHANGES IN TERMS OF EXISTING IT SERVICES AGREEMENTS If the Split-Off is not consummated, the Existing IT Services Agreements will continue, with such changes as General Motors and EDS may from time to time agree upon or as the GM Board upon recommendation of the Capital Stock Committee may from time to time determine to be fair to all classes of GM common stockholders. No agreement has been reached between GM and EDS regarding any changes to the Existing IT Services Agreements that may take effect if the Split-Off is not approved by General Motors common stockholders or is not consummated for any other reason. GM management has advised EDS management that in such an eventuality it would seek substantial changes in the Existing IT Services Agreements, including implementation of substantially all of the changes provided for by the Master Services Agreement. Neither the GM Board nor the Capital Stock Committee has determined whether to require such changes to the Existing IT Services Agreements if the Split-Off is not consummated, but they anticipate considering such changes if such circumstances arise. 26 SPECIAL FACTORS PURPOSES OF THE SPLIT-OFF The GM Board has determined that ownership of EDS is not necessary for GM to execute its IT strategy or to ensure the security of its computer data and other information. Furthermore, the GM Board has determined that there are certain actual and potential conflicts between the business of EDS and the other businesses of General Motors. The Split-Off is intended to address such conflicts in a manner that is beneficial from the standpoint of all stockholders of GM and to allow the boards and management of GM and EDS to increase their focus on their respective business operations. Approximately one-third of the outstanding Class E Common Stock is held by the GM Hourly Plan Special Trust. Accordingly, after the Split-Off, so long as the GM Hourly Plan Special Trust holds any EDS Common Stock, any appreciation or depreciation in the value of EDS Common Stock will affect the level of General Motors' pension expense and unfunded pension liability, which are actuarially determined and computed in accordance with generally accepted accounting principles. The Split-Off of EDS from General Motors is intended to accomplish at least three business objectives from the perspective of EDS and the holders of Class E Common Stock. First, converting EDS from a wholly owned subsidiary of GM into an independent, publicly owned company is intended to remove limitations on EDS' ability to participate in strategic alliances, particularly in the rapidly growing and converging computing and software, communication, media and entertainment, and electronic commerce industries, which are increasingly important to EDS' continued competitiveness. Second, separating General Motors and EDS is intended to remove limitations on EDS' ability to obtain additional business and establish new customer relationships that result from GM's ownership of EDS, its common ownership of EDS, Hughes and GMAC, and the increasing overlap between EDS and the telecommunications and certain other businesses of Hughes. Finally, causing EDS to become a stand-alone, public company is intended to better position EDS to meet its growing capital needs. Each of these business objectives is described in more detail below. Strategic Alliances. The first purpose of the Split-Off is to eliminate the impediments arising from General Motors' ownership of EDS that have prevented EDS from pursuing and consummating strategic transactions that are important to its continued competitiveness. During the decade in which EDS has been a subsidiary of General Motors, there has been an increasing convergence of the computing and software, communication, media and entertainment, and electronic commerce industries. Because the ability to offer integrated services within these fields is widely viewed as necessary to remain competitive and grow, strategic alliances among service providers in these industries have multiplied. Consistent with this industry trend, EDS has engaged in discussions with leading telecommunications providers regarding potential strategic combinations on numerous occasions during the last decade. See "-- Background of the Split-Off." While some of these negotiations reached advanced stages (most notably the discussions with Sprint Corporation in 1994), none has resulted in a significant strategic transaction. In each case, the difficulties associated with EDS' status as a subsidiary of GM, including the complexities and control issues created by the nature of the Class E Common Stock, have prevented or hindered the consummation of a transaction. General Motors and EDS believe that these factors will continue to restrict EDS' ability to expand into integrated worldwide markets so long as EDS remains a subsidiary of General Motors. Certain Additional Growth Opportunities. A second purpose of the Split-Off is to remove certain limitations on EDS' ability to obtain additional business and establish new customer relationships that have arisen as a result of EDS' status as a subsidiary of GM. These limitations have not been imposed by GM, but rather are a result of certain reactions of potential EDS customers to EDS' affiliation with GM. Such limitations have become increasingly significant during the 1990s as the businesses of General Motors and GMAC and the telecommunications and certain other businesses of Hughes have expanded either to present conflicts that limit EDS' ability to obtain business from certain parties or to overlap with EDS' activities. In some cases, competitors of General Motors, Hughes or GMAC in industries that are important target markets for EDS have been reluctant to become customers or partners of EDS due to concerns relating to divulging confidential and proprietary information to an affiliate of one of their competitors. For example, GM and EDS believe that EDS' affiliation 27 with General Motors and GMAC has limited EDS' ability to expand its business within the automotive, consumer finance and related industries, despite EDS' extensive expertise in these important markets. Similarly, GM and EDS believe that common ownership of EDS and Hughes, which participates in the direct to home satellite television services and wireless communications industries, has caused EDS to lose or be disadvantaged in seeking certain business opportunities with potential customers and partners, including in the cable television industry, who are concerned by Hughes' competition in these areas. General Motors and EDS expect impediments and conflicts like these to intensify in future years if the Split-Off does not occur. Capital Needs. A third purpose of the Split-Off is to afford EDS more flexible access to capital markets to meet its growing capital needs without regard to competing considerations of GM and its affiliates. As a wholly owned subsidiary of GM, EDS' ability to sell equity and debt securities to meet its rising capital needs is limited by factors relating to GM. EDS and the remainder of GM's operations are in industries with different characteristics, and each of them has substantially different goals and needs with respect to incurrence of debt and financial leverage. General Motors, which is engaged principally in the highly cyclical automotive industry, places great importance on maintaining a strong reserve of liquid assets and a high credit rating for itself and its financial subsidiary, GMAC. In contrast, EDS has based its business on long-term customer contracts, and as a result has experienced stable cash flow and revenues that should permit it to sustain higher debt-to-equity ratios on a stand-alone basis than those targeted by GM for GM and its consolidated subsidiaries. These different business needs create conflicts that GM and EDS believe will continue to grow. In addition, as EDS' business has expanded and evolved in recent years, its capital requirements have increased significantly. Driven in large part by the convergence among hardware, software, communication, information content and service providers, EDS has made tactical acquisitions and capital intensive investments to expand its IT, hardware and telecommunications capacities. In addition, EDS' customers have often insisted that EDS expend its own capital to acquire their IT operations, hire their employees and, in some cases, acquire an equity stake in the customers themselves. Accordingly, EDS believes that its capital requirements are likely to continue to increase in the future. Achievement of each of the foregoing business objectives is dependent on numerous factors in addition to consummation of the Split-Off, many of which are beyond the control of EDS. Accordingly, there can be no assurance as to whether and to what extent any of such objectives will in fact be achieved if the Split-Off is consummated. ALTERNATIVES TO THE SPLIT-OFF In addition to considering the Split-Off of EDS from General Motors, the GM Board considered four other alternatives to address the conflicts and limitations and accomplish the objectives outlined in "--Purposes of the Split-Off." The first alternative considered was to make no change to the existing structure or businesses of the General Motors group. Maintaining the current structure, however, would not address EDS' difficulties in completing strategic alliances, the growing business conflicts between the business of EDS and other businesses of General Motors or challenges in providing for the growing capital needs of EDS. Furthermore, due to converging lines of business among EDS and other business units within General Motors, this option would require the GM Board and the Capital Stock Committee to increasingly confront difficult business decisions regarding capital allocation and other operational issues in order to avoid, mitigate or resolve conflicts. The second alternative considered was the maintenance of the existing structure of the GM group with explicit delineation of the areas and the manner in which EDS and Hughes could operate and compete. Implementation of this approach would have required extensive oversight by the GM Board and the Capital Stock Committee, involving continual and complex definitions and redefinitions of markets and competitive boundaries in a highly fluid business landscape, and would have continued to limit operating and strategic flexibility for both EDS and Hughes. Moreover, this approach would have left unresolved complications surrounding the unwillingness of potential strategic partners to enter into alliances with EDS, conflicts stemming from the unwillingness of competitors of General Motors, Hughes and GMAC to do business with EDS, and limitations on meeting EDS' heightened capital needs. 28 The third alternative considered was the merger of all or part of the businesses of EDS and Hughes. Under this option, EDS and Hughes would have consolidated their efforts to win contracts instead of competing for them and potentially benefited from opportunities such as Hughes' ability to provide a portion of EDS' telecommunications needs. A merger of EDS and Hughes, however, could have exacerbated EDS' difficulties in seeking and maintaining certain customers and partners that are Hughes' competitors in the telecommunications industry and could have limited EDS' access to critical telecommunications capabilities not owned by EDS or Hughes. Moreover, before this option could have been implemented, a variety of difficult operational issues, such as determining exactly which operations should be merged and how this would be accomplished, would have needed to be resolved. The fourth alternative considered was the divestiture of all or part of Hughes. This approach would have eliminated business conflicts arising from EDS' affiliation with Hughes, made more capital available for the remaining members of the GM group, including EDS, and simplified General Motors' decision-making process with respect to capital allocation within the group. It would not, however, have removed many of the obstacles to EDS' consummation of strategic combinations or addressed the conflicts caused by competition between customers of EDS and other members of the GM group. Additionally, it would not have addressed the conflicts between the capital raising activities of General Motors and EDS. Furthermore, General Motors currently views the automotive electronics business of Hughes' wholly owned subsidiary, Delco, as part of GM's core operations. After examining the four other alternatives, the GM Board concluded that a divestiture of EDS offered the most comprehensive solution to the conflicts and limitations described in "--Purposes of the Split-Off." Such a divestiture was expected to remove the limitations on EDS' ability to participate in major strategic alliances and to obtain additional business that the GM Board believed were attributable to EDS' status as a subsidiary of General Motors, although there can be no assurance as to whether and to what extent any of the business objectives of the Split-Off will be achieved if the Split-Off is consummated. See "Risk Factors Regarding EDS After the Split-Off--No Assurance of Strategic Alliances and Other Business Opportunities." A divestiture of EDS was also expected to address EDS' capital needs more effectively than the other alternatives. In addition, such a divestiture was expected to allow the boards and management of GM and EDS to increase their focus on their respective business operations. On the other hand, divestiture of EDS was not believed to present potential adverse consequences for GM's automotive business because the GM Board had determined that ownership of EDS is not necessary for GM to execute its IT strategy or to ensure the security of its computer data and other information. In considering a divestiture of EDS, the GM Board determined that any such transaction should be one that would both be tax-free for U.S. federal income tax purposes and not result in a recapitalization of the Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio as provided under the General Motors Certificate of Incorporation upon a disposition by General Motors of substantially all of the business of EDS and under certain other circumstances. This determination was based on the GM Board's belief that the payment by General Motors of either the 20% premium on the Class E Common Stock resulting from such exchange ratio or a material tax on an EDS divestiture would not be in the best interests of General Motors and its stockholders and that payment of the 20% premium in the context of a split-off of EDS would not be consistent with the purpose for which the 120% exchange rate provision was included in the terms of the Class E Common Stock. EFFECTS OF THE SPLIT-OFF As a result of the Split-Off, EDS will become an independent, publicly owned company rather than a wholly owned subsidiary of General Motors. In connection with the Split-Off, each outstanding share of Class E Common Stock (which is a security of General Motors designed to provide financial returns based on the performance of EDS) will be converted into one share of EDS Common Stock. As a result of the Merger, the General Motors Certificate of Incorporation will be amended so that the Split-Off will not result in the recapitalization of Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio as currently provided in the General Motors Certificate of Incorporation upon a disposition by General Motors of substantially all of the business of EDS and under certain other circumstances, and to change certain provisions relating to the 29 Preferred Stock that will allow the GM Board to determine the specific rights, preferences and limitations of any series of Preferred Stock if and when issued in the discretion of the GM Board and that will cause the Preferred Stock to assume the characteristics of "blank check" preferred stock. Holders of EDS Common Stock will have no rights comparable to such recapitalization rights of holders of Class E Common Stock. See "Comparison of Class E Common Stock and EDS Common Stock." Upon consummation of the Split-Off, General Motors' $1 2/3 Common Stock and Class H Common Stock will remain outstanding and essentially unaltered. Moreover, because under the General Motors Certificate of Incorporation dividends on each class of General Motors' common stock may only be declared and paid out of certain defined amounts attributable to such class, dividends to holders of $1 2/3 Common Stock and Class H Common Stock will be largely unaffected by the Split-Off. See "Risk Factors Regarding General Motors after the Split-Off--Loss of Potential Availability of EDS Funds and Assets" and "Class E Common Stock--Dividend Policy" and "--Considerations Relating to Multi-Class Common Stock Capital Structure." If the Split-Off takes place, however, holders of $1 2/3 Common Stock and Class H Common Stock will lose the portion of their liquidation rights attributable to General Motors' ownership of EDS' equity and assets. For additional information on the effects of the Split-Off on GM, see "Risk Factors Regarding General Motors after the Split- Off--Reduction in General Motors' Consolidated Net Worth, Assets and Certain Ratios" and "General Motors Unaudited Pro Forma Condensed Consolidated Financial Statements." In addition, in the Merger, the General Motors Certificate of Incorporation will be amended as described herein. See "The Split-Off--Merger Agreement." Immediately prior to the Split-Off and as a condition of the Merger whereby the Split-Off is effected, EDS will contribute to Mergeco the Special Inter- Company Payment. As a result of the Merger, all of Mergeco's assets, which will consist entirely of the cash contributed by EDS, will become assets of General Motors. General Motors will retain such cash for its general corporate purposes, and no corresponding or related dividend will be distributed by General Motors to its stockholders. EDS expects to fund the Special Inter- Company Payment through borrowings under its existing commercial paper and committed credit facilities. See "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations." Immediately prior to and as a condition of the consummation of the Merger, General Motors and EDS will enter into the Master Services Agreement. The IT services to be provided by EDS under the IT Services Agreements will generally be similar to those provided to General Motors under the Existing IT Services Agreements. However, unlike the Existing Master Services Agreement (which does not have a fixed term, but provides that it may be terminated by either party in the event of the sale of all or substantially all of the assets or stock of EDS to a non-GM entity), the Master Services Agreement provides for an initial term of 10 years from the date upon which the Split-Off is consummated, which may be extended by agreement of the parties. In addition, the IT Services Agreements provide that certain significant changes will be made to the pricing and terms of services provided by EDS to General Motors. The GM Board believes that such changes are necessary (i) in light of the fact that, after the Split-Off, EDS will no longer be a subsidiary of General Motors and the Capital Stock Committee will no longer be able to monitor the IT service arrangements between the parties, (ii) to reflect the evolutionary nature of the General Motors-EDS customer relationship and the IT services industry and (iii) to provide additional assurances to General Motors, as EDS' largest customer, that the IT services performed by EDS will remain competitive. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements," "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business of EDS--Revenues." Upon consummation of the Split-Off, former holders of Class E Common Stock will no longer own any interest (incident to such holdings) in the equity or assets of General Motors, but will instead own an equity interest in EDS. Such holders will no longer have any rights (as such holders) to share in the equity and assets of General Motors upon General Motors' liquidation but will have the right to receive their proportionate share of EDS' assets in the event of its liquidation. In addition, as holders of EDS Common Stock rather than Class E Common Stock, such holders (in their capacities as such) will no longer be entitled to vote as General Motors stockholders but will have the right to vote directly on matters with respect to EDS submitted to the vote of EDS' stockholders. As EDS stockholders, former holders of Class E Common Stock will forego the potential for 30 a recapitalization of their Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio as currently provided by the General Motors Certificate of Incorporation upon a disposition by General Motors of substantially all of the business of EDS and under certain other circumstances. Holders of EDS Common Stock will, however, have the potential to realize premiums over prevailing market prices for their EDS Common Stock in connection with certain corporate transactions, including tender offers for EDS Common Stock and change in control transactions involving EDS, although there can be no assurance in this regard. Such premiums, if any, will not be limited by any formula in the EDS Certificate of Incorporation comparable to that relating to the recapitalization of Class E Common Stock in the General Motors Certificate of Incorporation. See "Risk Factors Regarding EDS after the Split-Off--Certain Limitations on Changes in Control of EDS," "Class E Common Stock--Liquidation Rights" and "--Recapitalization" and "Comparison of Class E Common Stock and EDS Common Stock." Approximately one-third of the outstanding Class E Common Stock is held by the GM Hourly Plan Special Trust. Accordingly, after the Split-Off, so long as the GM Hourly Plan Special Trust holds any EDS Common Stock, any appreciation or depreciation in the value of EDS Common Stock will affect the level of General Motors' pension expense and unfunded pension liability, which are actuarially determined and computed in accordance with generally accepted accounting principles. Under the terms of the GM-PBGC Agreement, which was entered into in connection with the March 1995 contribution of Class E Common Stock and cash to the GM Hourly Plan, GM has agreed to defer the use of funding credits that would otherwise result from such stock and cash contributions. Consequently, GM will continue to make regular cash contributions to the GM Hourly Plan over the next several years. Because all outstanding shares of Class E Common Stock will be eliminated in the Split-Off, the Class E Common Stock will be delisted from the NYSE. Application has been made to list the EDS Common Stock on the NYSE, and such application has been granted pending notice of issuance. The trading symbol for the EDS Common Stock on the NYSE will be "EDS." The Class E Common Stock is currently registered as an equity security of General Motors under the Exchange Act. General Motors is permitted under the Exchange Act to apply to the Commission for termination of such registration if the Class E Common Stock is neither listed on a national securities exchange nor held by at least 300 holders of record, and General Motors intends to apply for such termination immediately following consummation of the Split-Off. General Motors will, however, remain subject to the reporting obligations of the Exchange Act on account of its other outstanding securities. In addition, EDS intends to file with the Commission a registration statement on Form 10 registering the EDS Common Stock under the Exchange Act, and EDS will be subject to the reporting obligations of the Exchange Act following the Split-Off. BACKGROUND OF THE SPLIT-OFF GM's Acquisition of EDS. In 1984, General Motors acquired EDS, which at the time was already a leading provider of IT services. In connection with the acquisition of EDS, General Motors created a new class of its common stock, the Class E Common Stock, designed to provide financial returns based on the future performance of EDS. The agreement governing the acquisition of EDS by GM contemplated that EDS would be operated as an independent subsidiary of General Motors with a substantial degree of autonomy. Pursuant to such agreement, in 1985, General Motors and EDS entered into the Existing Master Services Agreement. Within the framework of the Existing Master Services Agreement, EDS is currently responsible for substantially all of the worldwide data processing and telecommunications activities of General Motors and its subsidiaries (other than Hughes, with the exception of its subsidiary, Delco), including integrated information systems for payroll, health and benefits, office automation, communications and plant automation functions. See "Business of EDS--Services for General Motors." It is GM's policy that a standard of fair dealing govern the relationship between EDS and General Motors. To that end, in 1985 the GM Board formed a standing committee, comprised entirely of independent directors of General Motors, with responsibility for reviewing, among other things, (i) the principal business and financial relationships and transactions among GM, EDS and Hughes, (ii) the dividend policies and practices of GM and 31 (iii) such other matters as have the potential to have differing effects on holders of the three classes of General Motors common stock. That committee is currently known as the "Capital Stock Committee." See "Class E Common Stock-- Considerations Relating to Multi-Class Common Stock Capital Structure." EDS Strategic Combination Discussions. During the period in which EDS has been a subsidiary of GM, there has been an increasing convergence of the computing and software, communications, media and entertainment, and electronic commerce industries. Because the ability to offer customers integrated IT services and systems is increasingly viewed as necessary to remain competitive and grow, strategic alliances among service providers in these industries have become more prevalent. Consistent with this industry trend, EDS has engaged in discussions with leading telecommunications providers regarding potential strategic combinations on numerous occasions in the last decade in an effort to enhance its own competitiveness. In 1991, EDS explored the possibility of acquiring an international supplier of IT services and had preliminary strategic discussions with a long-distance carrier. In late 1992 and early 1993, EDS engaged in extended negotiations with an international telecommunications company regarding a strategic alliance. These discussions involved numerous types of possible business alliances and reached varying stages of negotiations, but none of them resulted in any consummated transaction. In 1994, EDS and GM reached an advanced stage of negotiations on a possible merger with a telecommunications company, Sprint Corporation ("Sprint"). Like many of EDS' earlier potential strategic partners, Sprint was unwilling to enter into a business combination with EDS if General Motors (whose dividend and other financial policies are tied to a worldwide, cyclical automotive business) remained the major stockholder of the merged entity. Based upon the GM Board's determination that continued ownership of EDS was not necessary for General Motors to implement its IT strategy and that General Motors would be willing to split-off EDS to advance EDS' strategic objectives, GM announced publicly that it would consider a split-off of EDS to facilitate EDS' possible combination with Sprint. In particular, in a May 16, 1994 press release, General Motors stated, in part: "General Motors Corporation today confirmed that it is considering a proposal to spin off its wholly owned subsidiary, Electronic Data Systems Corp., (EDS) to holders of Class E common stock. Such a spin-off would be proposed to General Motors shareholders if ongoing negotiations between EDS and Sprint result in an agreement for those companies to merge or form a strategic alliance. A spin-off of EDS to Class E shareholders would be proposed only in a transaction that is tax free, and does not result in the recapitalization of Class E common stock into General Motors $1 2/3 par value common stock at a 120 percent exchange ratio, as currently provided for under certain circumstances by General Motors' certificate of incorporation. EDS has been a wholly owned subsidiary of General Motors since 1984. In the event that EDS becomes an independent company, General Motors and EDS plan to enter into a new, 10-year master agreement, with options for renewal, under which EDS would continue to provide the same information technology services for General Motors that it does today." Discussions with Sprint terminated in June 1994 when General Motors, EDS and Sprint were unable to agree on the proper exchange ratio for EDS stock and Sprint stock to have been issued in the EDS/Sprint transaction subsequent to the split-off then contemplated by the parties. The parties disagreed in part because of the difficulty, for purposes of such exchange ratio, of valuing the Sprint stock in relation to the Class E Common Stock, which is a security of General Motors with rights to dividends based on the earnings of EDS, as opposed to a security of an independent company with full voting control. The failure to complete the EDS/Sprint transaction was also partially attributable to the additional constraints and complications created by combining one complex transaction, a split-off of EDS, with a second complex transaction, a strategic merger involving a second public company. Such uncertainties and complexities added both time and procedural requirements (such as additional stockholder votes and governmental approvals, including a ruling by the IRS as to the tax-free status of a split-off) to the transaction process, and thereby made the likelihood of completing the transaction more uncertain. See "-- Purposes of the Split-Off." 32 Consideration of Split-Off. Following the termination of discussions with Sprint, the GM Board reaffirmed that it remained willing to consider a split- off of EDS under appropriate circumstances. On June 6, 1994, GM issued a press release stating that it "would continue to consider a proposal to spin-off its wholly owned subsidiary, Electronic Data Systems (EDS) Corp., if necessary to facilitate EDS' ability to attain its strategic objectives. Such a spin-off could occur through an exchange of EDS common stock for Class E stock and would only be proposed in a transaction that is tax-free." From time to time after June 1994, GM and EDS management personnel and financial, legal and accounting advisers engaged in informal discussions of EDS' strategic needs and ways of addressing them, including the possibility of a split-off. Initially, these discussions assumed that a split-off would be proposed only in the context of a specific strategic combination with a third party. However, as the discussions progressed, they came to include consideration of splitting off EDS for general strategic reasons rather than in the context of a particular business combination. In connection with these ongoing discussions, in February 1995, McKinsey & Company ("McKinsey"), a management consulting firm, began to assess the implications of the changing information technology industry for General Motors' major lines of business, including the market forces driving the convergence of computing, telecommunications, electronic commerce and media. General Motors engaged McKinsey to assist GM management in developing a perspective on current and potential conflicts among the major businesses within GM, with a particular focus on whether EDS would be in a stronger competitive position if it were not owned by GM. During January to July 1995, GM and EDS management personnel and financial, legal and accounting advisers met from time to time to assess EDS' strategic objectives and to consider legal, tax and accounting issues that would be presented by a split-off transaction. Among other things, the independent accounting firms for GM and EDS considered the appropriate accounting treatment for a split-off transaction and reviewed their conclusions with the accounting staff of the Commission. In addition, during and after April 1995, tax counsel for GM and EDS began to assess whether the strategic objectives identified by management were consistent with the principles necessary to make a determination that any proposed transaction would be tax-free to General Motors and its stockholders for U.S. federal income tax purposes. These preliminary discussions did not result in any definitive determination either that a split-off would be desirable in the absence of a strategic combination or as to the structure or terms of any transaction that might be presented to the GM Board. In June 1995, the GM Hourly Plan Special Trust and a trust (the "GM Salaried Plan Trust") under the General Motors Retirement Plan Trust for Salaried Employees completed a public offering in which they sold 42.5 million shares of Class E Common Stock. See "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust." In the prospectus related to such public offering, General Motors stated: "The managements of EDS and General Motors are engaged in discussions concerning the most appropriate means of addressing EDS' strategic objectives, including the possibility of a spin-off of EDS. These discussions have not produced a definitive proposal as to the structure or terms of any transaction or as to whether any transaction will be proposed to the board of directors of General Motors or EDS or the stockholders of General Motors. Any spin-off of EDS would be proposed only in a transaction determined by General Motors' Board to be fair to holders of all classes of General Motors' capital stock and that would be tax free and would not result in the recapitalization of Class E Common Stock into General Motors $1 2/3 Common Stock at a 120% exchange ratio as currently provided for under certain circumstances in the General Motors Certificate of Incorporation." Based on the continuing discussions between management personnel at GM and EDS and on the ongoing work by McKinsey, representatives of General Motors' financial staff (Leon J. Krain, Vice President and Group Executive, and Heidi Kunz, then Vice President and Treasurer) presented the financial staff's recommendations regarding a possible split-off of EDS to General Motors' senior management decisionmaking body, the 33 President's Council, on July 28, 1995. The members of the President's Council in attendance consisted of J.T. Battenberg III, Executive Vice President, Louis R. Hughes, Executive Vice President, J. Michael Losh, Executive Vice President and Chief Financial Officer, Harry J. Pearce, as Executive Vice President, John F. Smith, Jr., as Chief Executive Officer and President, and G. Richard Wagoner, Jr., Executive Vice President. The President's Council reviewed the financial staff's recommendation that General Motors proceed to develop the terms of a possible split-off of EDS and recommended that the matter be brought before the GM Board and the Capital Stock Committee at their regular meetings to be held in early August 1995. At its meeting on August 4, 1995, the President's Council decided to present the matter to the GM Board and the Capital Stock Committee, as recommended by GM management. August 1995 Capital Stock Committee Meeting. At meetings of the Capital Stock Committee on August 6, 1995 and of the GM Board on August 7, 1995, GM management reported its recommendation that General Motors proceed to develop a specific proposal to split-off EDS. The principal discussion of these matters took place during the meeting of the Capital Stock Committee on August 6, 1995 (the "August 1995 CSC Meeting"). All of the members of the GM Board were invited to attend this meeting, which was attended not only by the members of the Capital Stock Committee (Thomas H. Wyman, Chairman, John H. Bryan, Ann D. McLaughlin, John G. Smale and Dennis Weatherstone) but also by certain other members of the GM Board (Thomas E. Everhart, Charles T. Fisher III, J.W. Marriott, Jr., Edward T. Pratt, Jr. and Louis W. Sullivan) and by Mr. Smith as Chief Executive Officer and President. The August 1995 CSC Meeting was also attended by Mr. Battenberg, Mr. Krain, Mr. Losh, Mr. Pearce, Mr. Wagoner, Ms. Kunz, Thomas A. Gottschalk, General Counsel, and other members of GM management; by Lester M. Alberthal, Jr., Chairman, President and Chief Executive Officer of EDS and Gary J. Fernandes and John R. Castle, Jr., Senior Vice Presidents of EDS; and by a representative of McKinsey and the Capital Stock Committee's independent legal counsel, Weil, Gotshal & Manges LLP. At the August 1995 CSC Meeting, management reviewed the history of General Motors' ownership of EDS since 1984 and General Motors' determination that continued ownership of EDS was not necessary for General Motors to execute its IT strategy or to ensure the security of its computer data and other information. Management also reviewed the growing perception of conflicts with other GM businesses as EDS' business grew and expanded in scope during the time it had been owned by General Motors. Among other things, as boundaries increasingly disappeared between certain industries in which EDS and Hughes participate, EDS had experienced a growing number of business conflicts and limitations arising from the common ownership of both companies by General Motors. Furthermore, it had become increasingly apparent that GM's ownership of EDS presented a significant impediment to EDS' ability to consummate large strategic transactions such as the proposed alliance with Sprint. Also, EDS' significant annual growth in revenues, among other things, had resulted in greater capital needs for its business, which sometimes conflicted with GM's need to access capital for its other businesses. See "--Purposes of the Split- Off." Management also reported on a number of financial, legal, tax and accounting matters that would affect any proposed split-off. These matters included the necessity that the exchange ratio for the Class E Common Stock and the EDS Common Stock and other terms be fair to all classes of General Motors common stockholders, that the transaction be tax-free to General Motors and its stockholders for U.S. federal income tax purposes, that the terms of the Existing IT Services Agreements be amended and that other agreements customarily incident to a split-off be entered into by General Motors and EDS in connection with any split-off. Management also reported its determination, concurred with by General Motors' independent accountants, that under generally accepted accounting principles a split-off would be accounted for at General Motors' historical amounts as a non-reciprocal transfer to the holders of Class E Common Stock, with no accounting gain or loss being recognized by General Motors in its consolidated statement of income on account thereof. A representative of McKinsey summarized the conclusions of the consulting project undertaken by McKinsey as described above. He observed that both EDS and Hughes were currently well positioned to participate in the large and rapidly developing IT and telecommunications marketplace. However, common ownership of EDS and Hughes by General Motors and the increasing convergence of IT and telecommunications industry participants and market sectors had created business conflicts between EDS, Hughes and General Motors 34 that McKinsey anticipated would continue and intensify over time. He also stated that McKinsey believed that competition for customers and business partners, restrictions on bidding and other customer concerns arising from common ownership, obstructions to strategic transactions, reduced access to funds for capital expenditures and differences in each company's decision- making processes were all likely to have an increasing effect on the businesses of EDS, Hughes and General Motors over time. GM management and the McKinsey representative next reviewed the possible alternative strategic options for EDS and Hughes that had been identified: continuing the status quo by allowing each business to continue independently; determining where and how each company would operate in order to avoid conflicts; merging all or part of the businesses of EDS and Hughes; divesting Hughes; and divesting EDS. The McKinsey representative discussed the relative degree to which each of the five alternatives would effectively address the conflicts and limitations described in "--Purposes of the Split-Off," as well as certain related business synergies and the feasibility of implementation. The matters discussed and conclusions reached, which were concurred with by GM management, were substantially as set forth under "--Alternatives to the Split-Off." Based on the foregoing, GM management then reported that it had concluded that a split-off of EDS would most effectively address EDS' strategic objectives and recommended that the GM Board authorize development of definitive terms for a split-off of EDS. The Capital Stock Committee, with other GM Board members participating, engaged in a detailed discussion of the matters reported by management and McKinsey. They also discussed a number of matters relating to the valuation of EDS to be used in any split-off that might be proposed, the necessity of negotiating amendments to the terms of the Existing IT Services Agreements in connection with a split-off, tax considerations related to a split-off and the business plans for EDS following a split-off. The Capital Stock Committee also discussed and considered appropriate means of ensuring that the terms of any split-off transaction would be fair to all classes of GM common stockholders. In particular, the Capital Stock Committee determined that it would be appropriate to institute a process of arm's-length negotiation between separate teams negotiating from the perspective of each of the groups of General Motors stockholders that could be deemed to have divergent interests in a split-off. Accordingly, the Capital Stock Committee considered and endorsed procedures for establishing the financial and other essential terms of a split-off in which the GM Board would be aided by two management negotiating teams, one consisting of GM executive officers and the other consisting of EDS executive officers, with each team to be counseled by its own internal and outside financial and legal advisers. See "--Negotiating Teams." The progress of the negotiating teams would be reported to the Capital Stock Committee, which would oversee the negotiations to ensure a level playing field between the parties and keep the full GM Board informed about the status of negotiations. The Capital Stock Committee and, ultimately, the full GM Board would then review the results of this negotiating process in making their own determinations as to whether the structure and terms of any split-off proposal would be fair to all General Motors common stockholders. In addition, any such transaction approved by the GM Board would then be submitted for approval to appropriate class votes of GM common stockholders, including separate class votes of holders of $1 2/3 Common Stock and Class E Common Stock. In considering alternative means for establishing the terms of a split-off, the Capital Stock Committee also requested that GM management explore the feasibility of structuring a split-off in a way that would permit the market, upon full disclosure of all material facts, to determine the relative values of the Class E Common Stock and the EDS Common Stock. After discussion of the foregoing matters, the Capital Stock Committee determined to recommend that the GM Board approve management's recommendation of authorization to proceed to develop definitive terms for a split-off of EDS using the negotiating procedures that had been described to the Capital Stock Committee. August 1995 GM Board Meeting. At its meeting the following day, August 7, 1995, which was attended by all of GM's directors, the GM Board received a report of the matters discussed at the August 1995 CSC Meeting and concluded that a split-off of EDS, on terms that would be tax-free to General Motors and its stockholders for U.S. federal income tax purposes and fair to all classes of General Motors common stockholders, would be in the best interests of General Motors and its stockholders. Accordingly, the GM Board appointed the negotiating teams and authorized the process described above in order to aid the GM Board in the development 35 of definitive terms for such a transaction, subject to oversight of the negotiating process by the Capital Stock Committee and subject to the GM Board's own review and consideration of such definitive terms and changes thereto that it might determine to make. Consistent with the principle of trying to ensure a level playing field for the two negotiating teams, the GM Board determined that officers and employees of General Motors and EDS who served as members of the negotiating teams or in support of such teams would be indemnified to the same extent as directors and officers of General Motors are indemnified under General Motors' By-Laws. Finally, the GM Board authorized the filing of a request with the IRS seeking a ruling on the tax- free status of the proposed transaction. Following the August 7, 1995 Board meeting, General Motors issued a press release stating as follows: "GM said today that it intends to pursue a split-off of its wholly owned subsidiary, EDS, to its GM Class E shareholders in a tax-free exchange of stock. The GM Board of Directors today approved a recommendation by GM and EDS managements to develop specific terms and a plan for a split-off transaction through which EDS would become an independent, public company. The split-off would be subject to a number of approvals and to a favorable vote by holders of GM common stocks. . . . To achieve a split-off, GM would exchange EDS capital stock for the outstanding shares of GM Class E common stock. There are currently 438.7 million shares of GM Class E common stock outstanding, and 44.9 million shares currently reserved for issuance upon conversion of Series C Preference Stock. The process of establishing definitive terms for a split- off transaction which will be fair to all holders of GM common stock will, among other things, consider differences between the values of GM Class E and EDS common stocks in order to establish any adjustment deemed appropriate by the GM Board of Directors. A split-off would be subject to the appropriate stockholder approvals, and a favorable Internal Revenue Service ruling that the transaction would be tax-free. The specific terms of a transaction, which are yet to be developed, must also be approved by the GM Board of Directors. Subject to these and other approvals and conditions, GM and EDS expect that a split- off could occur in the first half of 1996. However, it should be noted that due to the numerous uncertainties involved in these matters, there can be no assurance that any split-off of EDS will be proposed or completed. A split-off would be proposed only in a manner that would not result in the recapitalization of GM Class E common stock into GM $1 2/3 par value common stock at a 120 percent exchange ratio, as currently provided for under certain circumstances in the GM certificate of incorporation. In the event of a split-off GM and EDS would enter into a long-term agreement in which EDS would provide substantially the same information technology and other services for GM that it does today." Alternative Market-Based Valuation Mechanisms. In a letter dated August 28, 1995, the General Motors Treasurer's Office responded to the request made by the Capital Stock Committee at its August 6, 1995 meeting for the exploration of the feasibility of structuring a split-off in a way that would allow the market to value the differences between the Class E Common Stock and the EDS Common Stock. Taking into account various legal, tax and accounting considerations, the Treasurer's Office reviewed four such potential market mechanisms, none of which were found to be feasible. Under the first alternative, General Motors would have distributed some shares of EDS Common Stock to the public prior to a split-off and set a split-off exchange ratio based on the trading values of both stocks. Under the second alternative, EDS Common Stock would have been publicly traded on a "when-issued" basis (i.e., conditional pending issuance) for a period of time preceding a split-off, and the split-off exchange ratio would have been based on the trading prices of the EDS Common Stock and the Class E Common Stock during such period. Under the third alternative, shares of EDS Common Stock would have been sold through an auction in which, in order to preserve the tax-free nature of such transaction, participation would have been restricted to GM stockholders and consideration for the purchase of EDS Common Stock in the auction would have been restricted to GM capital stock. Under the fourth alternative, GM would have issued to holders of $1 2/3 Common Stock warrants that would be required to accompany each share of Class E Common Stock in order for such stock to be exchanged for EDS Common Stock in a split-off on a one-for-one basis. This fourth alternative contemplated that holders of $1 2/3 Common Stock and Class E Common Stock would engage in negotiations to arrive at a price for the warrants reflecting their relative valuations of the two securities. 36 After assessing the foregoing alternatives, the Treasurer's Office reported its conclusion that the practical problems and costs associated with the implementation of any such market mechanism would be substantial. In addition, the letter expressed the Treasurer's Office's opinion that, due to the imperfect market in which the EDS Common Stock would be priced under any of the available alternatives, the relative pricing observed in any such market should not be relied on by the GM Board as the basis for determining the terms of any split-off. The letter concluded that a "private" valuation of the respective values of the Class E Common Stock and the EDS Common Stock (such as that contemplated by the process established by the GM Board) would better take into account all relevant considerations. In view of the conclusions reached by the Treasurer's Office, a market mechanism for valuing the differences between Class E Common Stock and EDS Common Stock was not utilized and the GM Board continued to rely on the arm's-length negotiation process, with Capital Stock Committee oversight, as described herein. Furthermore, no conclusion was reached as to how any such market based valuation, even if reliably determined, would affect the GM Board's deliberations as to the fairness of all of the terms and conditions of a split-off. Negotiating Teams. As noted previously, in order to aid the GM Board in the development of definitive financial and other essential terms of the Split- Off, the GM Board appointed two management negotiating teams at its August 1995 meeting. One team, which consisted of executive officers of General Motors (the GM Team), was charged with negotiating terms of the Split-Off to be recommended to the Capital Stock Committee and the GM Board from the perspective of the holders of the $1 2/3 Common Stock and the Class H Common Stock, who would continue to be stockholders of General Motors after the Split-Off. The GM Team initially consisted of Harry J. Pearce, as General Motors' Executive Vice President with responsibility, among other things, for EDS and Hughes matters, and Heidi Kunz, then Vice President and Treasurer of General Motors. On December 4, 1995, the GM Board accepted the resignation of Ms. Kunz as Vice President and Treasurer and appointed John D. Finnegan to replace Ms. Kunz in that position. On December 4, 1995, the GM Board also elected Mr. Pearce to the GM Board and designated him as Vice Chairman of the GM Board. On February 5, 1996, the GM Board reconstituted the GM Team to consist of Messrs. Finnegan, Krain and Losh. The GM Team was authorized to use the assistance of General Motors' Treasurer's Office Staff and Legal Staff, and also engaged Merrill Lynch as its independent financial advisor and the law firms of Kirkland & Ellis, Richards Layton & Finger and Milbank, Tweed, Hadley & McCloy as its outside counsel. The other team, which consisted of executive officers of EDS (the EDS Team), was charged with negotiating terms of the Split-Off to be recommended to the Capital Stock Committee and the GM Board from the perspective of the holders of Class E Common Stock, who would become stockholders of EDS in the Split- Off. The EDS Team consisted of Lester M. Alberthal, Jr., Chairman, President and Chief Executive Officer of EDS, Gary J. Fernandes, Senior Vice President of EDS, and Joseph M. Grant, Senior Vice President and Chief Financial Officer of EDS. The EDS Team was authorized to use the assistance of the Financial and Legal Staffs of EDS and also engaged Lehman Brothers as its independent financial advisor and the law firms of Baker & Botts, L.L.P., Prickett, Jones, Elliott, Kristol & Schnee and Hughes & Luce, L.L.P. as its outside counsel. In March 1996, certain senior personnel involved in providing financial advice to the EDS Team left Lehman Brothers to join Morgan Stanley, at which time Morgan Stanley also began advising the EDS Team. Since the time Morgan Stanley began advising the EDS Team, it and Lehman Brothers have performed their services in cooperation with each other. See "--Fairness Opinions--EDS Team Financial Advisors Fairness Opinions." On August 31, 1995, representatives of Weil, Gotshal & Manges LLP, independent counsel to the Capital Stock Committee, held a meeting with the General Counsel of General Motors and another attorney on the GM Legal Staff as representatives of the GM Team and with a Senior Vice President of EDS and the General Counsel of EDS as representatives of the EDS Team. At this meeting, there was preliminary discussion of the appropriate sequence for negotiating the provisions of the IT Services Agreements and the amount of any special payment between GM and EDS. On September 7, 1995, members and representatives of the management negotiating teams and their advisors met with representatives of Weil, Gotshal & Manges LLP for further discussion of the sequencing of negotiations and other procedural matters. The meeting was attended on behalf of the GM Team by Ms. Kunz and representatives of the GM Treasurer's Office, the GM Legal Staff, Merrill Lynch and Kirkland & Ellis. Participants in the meeting for the EDS Team were Mr. Fernandes and Mr. Grant, together with EDS' General 37 Counsel and representatives of Lehman Brothers and Baker & Botts, L.L.P. The participants in the meeting discussed the order in which they would negotiate various terms of the transaction. It was determined at the meeting that the terms of the IT Services Agreements would be negotiated before other matters, such as the amount of any special payment between General Motors and EDS, in order to enhance the arm's-length and commercially reasonable nature of the IT Services Agreements on a stand-alone basis. Counsel for the Capital Stock Committee also reviewed the background behind the formation of the management negotiating teams and explained the process contemplated by the Capital Stock Committee. Negotiation of IT Services Agreements. The EDS Team designated Paul Chiapparone, Senior Vice President of EDS, and John R. Castle, Jr., Senior Vice President of EDS, as its lead negotiators regarding the IT Services Agreements, and the GM Team similarly designated Leon J. Krain, GM Vice President and Group Executive--Finance (who later was designated a member of the GM Team), and Thomas A. Gottschalk, General Counsel of GM, as its lead negotiators. Subsequently, Messrs. Krain and Gottschalk formed a negotiating guidance team, consisting of themselves, Robert Hendry, GM Group Vice President, North American Operations Business Support Group, and Vince Barabba, General Director--Knowledge Network, to provide senior level direction to GM's staff negotiators. The lead negotiators met on September 21, 1995 to discuss the framework and procedures for the negotiations and the appointment of staff-level negotiating teams and outside advisors. The staff negotiators for the teams held their first meeting on September 29, 1995. The GM Team representatives outlined their view of the essential elements of new agreements that would meet GM's business requirements, including the duration of the principal agreement's initial term, determination of "in-scope" services to be provided, provisions relating to competitiveness of services provided with respect to quality, service, price and technology, and the establishment of appropriate payment terms for services rendered. The EDS Team representatives asked clarifying questions but did not negotiate substantive terms at that time. At its meeting on October 2, 1995, the GM Board received reports on the status of the Split-Off from Mr. Pearce and Mr. Wyman, chairman of the Capital Stock Committee, including a report on the principal issues with respect to the negotiation of the IT Services Agreements. All of the members of the GM Board were present at the meeting. During October and early November 1995, the representatives of the management negotiating teams exchanged views regarding the IT services issues that had been identified by GM at the September 29, 1995 meeting. The EDS Team representatives noted that GM and EDS had participated in a successful strategic IT partnership for more than ten years and stated that the GM/EDS relationship should continue largely unchanged so as to continue to help GM achieve important strategic objectives, including maximizing the value provided to GM by EDS' worldwide organization and resources, making information a strategic advantage for GM on a global basis, improving GM's worldwide competitive cost and quality position through the innovative and effective use of IT, implementing common systems and processes approved by GM, enabling GM to make the most effective use of its IT expenditures and allowing GM and EDS to continue to work together to demonstrate that GM pays reasonable prices for and receives meaningful value from the services provided by EDS. On that basis, the EDS Team representatives suggested that no material changes would be needed to the Existing IT Services Agreements other than to provide for a specific duration rather than an indefinite term and that the principal issues to be negotiated should be limited to the duration of initial and renewal terms for the agreements, provisions for termination upon material default or non-payment, mitigation and allocation of recurring costs resulting from the split-off, dispute resolution procedures, the establishment of an information technology committee of GM and EDS corporate officers to oversee implementation of the agreement and the elimination of any existing contract ambiguities. As described in their September 29, 1995 presentation, the GM Team representatives stated their view that certain additional changes would be required in the context of a split-off because (i) the Capital Stock Committee and other fairness mechanisms such as cost audits would no longer be available to monitor the commercial reasonableness and fairness of implementation of the agreements, (ii) the provisions of the agreements had been developing in an evolutionary manner during the decade that GM had 38 owned EDS and would, in any event, continue to develop to reflect changing business, industry and economic circumstances, and (iii) the IT outsourcing industry had experienced significant growth and change since GM acquired EDS in 1984, and it was therefore now possible and appropriate for the agreements to reflect the more competitive IT outsourcing market. At its meeting on November 5, 1995, the Capital Stock Committee received a report from representatives of Weil, Gotshal & Manges LLP, its independent counsel, on the status of the negotiations of the IT Services Agreements. The members of the Capital Stock Committee in attendance at the meeting consisted of Mr. Wyman, Mr. Bryan, Ms. McLaughlin and Mr. Weatherstone. After extensive discussion of issues that had arisen in the course of the negotiations, the Capital Stock Committee determined that the negotiating teams were in need of guidance as to the corporate objectives to be addressed in a split-off. Accordingly, the Capital Stock Committee recommended that the GM Board provide the following guidelines to the management negotiating teams regarding its goals and priorities with respect to the Split-Off in general and the IT Services Agreements in particular: (i) an appropriate, long-term IT supply contract should be developed for the proposed split-off to achieve the respective business goals of GM and EDS; (ii) the terms of any such contract should take into account and further the legitimate interests and expectations of all GM stockholders; (iii) GM should resume the principal role in developing and supervising its IT strategy and programs, while still drawing on EDS' expertise; and (iv) since following any split-off the Capital Stock Committee would no longer be able to review the terms on which EDS provides IT services to GM and would therefore have to rely on contractual protections, the IT Services Agreements should provide GM with greater ability to test the competitiveness of the terms on which EDS would provide such services to GM, including through the opportunity to competitively bid limited portions of GM's IT service needs and to award such bids to suppliers other than EDS when appropriate. At a GM Board meeting on November 6, 1995 attended by all of the directors, the GM Board received a report from Mr. Wyman on the status of various issues relating to the Split-Off, including the guidelines recommended by the Capital Stock Committee. The GM Board concurred that counsel for the Capital Stock Committee should communicate such guidelines to the GM Team and the EDS Team. Such counsel so communicated the guidelines and indicated that the guidelines should be used to inform and guide the continuing negotiations of the terms of the IT Services Agreements. Counsel also communicated the GM Board's desire that the GM Team and the EDS Team and their lead negotiators remain personally involved in the negotiations in order to expedite them. At meetings during the first half of November 1995, the GM Team negotiators and the EDS Team negotiators continued to exchange proposals regarding contract terms and identified as the key issue finding appropriate means, including limited competitive bidding and outsourcing, to assure GM of the competitiveness of EDS' prices, quality, service and technology. During these meetings, the GM Team representatives also stressed the importance of realizing long-term reductions in GM's structural costs, whether a split-off were to occur or not. In these meetings, the respective representatives also discussed certain other issues relating to the GM/EDS relationship that would likely have arisen in the absence of split-off discussions, including the implementation of a new agreement upon the expiration on December 31, 1995 of EDS' arrangement with GM's International Operations group, the pricing of certain information processing activities and communications services ("IPACS") provided by EDS and matters relating to a new plant floor automation project being undertaken by GM's North American Operations group. On November 20, 1995, GM determined to withhold certain IPACS payments from EDS pending resolution of disputed amounts. At the GM Board meeting on December 4, 1995, with all directors in attendance, the GM Board received a report on the status of the Split-Off from Weil, Gotshal & Manges LLP, independent counsel to the Capital Stock Committee. It was reported that although Messrs. Alberthal and Pearce and other senior EDS and GM executives had become personally involved in the negotiations of the IT Services Agreements and some progress appeared to have been made, there was as yet no resolution of significant substantive issues. On December 18, 1995, the GM Board met by telephone conference, with all but one director in attendance. Representatives of EDS described the terms of certain provisions of the EDS Certificate of Incorporation, the 39 EDS Bylaws and the EDS Rights Agreement that EDS desired to adopt in order to protect future public stockholders of EDS, including holders of Class E Common Stock who would become EDS stockholders upon consummation of the Split-Off, from certain abusive and coercive takeover tactics by third parties. The EDS representatives noted that the proposal to adopt these provisions was not being made in response to any known takeover threat and that many public companies have similar provisions. After discussion and review of information regarding, among other things, the market impact of such provisions, the GM Board determined that it would have no objection to the implementation of such provisions at any time after the management negotiating teams reached an agreement in principle on the material terms of the IT Services Agreements. Following the resolution of these terms, the protective provisions were adopted by EDS on March 12, 1996. For a description of the EDS Rights Agreement and other provisions, see "EDS Capital Stock." Negotiations with respect to the principal terms for the IT Services Agreements continued during December 1995 and January and February 1996. The principal issues discussed included extension of certain service agreements, limited exposure of certain services to competitive bidding, the timing of payments by GM for services provided by EDS, the definition of "in-scope" services, termination rights for GM in certain circumstances (including in the event of certain changes in control of EDS), commitments by both parties with respect to certain structural cost reductions for GM, the identification of project personnel and the ownership of intellectual property. The parties also discussed the IPACS payments being withheld by GM and certain disputed issues involving GM's international operations. At the GM Board Meeting on February 5, 1996, with all but one director in attendance, Mr. Wyman reported to the GM Board on the status of the Split-Off discussions and the GM Board reconstituted the GM Team as described above in "--Negotiating Teams." On February 8, 1996, the EDS Team's lead negotiators and the GM Team's lead negotiators reached a preliminary agreement with respect to a substantial number of terms proposed to be included in the IT Services Agreements. Two material issues under discussion at that time were not fully resolved by the preliminary agreement. One such issue related to the scope of GM's termination rights in the event of a change of control of EDS and the other related to the methods for the resolution of disputes arising in connection with the negotiation of the terms of future service agreements under the Master Services Agreement. In mid-February 1996, the parties commenced work on definitive documentation for the IT Services Agreements. In March 1996, agreement was reached by the parties' lead negotiators as to the two previously unresolved material issues. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements." Negotiation of Special Inter-Company Payment. The GM Team and EDS Team agreed that it would be appropriate to address a special inter-company payment as one of the terms of the Split-Off in order to enable the GM Board to determine that the Split-Off is fair to all classes of GM common stockholders. See "--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions." On December 8, 1995, in response to an inquiry from the IRS regarding the Tax Ruling, General Motors advised the IRS that the Special Inter-Company Payment would not exceed one billion dollars and could well be substantially less. As described above, it had been determined in September 1995 that the amount of the Special Inter-Company Payment would not be negotiated by the management negotiating teams until after they reached agreement on the principal terms of the IT Services Agreements. Accordingly, negotiation of the amount of the Special Inter- Company Payment did not commence until shortly after the teams reached a preliminary agreement on February 8, 1996 as to a substantial number of terms proposed to be included in the IT Services Agreements. In order to facilitate the negotiating process, the independent counsel for the Capital Stock Committee invited representatives of the GM Team and the EDS Team to make separate presentations to such counsel as to each respective team's views on the appropriate range for the amount of the Special Inter- Company Payment and its underlying assumptions and analysis. The two teams generally considered similar factors relating to the overall Split-Off transaction in formulating their views as to a range of appropriate values for the Special Inter-Company Payment. Both teams recognized that two of the principal factors relevant to the negotiation of the amount of the Special Inter-Company Payment were (i) the different characteristics of the Class E Common Stock, which is a security of GM designed to provide financial returns based on the performance of EDS, and 40 the EDS Common Stock, which is a more typical equity security, and (ii) the financial impact of the terms of the IT Services Agreements. However, each team had different assumptions and views about the effect of the factors due, in part, to the asymmetrical impact that certain factors could have on GM and EDS, respectively. For example, the GM Team anticipated that GM's IT spending (and corresponding EDS revenues) would slightly increase over the ten-year initial term of the IT Services Agreements, while the EDS Team expected a slightly declining revenue stream during that period. In addition, while the GM Team had access to information about and focused its attention on the spending (and revenue) effects of changes in the IT Services Agreements, the EDS Team also had access to information about and placed greater weight on the effect that the changes in the IT Services Agreements might have on EDS' operating margins. The teams also had different assessments of the changes that likely would be made in the Existing IT Services Agreements in the absence of a Split-Off and the anticipated financial impact of such changes on EDS. The factors considered by the negotiating teams were also considered by the Capital Stock Committee and the GM Board and are described in greater detail below under "--March 3, 1996 Capital Stock Committee Meeting," "--March 22, 1996 Capital Stock Committee Meeting" and "--March 31, 1996 GM Board Meeting." The GM Team and its advisors made an initial presentation to counsel for the Capital Stock Committee on February 16, 1996. At this meeting, the GM Team stated that, based on its assumptions, a Special Inter-Company Payment could be supported in the range of $750 million to $1.7 billion. Nevertheless, in light of the prior determination that any special payment would not exceed $1.0 billion and in order not to impair the growth potential of EDS following the Split-Off, the GM Team stated that the Special Inter-Company Payment should be in the range of $750 million to $1.0 billion. On February 19, 1996, the EDS Team and its advisors had an initial meeting with the independent counsel for the Capital Stock Committee. At this meeting, the EDS Team stated that, based on its assumptions, the amount to be paid by EDS to GM in connection with the Split-Off should not exceed $250 million and that the EDS Team was not currently prepared to recommend the making of any payment. Between February 20, 1996 and March 1, 1996, there were further discussions by both teams and their advisors with counsel for the Capital Stock Committee as well as three meetings between the GM Team and the EDS Team with respect to the Special Inter-Company Payment. At these meetings, the teams exchanged their respective views as to the appropriate factors to consider in determining the amount of the Special Inter-Company Payment. Although both teams generally agreed on the list of such factors and whether the factors had positive or negative effects, the teams held widely divergent estimates of the value and importance of almost all of the factors. Rather than resolving their different views on individual matters, the teams sought to reach a compromise on an amount of the Special Inter-Company Payment that would permit each team to recommend the terms of the Transactions taken as a whole to the Capital Stock Committee and the GM Board. As a result of these discussions, the GM Team and EDS Team reached preliminary agreement on March 1, 1996 on a Special Inter-Company Payment in the amount of $500 million. In reaching this preliminary agreement, the teams recognized that the Special Inter-Company Payment constituted only one of the many terms of the Split-Off and related transactions, all of which are integrally related. Accordingly, the teams viewed their agreement as to the amount of the Special Inter-Company Payment as preliminary in that it was premised on, among other things, the review of and approval by the Capital Stock Committee and the GM Board of all of the terms of the Transactions on substantially the same terms as those contemplated by the teams at the time such preliminary agreement was reached. The teams also reached preliminary agreement that General Motors would provide EDS a $50 million allowance relating to the resolution of various uncertain, contingent or other matters arising out of the separation of GM and EDS. March 3, 1996 Capital Stock Committee Meeting. At its meeting on March 3, 1996 (the "March 3, 1996 CSC Meeting"), the Capital Stock Committee received reports and presentations as to the Split-Off and related matters. All of the members of the Capital Stock Committee and certain other members of the GM Board attended the meeting. The relevant portion of the March 3, 1996 CSC Meeting was also attended by representatives of the management negotiating teams and their advisors and by the Capital Stock Committee's independent legal counsel. 41 Independent counsel for the Capital Stock Committee reviewed certain corporate governance matters relating to consideration of the Split-Off. Representatives of the GM Legal Staff then reported on various aspects of the developing Split-Off proposal and on an update provided by McKinsey to its consulting project concerning potential conflicts between EDS' business and other businesses of GM and its subsidiaries which had been discussed at the August 1995 CSC Meeting. This update included McKinsey's conclusion that the fundamental industry forces shaping competition (and creating potential conflicts among GM's current businesses) had intensified, strengthening the rationale underlying its earlier recommendation as to a split-off of EDS. Mr. Gottschalk and Mr. Castle, on behalf of the GM Team and the EDS Team, respectively, then reported on the substantial progress made by the negotiating teams, including reaching preliminary agreement with respect to a substantial number of terms proposed to be included in the IT Services Agreements. With Mr. Castle's concurrence, Mr. Gottschalk summarized the agreement that had been negotiated with respect to, among other things, the term of the new Master Services Agreement, the allocation of responsibility between GM and EDS for IT strategy and direction, the limited competitive bidding that would be permitted, the identification of key EDS employees for critical projects, revised payment terms, certain matters related to the scope of the agreement and the inclusion of a standard of good faith and fair dealing in the contract. He also reported that the teams were still negotiating certain matters relating to termination provisions for the Master Services Agreement. Counsel for the Capital Stock Committee then reviewed certain matters relating to the negotiations over the amount of the Special Inter-Company Payment, noting that such payment should take into account, among other factors, the financial impact of the IT Services Agreements on EDS to the extent that such impact was attributable to the Split-Off. However, counsel noted that, while both negotiating teams expressed their belief that certain changes would have been made to the Existing IT Services Agreements in the absence of a split-off of EDS, the exact nature and timing of such changes were extremely difficult, if not impossible, to determine. Mr. Finnegan and Mr. Grant, representing the GM Team and the EDS Team, respectively, then discussed the negotiations regarding the amount of the Special Inter-Company Payment. They observed that the payment was considered as one element among many in the overall Split-Off transaction. They reported on the factors considered in negotiating the amount of the payment, noting that both teams generally agreed as to the list of such factors and whether the factors had a positive or negative effect but that virtually all of the factors were subject to widely varying estimates of value and importance, and that the teams had not resolved their differences in reaching a preliminary agreement on a payment of $500 million and a preliminary agreement to recommend that General Motors provide EDS a $50 million allowance relating to the resolution of various uncertain, contingent or other matters arising out of the separation of GM and EDS. The factors considered to have a positive effect on the holders of the $1 2/3 Common Stock were the removal of the existing and potential business conflicts that had previously been identified between EDS and certain other GM business units, including Hughes and GMAC; any decrease in GM's pension expense and funding obligations that may be caused by any appreciation resulting from the Split-Off in the EDS Common Stock to be owned by the pension plans for GM's hourly-rate and salaried employees; the receipt of the Special Inter-Company Payment; the terms of the new IT Services Agreements; and the elimination of the potential recapitalization of the Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio upon a disposition by GM of substantially all of the business of EDS. Certain of these factors, including the removal of potential business conflicts between EDS and Hughes and, with respect to Delco, the terms of the IT Services Agreements, were also considered to have a positive effect on the holders of Class H Common Stock. Factors considered to have a positive effect on the holders of the Class E Common Stock included the benefits of owning an equity security like EDS Common Stock rather than Class E Common Stock, which is a security of GM designed to provide holders with financial returns based on the performance of EDS; the removal of constraints on EDS' ability, as a subsidiary of GM, to participate in strategic alliances, including the ability to use EDS Common Stock in large acquisitions; the availability of new market opportunities and increased growth potential for EDS; lower cost of and better access to capital for EDS; the possibility that EDS Common Stock would be included in the Standard & Poor's 500 Index after the Split-Off; the release by the PBGC of EDS from liability under Title IV of ERISA 42 relating to GM's U.S. pension plans; and the potential of holders of EDS Common Stock to realize premiums over prevailing market prices in connection with certain corporate transactions, including tender offers and other change of control transactions. The teams also agreed on the list of certain negative factors. The factors considered to have a negative effect on the holders of $1 2/3 Common Stock were the loss of the ability to control through ownership its IT provider, EDS, the possible effect of the Split-Off on GM's credit rating and credit profile and the loss of the ability of General Motors to elect to recapitalize shares of Class E Common Stock as shares of $1 2/3 Common Stock. The factors considered to have a negative effect on the holders of Class E Common Stock were the payment of the Special Inter-Company Payment; the terms of the new IT Services Agreements; and the loss of the right to recapitalization of the Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio under certain circumstances. Other practical considerations discussed included market expectations and the requirement to have the Split-Off approved by GM's common stockholders and that, after the Split-Off, EDS should be adequately capitalized to pursue growth and new business opportunities. March 4, 1996 GM Board Meeting. At the GM Board meeting on March 4, 1996, with all but one director in attendance, Mr. Wyman reported to the GM Board regarding the Capital Stock Committee's review of the status of the Split-Off at its March 3, 1996 meeting. March 18, 1996 Capital Stock Committee Meeting. At a telephonic meeting of the Capital Stock Committee on March 18, 1996, with all members participating, counsel to the Capital Stock Committee described the process planned for the further review and consideration of the Split-Off by the Capital Stock Committee, including matters related to the Capital Stock Committee's March 22, 1996 meeting. The Capital Stock Committee also received a report on the status of certain issues with respect to the IT Services Agreements. March 22, 1996 Capital Stock Committee Meeting. The Capital Stock Committee met by telephone conference on March 22, 1996, with all members participating. Members of GM and EDS management, representatives of the financial and legal advisors to the GM Team and EDS Team and the Capital Stock Committee's independent legal counsel participated in the relevant portions of the meeting. Counsel for the Capital Stock Committee reviewed certain matters relating to directors' responsibilities, the process that had previously been established for arm's length negotiations regarding the terms of the Split-Off and the role of the Capital Stock Committee in reviewing the proposed terms of the Transactions. Mr. Finnegan presented a report on behalf of GM management as to the background of the Transactions, including the principal business purposes for the Split-Off, the strategic advice received from McKinsey, the Tax Ruling and the process of arm's-length bargaining that had been followed by the management negotiating teams. Mr. Finnegan noted that the anticipated benefits and costs of the Transactions from the perspective of each of the three classes of GM common stock would be addressed in the reports of the management negotiating teams and financial advisors. Mr. Finnegan also presented the report of the GM Team, noting that it was relying on the advice of Merrill Lynch that it expected to be in a position to render the Merrill Lynch Fairness Opinion to the GM Board on March 31, 1996. He reviewed certain material terms and advantages and disadvantages of the Transactions, including the IT Services Agreements and the Special Inter- Company Payment, from the perspective of the holders of $1 2/3 Common Stock and Class H Common Stock. Based on the foregoing, Mr. Finnegan stated that the GM Team recommended the Transactions as in the best interest of and fair to the holders of $1 2/3 Common Stock and Class H Common Stock. Members of the EDS Team then reviewed the background and history of the negotiations, including the appointment of the teams as an aid to the process established by the GM Board, the engagement by the EDS Team of its financial advisors and counsel, the preliminary agreements reached by the teams with respect to the terms of the Master Services Agreement and the amount of the Special Inter-Company Payment and the anticipated financial effects of the Transactions on EDS. After reviewing the foregoing matters, the EDS Team recommended the proposed terms of the Split-Off to the Capital Stock Committee as being in the best interests of the holders of the Class E Common Stock and, accordingly, fair to such holders. In reaching its conclusions, 43 the EDS Team specifically noted that (i) it was relying on the advice of Lehman Brothers and Morgan Stanley that they expected to be in a position to render an opinion to the effect that, based on and subject to the assumptions, limitations and other matters set forth therein, the financial effect of the Split-Off Transactions taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock; (ii) it had considered both the advantages and disadvantages of the Transactions from the perspective of the holders of Class E Common Stock; and (iii) its conclusions were subject to the understanding of EDS' management that substantial changes would have been made beginning in 1996 to the Existing Master Services Agreement regardless of whether the Split-Off occurred. The disadvantages of the Transactions identified by the EDS Team included (a) the impact on EDS and the holders of Class E Common Stock of the changes reflected in the Master Services Agreement; and (b) the impact on EDS and the holders of Class E Common Stock of the Special Inter-Company Payment. The advantages of the Transactions identified by the EDS Team included (a) the benefits of owning EDS Common Stock instead of Class E Common Stock, which is a derivative or "tracking" stock; (b) the removal of constraints on EDS to pursue strategic alliances not available to EDS as a subsidiary of General Motors; (c) the removal of constraints on EDS to pursue new market opportunities not available to EDS as a subsidiary of General Motors; (d) the more flexible access to capital markets that will be available to EDS after the Split-Off without regard to competing considerations of General Motors; (e) the advice of the financial advisors to the EDS Team regarding the likelihood of EDS being included in the Standard & Poor's 500 Index and the benefits of such inclusion; (f) the release by the PBGC of EDS from contingent liability for General Motors pension benefit obligations; (g) the tax-free nature of the Split-Off; and (h) the advantages of a simplified governance process after the Split-Off, including the benefits of a board of directors that will be focused exclusively on the interests of the holders of EDS Common Stock. Members of the EDS Team also discussed certain matters relating to corporate governance arrangements for EDS following the Split-Off, including the identity of the persons who would be elected to serve as non-employee directors of EDS upon the consummation of the Split-Off. A representative of Merrill Lynch presented certain financial analyses regarding the Split-Off, as described under "--Fairness Opinions--Merrill Lynch Fairness Opinion." The representative said that Merrill Lynch expected to be in a position to render the Merrill Lynch Fairness Opinion to the full GM Board on March 31, 1996. A representative of Morgan Stanley presented a joint report of Morgan Stanley and Lehman Brothers as to the EDS Team Financial Advisors' analysis of the financial effect of the Split-Off Transactions from the perspective of the holders of Class E Common Stock. Information about the report is provided under "--Fairness Opinions--EDS Team Financial Advisors Fairness Opinions." The representative said that Morgan Stanley and Lehman Brothers expected to be in a position to render their respective opinions to the full GM Board on March 31, 1996. Representatives of GM's Legal and Tax Staffs described certain terms of the Merger Agreement, the Separation Agreement and the Tax Allocation Agreement. EDS management reported on EDS' consideration of a nonrecurring charge to be taken no earlier than the second quarter of 1996. See "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations." In addition, EDS management reported on various matters relating to the GM Hourly Plan Special Trust's ownership of Class E Common Stock. Mr. Smith, GM's Chairman, Chief Executive Officer and President, summarized the presentations and recommendations that had been made by or on behalf of the two management negotiating teams. Based on the foregoing, he stated that GM executive management recommended the Transactions as fair to all classes of GM common stockholders and in the best interests of GM and its common stockholders. After reviewing and discussing the foregoing matters, and acting in reliance on the reports provided by and the advice of Merrill Lynch, Lehman Brothers and Morgan Stanley that they expected to be in a position to render fairness opinions as described herein, the Capital Stock Committee unanimously adopted a resolution recommending that the GM Board proceed with the Transactions as being in the best interests of, and fair to, General Motors and each class of GM common stockholders. 44 March 31, 1996 GM Board Meeting. The GM Board held a special meeting on March 31, 1996 to review and consider the terms of the proposed Split-Off as recommended by the two management negotiating teams, by GM executive management and by the Capital Stock Committee. The special meeting was attended by all but one of the members of the GM Board as well as by members of GM and EDS management, representatives of the financial and legal advisors to the GM Team and the EDS Team, counsel for the Capital Stock Committee and representatives of GM's independent auditors. Counsel for the Capital Stock Committee reviewed the terms of proposed resolutions to be considered by the GM Board and certain matters relating to the GM Board's responsibilities in connection with considering the Transactions. Counsel reviewed the GM Board's fiduciary obligations to holders of all classes of GM common stock and the process that had been established by the GM Board for arm's-length negotiation of the terms of the Split-Off under the supervision of, and subject to review by, the Capital Stock Committee. Counsel also noted that with respect to the fairness of the Transactions to each class of GM common stockholders, approval of the Transactions would be sought not only from all three classes of GM common stockholders voting together as a single class in accordance with their respective voting rights, but also from the holders of the $ 1 2/3 Common Stock voting as a separate class and the holders of the Class E Common Stock voting as a separate class. In addition, counsel reported on the status of certain pending litigation relating to the Split-Off. See "--Certain Litigation." Mr. Wyman, Chairman of the Capital Stock Committee, reported as to the special role that the Capital Stock Committee had played for many years in reviewing the relationship between General Motors and EDS. He described the special charge given to the Committee in August 1995 to oversee the negotiations between the management negotiating teams and review the proposed terms of the Transactions, noting that the Capital Stock Committee had held seven meetings since August 1995 relating to the Split-Off (including the August 1995 CSC Meeting) and members of the Capital Stock Committee had participated in numerous other informal briefings and conferences with counsel and members of the management negotiating teams and had reported to the GM Board regarding such meetings, briefings, and conferences at eight different GM Board meetings, including the August 7, 1995 GM Board Meeting. Mr. Wyman noted the Capital Stock Committee's involvement in determining that the principal terms of the IT Services Agreements should be negotiated before other terms of the Transactions and in providing specific guidance to the negotiating teams in November 1995 as to the corporate objectives to be addressed in a split-off of EDS, particularly with respect to IT Services. He also noted the complexity of evaluating the proposed IT Services Agreements in comparison to the arrangements that might have prevailed between the parties in the absence of the Split-Off. He said that if the Split-Off were not consummated for any reason, the Capital Stock Committee anticipated that it would review further the subject of GM/EDS IT services arrangements and consider whether any changes would be appropriate. Based on the foregoing and the matters discussed at the March 22, 1996 meeting of the Capital Stock Committee (including the reports and recommendations of the GM Team and EDS Team and GM executive management and the fairness opinions expected to be delivered by Merrill Lynch and by each of the EDS Team Financial Advisors), Mr. Wyman stated that the Capital Stock Committee had unanimously determined that the Transactions are in the best interests of, and fair to, General Motors and each class of its common stockholders, and that the Capital Stock Committee recommended that the GM Board proceed with the Transactions. See "-- March 22, 1996 Capital Stock Committee Meeting." Mr. Finnegan presented a report of GM management with respect to the background, purposes and terms of the Transactions, which report was substantially similar to the report on these matters that he had delivered to the Capital Stock Committee on March 22, 1996. See "--March 22, 1996 Capital Stock Committee Meeting." Mr. Smith stated that, based on the information that had previously been delivered to the GM Board, the presentations to be made by the management negotiating teams and their respective financial advisors, and the actions of the Capital Stock Committee, GM's senior executive management believed that the two teams had used a fair process to negotiate and structure a transaction that is fair to all classes of GM common stockholders and that GM should proceed with the Transactions as being in the best interests of GM and all of its common stockholders. 45 Merrill Lynch delivered its written opinion to the GM Board that, based on and subject to the assumptions, limitations and other matters set forth therein, the Financial Effects of the Transactions (as defined in the Merrill Lynch Fairness Opinion) are fair, from a financial point of view, to General Motors and, accordingly, to General Motors' common stockholders after consummation of the Merger, namely the holders of the $1 2/3 Common Stock and the Class H Common Stock. A copy of the Merrill Lynch Fairness Opinion, which sets forth the assumptions made, matters considered and limits of the review undertaken, is attached as Appendix B-1 to this Solicitation Statement/Prospectus and is incorporated herein by reference. A representative of Merrill Lynch reviewed with the GM Board certain materials relating to the Transactions and such opinion, which materials have been filed as an exhibit to the Schedule 13E-3. For further information about the Merrill Lynch Fairness Opinion and related presentation to the GM Board, see "--Fairness Opinions--Merrill Lynch Fairness Opinion." The EDS Team Financial Advisors delivered their written opinions to the GM Board to the effect that, based on and subject to the assumptions, limitations and other matters set forth therein, the financial effect of the Split-Off Transactions (as defined in the Lehman Brothers and Morgan Stanley Fairness Opinions) taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock. A copy of each of the Lehman Brothers and Morgan Stanley Fairness Opinions, which sets forth the assumptions made, matters considered and limits of the review undertaken, is attached as Appendix B-2 and Appendix B-3, respectively, to this Solicitation Statement/Prospectus and is incorporated herein by reference. A representative of the EDS Team Financial Advisors reviewed with the GM Board certain materials relating to the Transactions and such opinions, which materials have been filed as an exhibit to the Schedule 13E-3. For further information about the Lehman Brothers and Morgan Stanley Fairness Opinions and related presentation to the GM Board, see "--Fairness Opinions--EDS Team Financial Advisors Fairness Opinions." Mr. Finnegan presented a report on behalf of the GM Team as to the negotiation of the terms of the Split-Off, including the IT Services Agreements and the Special Inter-Company Payment, from the perspective of the holders of the $1 2/3 Common Stock and the Class H Common Stock, which report was substantially similar to the report on these matters that he had delivered to the Capital Stock Committee on March 22, 1996. See "--March 22, 1996 Capital Stock Committee Meeting." Based on the entire process and its results, and in reliance on the Merrill Lynch Fairness Opinion, he stated that the GM Team believed the terms of the Transactions are in the best interests of GM and fair to the holders of $1 2/3 Common Stock and Class H Common Stock. Accordingly, the GM Team recommended that the Transactions be approved by the GM Board. Members of the EDS Team then proceeded, after reviewing the background and history of the negotiations between the management teams, to recommend the proposed terms of the Split-Off to the GM Board as being in the best interests of the holders of Class E Common Stock and, accordingly, fair to such holders. In reaching such conclusion, the EDS Team took note of the same bases and assumptions, and reviewed the same advantages and disadvantages of the Transactions, as were discussed at the meeting of the Capital Stock Committee held on March 22, 1996. See "--March 22, 1996 Capital Stock Committee Meeting." The GM Board also received reports on the Amended EDS Incentive Plan, EDS' consideration of a nonrecurring charge to be taken by EDS in the second quarter of 1996 and related disclosure matters, other matters relating to the business and operations of EDS and the governance of EDS after the Split-Off. See "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations." In addition, EDS management reported on certain matters relating to the GM Hourly Plan Special Trust's ownership of Class E Common Stock. GM management reported as to the appropriate accounting treatment for the Split-Off and discussed the process for filing this Solicitation Statement/Prospectus with the Commission and soliciting consents from GM's common stockholders in connection with the Transactions and the Amended EDS Incentive Plan. GM management also discussed the press releases and other announcements that would be appropriate in connection with the approval by the GM Board of the Transactions. After considering the foregoing matters, the GM Board unanimously determined that the Transactions are in the best interests of, and fair to, General Motors and each class of the GM common stockholders and, 46 accordingly, the GM Board unanimously approved and authorized the Transactions. The GM Board also unanimously determined to recommend to the common stockholders of GM that they execute consents approving the Transactions, including the adoption of the Merger Agreement. RECOMMENDATIONS OF THE CAPITAL STOCK COMMITTEE AND THE GM BOARD; FAIRNESS OF THE TRANSACTIONS As described above, at its August 7, 1995 meeting, the GM Board concluded that certain important strategic objectives of EDS could be addressed through a split-off of EDS and determined that a split-off of EDS on terms that would be fair to all classes of GM common stockholders would be in the best interests of GM and its stockholders. Furthermore, the GM Board required that any such split-off would be proposed only in a transaction that would be tax- free for U.S. federal income tax purposes and that would not result in the recapitalization of Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio as currently provided for upon a disposition by GM of substantially all of the assets of EDS and under certain other circumstances by the General Motors Certificate of Incorporation. See "--Alternatives to the Split-Off" and "--Background of the Split-Off--Consideration of Split-Off." In August 1995, the Capital Stock Committee considered and endorsed procedures for establishing the financial and other essential terms of a split-off. The GM Board, in connection with its August 1995 authorization to management to develop the terms of a specific proposal regarding a split-off, placed substantial reliance on presentations made to and discussions held at the August 1995 Capital Stock Committee meeting. Upon the recommendation of the Capital Stock Committee, the GM Board established procedures that it believed would result in the negotiation of the terms of a split-off transaction that would be fair to all classes of GM common stockholders. The principal procedure established was the process of arm's-length negotiation involving the GM Team and the EDS Team, each acting with its own legal and financial advisors and under the general oversight of the Capital Stock Committee, to ensure a level playing field between the parties. The GM Board relied substantially on the Capital Stock Committee to monitor and oversee the process by which the terms of the Transactions were developed. See "-- Background of the Split-Off--Consideration of Split-Off," "--August 1995 Capital Stock Committee Meeting," "--August 1995 GM Board Meeting" and "-- Negotiating Teams." The Capital Stock Committee and the GM Board monitored the progress of the management negotiating teams and provided guidance to them as appropriate, including the communication in November 1995 of certain guidelines regarding the GM Board's goals and priorities with respect to the Split-Off in general and the IT Services Agreements in particular. In addition, the Capital Stock Committee provided assistance to the negotiating teams in connection with the September 1995 decision to negotiate the terms of the IT Services Agreements before the other terms of the Transactions in order to enhance the arm's- length and commercially reasonable nature of the IT Services Agreements on a stand-alone basis. As a result of so sequencing the negotiations, the management teams were able to negotiate the amount of the Special Inter- Company Payment as a final term of the Transactions that would enable the Capital Stock Committee and the GM Board, taking into account all other factors (including the terms of the IT Services Agreements), to determine that the Transactions are fair to all classes of GM common stockholders. See "Background of the Split-Off--Negotiating Teams," "--Negotiation of IT Services Agreements" and "--Negotiation of Special Inter-Company Payment." In reviewing the terms of the Split-Off, the Capital Stock Committee placed substantial reliance on its determination (based on the reports of the two management negotiating teams and GM executive management) that there had in fact been a process that involved vigorous arm's-length negotiation between the two management teams, each of which was represented by independent financial and legal advisors. With respect to the fairness of the Transactions, the Capital Stock Committee also considered the fact that the Transactions would be submitted for approval not only by all of GM's common stockholders voting together as a single class in accordance with their respective voting rights, but also by separate class votes of the holders of $1 2/3 Common Stock and Class E Common Stock. The Capital Stock Committee considered the recommendations of the GM Team and the EDS Team, as well as the fact that the proposed terms of the Transactions satisfied the conditions initially established by the GM Board as to the tax-free nature of the Split- Off and the absence of a recapitalization at a 120% exchange ratio and the guidelines established in November 1995 as to certain other 47 matters. The Capital Stock Committee also considered the one-for-one ratio for converting shares of Class E Common Stock into shares of EDS Common Stock, the opportunities that would be afforded to EDS and GM to accomplish the purposes of the Split-Off, the amount of the Special Inter-Company Payment and the terms of the IT Services Agreements. In addition, as to the financial fairness of the Transactions, the Capital Stock Committee placed substantial reliance on the presentations made and fairness opinions expected to be delivered by Merrill Lynch and by each of the EDS Team Financial Advisors. On the basis of all of the foregoing considerations and the other matters discussed at its March 22, 1996 meeting, the Capital Stock Committee determined to recommend to the GM Board that General Motors proceed with the Transactions as in the best interests of, and fair to, GM and each class of GM common stockholders. See "--Background of the Split-Off--March 22, 1996 Capital Stock Committee Meeting." The GM Board determined the fairness of the Transactions based on substantially the same factors as those considered by the Capital Stock Committee. The GM Board did not formally assign weights to specific factors but considered all factors together. However, the GM Board placed principal reliance on its conclusion that certain important strategic objectives of EDS could be addressed through the Split-Off without significant potential adverse consequences for GM and its determination that a fair process had been developed and implemented for negotiating the terms of the Transactions. With regard to the negotiating process, the GM Board attributed substantial importance to the vigorous arm's-length negotiations that it determined had taken place between the two management negotiating teams and to the activities of the Capital Stock Committee and its independent counsel in overseeing and providing guidance to the management negotiating teams. In addition, (a) as to the fairness, from a financial point of view, of the financial effects of the Transactions on General Motors (and, accordingly, on holders of the $1 2/3 Common Stock and the Class H Common Stock), the GM Board principally relied on the Merrill Lynch Fairness Opinion and the presentation of Merrill Lynch to the GM Board and (b) as to the fairness, from a financial point of view, of the financial effects of the Transactions on holders of the Class E Common Stock, the GM Board principally relied on the presentation and written opinion of each of the EDS Team Financial Advisors. In addition to and without limiting the foregoing, in determining the fairness of the Transactions to each class of GM common stock, the GM Board considered (i) the report, presentation and recommendation of GM's executive management regarding the Split-Off and related transactions, (ii) the report and recommendation of each of the GM Team and the EDS Team, (iii) the presentation and written opinion of each of Merrill Lynch and the EDS Team Financial Advisors, (iv) the recommendation of the Capital Stock Committee that the GM Board proceed with the Transactions as in the best interests of, and fair to, GM and each class of GM common stockholders, (v) the background, oversight, deliberations and views of the Capital Stock Committee with respect to the Transactions and the relationship between GM and EDS, (vi) the information previously reviewed and the prior deliberations of the GM Board concerning the potential for a split-off of EDS and the relationship between GM and EDS and (vii) the other matters reported on at the March 31, 1996 GM Board Meeting. See "--Background of the Split-Off--March 31, 1996 GM Board Meeting" and "--Fairness Opinions." Based on the foregoing, the GM Board unanimously determined that the Transactions are in the best interests of, and fair to, General Motors and each class of the GM common stockholders and, accordingly, the GM Board unanimously approved and authorized the Transactions. The GM Board also unanimously determined to recommend to the common stockholders of GM that they execute consents approving the Transactions, including the adoption of the Merger Agreement. FAIRNESS OPINIONS Merrill Lynch Fairness Opinion On March 31, 1996, Merrill Lynch delivered its written opinion to the GM Board that, as of that date and on the basis of and subject to the assumptions, limitations and other matters set forth therein, the Financial Effects of the Transactions (as defined below) are fair, from a financial point of view, to General Motors and, accordingly, to General Motors' common stockholders after consummation of the Merger, namely the holders of the $1 2/3 Common Stock and the Class H Common Stock. As used in the Merrill Lynch Fairness Opinion and in 48 this section of this Solicitation Statement/Prospectus, the term "Financial Effects of the Transactions" refers collectively to the Special Inter-Company Payment, the $50 million allowance to EDS under the Separation Agreement, the expenses of implementing the Transactions to be borne by General Motors and the financial effects on General Motors (excluding EDS) of (i) certain changes, pursuant to the Master Services Agreement and certain IT Services Agreements, to the terms on which IT services are currently provided by EDS to General Motors (the "MSA Modifications"), (ii) the removal of certain potential conflicts between the business of EDS and certain other businesses of General Motors and its subsidiaries, (iii) any change in the market price of the shares of Class E Common Stock held by the GM Hourly Plan Special Trust and the GM Salaried Plan Trust (collectively, the "Plan Holdings") as a result of the Transactions and (iv) the conversion of each share of Class E Common Stock into one share of EDS Common Stock and, upon such conversion, the cancellation of all such shares of Class E Common Stock (the "Class E Common Stock Conversion"). A COPY OF THE MERRILL LYNCH FAIRNESS OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B-1 TO THIS SOLICITATION STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. THE SUMMARY OF THE MERRILL LYNCH FAIRNESS OPINION SET FORTH IN THIS SOLICITATION STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. COMMON STOCKHOLDERS OF GENERAL MOTORS ARE URGED TO READ THE MERRILL LYNCH FAIRNESS OPINION IN ITS ENTIRETY. Merrill Lynch also provided a written presentation to the GM Board regarding the financial and comparative analyses performed by Merrill Lynch in connection with preparation of the Merrill Lynch Fairness Opinion and discussed such analyses with the GM Board at its March 31, 1996 meeting. A description of such presentation is contained in this section of the Solicitation Statement/Prospectus. A substantially similar presentation was provided to the Capital Stock Committee and discussed with the Capital Stock Committee at its March 22, 1996 meeting. A copy of the written presentation to the GM Board has been filed as an exhibit to the Rule 13e-3 Transaction Statement filed with the Commission with respect to the Transactions and may be inspected and copied, and obtained by mail, from the Commission as set forth in "Available Information" and will be made available for inspection and copying at the principal executive offices of General Motors at General Motors Corporation, Room 11-243, General Motors Building, 3044 West Grand Boulevard, Detroit, Michigan 48202-3091 during regular business hours by any interested common stockholder of General Motors or his or her representative who has been so designated in writing. The Merrill Lynch Fairness Opinion is directed only to the fairness, from a financial point of view, of the Financial Effects of the Transactions to General Motors and, accordingly, to General Motors' common stockholders after consummation of the Merger, namely the holders of the $1 2/3 Common Stock and the Class H Common Stock, and does not constitute a recommendation to any common stockholder of General Motors as to whether such stockholder should consent to the Transactions. The Merrill Lynch Fairness Opinion does not in any manner address the fairness of the Transactions to EDS or to the holders of Class E Common Stock, matters as to which Merrill Lynch's opinion has not been requested. Furthermore, Merrill Lynch expressed no opinion as to the prices at which EDS Common Stock will trade subsequent to the Split-Off. The Merrill Lynch Fairness Opinion is necessarily based upon financial, economic, market and other conditions as they existed and could be evaluated on the date of the Merrill Lynch Fairness Opinion. In arriving at its opinion, Merrill Lynch, among other things: (1) reviewed General Motors' Annual Reports, Forms 10-K and related financial information for the five fiscal years ended December 31, 1994, General Motors' audited financial statements for the year ended December 31, 1995, drafts of General Motors' Annual Report and Form 10-K for that year, and General Motors' Forms 10-Q for the quarterly periods ending March 31, 1995, June 30, 1995 and September 30, 1995; (2) reviewed EDS' Annual Reports and related financial information for the five fiscal years ended December 31, 1994 and EDS' audited financial statements for the year ended December 31, 1995; (3) conducted discussions with members of senior management of General Motors concerning their views regarding (a) the use of IT services by General Motors in the future and (b) the strategic rationale for, and the financial effects on General Motors (excluding EDS) of, the Split-Off, including the financial benefits to General Motors of the removal of certain potential conflicts between the business of EDS and certain other businesses of General Motors and its subsidiaries; (4) reviewed certain forecasts furnished to 49 Merrill Lynch by General Motors management of General Motors' future expenditures for information technology services; (5) reviewed certain estimates furnished to Merrill Lynch by management of General Motors of the expenses of implementing the Transactions to be borne by General Motors; (6) reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets and prospects of EDS, furnished to Merrill Lynch by EDS; (7) reviewed published reports of equity analysts regarding their expectations with respect to the future earnings of EDS and the impact of the Split-Off on such earnings; (8) conducted discussions with members of senior management of EDS concerning their views regarding the strategic rationale for, and the financial effects on EDS of, the Split-Off, and various strategic alternatives available to EDS, both as a wholly owned subsidiary of General Motors and as an independent, publicly traded company; (9) compared certain financial ratios of EDS, on a pro forma basis giving effect to the Split-Off, to the financial ratios of certain companies that Merrill Lynch deemed to be reasonably similar to EDS; (10) reviewed the historical market prices for the Class E Common Stock to be converted into EDS Common Stock in the Split-Off and considered the potential impact of the Split-Off on the market price thereof; (11) considered the financial benefits to General Motors of its rights of ownership and control of EDS (taking into account the terms of the Class E Common Stock and the GM Board's policies with respect to the exercise of such rights), all of which would terminate as a result of the Class E Common Stock Conversion; (12) compared the financial terms of the Split-Off with the financial terms of certain transactions that Merrill Lynch deemed to be relevant; (13) considered the alternatives available to EDS and General Motors in developing and implementing strategic alliances and other strategic alternatives for EDS, as a wholly owned subsidiary of General Motors, with third parties; (14) reviewed a draft dated March 27, 1996 of the Merger Agreement; (15) reviewed a draft dated March 26, 1996 of the Separation Agreement and a draft dated March 28, 1996 of the Tax Allocation Agreement; (16) reviewed the Existing Master Services Agreement and a draft dated March 22, 1996 of the Master Services Agreement; (17) reviewed the General Motors Certificate of Incorporation and GM's By-laws; (18) reviewed (a) the GM-PBGC Agreement, (b) the Escrow Agreement (the "Escrow Agreement") made as of March 5, 1996 by and among Bankers Trust Company (the "Escrow Agent"), the PBGC and General Motors and (c) forms of the Unconditional Releases (as defined below in "--GM-PBGC Agreement"); (19) reviewed the Registration Rights Agreement; (20) reviewed the Final Exemption published by the Department of Labor in the Federal Register dated March 15, 1995 with respect to GM's March 1995 contribution of Class E Common Stock and cash to the GM Hourly Plan Special Trust; (21) reviewed the Tax Ruling and the request to the IRS for such ruling; (22) reviewed a draft dated March 28, 1996 of this Solicitation Statement/Prospectus; and (23) reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as Merrill Lynch deemed necessary, including Merrill Lynch's assessment of general economic, market and monetary conditions. In preparing the Merrill Lynch Fairness Opinion, Merrill Lynch assumed and relied on the accuracy and completeness of all information supplied or otherwise made available to it by General Motors and EDS, and Merrill Lynch did not independently verify such information or undertake an independent evaluation or appraisal of any of the assets or liabilities of General Motors or EDS and was not furnished with any such evaluation or appraisal. With respect to the forecasts furnished by General Motors management of General Motors' future expenditures for information technology services, Merrill Lynch assumed that they are reasonably based and reflect the best currently available estimates and judgments of such management as to such expected expenditures. Merrill Lynch assumed that the executed Unconditional Releases will be released from escrow in accordance with the terms of the Escrow Agreement. In addition, Merrill Lynch assumed that any appreciation in the market price of the Plan Holdings as a result of the Transactions will directly reduce General Motors' pension expense and unfunded pension liability. Merrill Lynch was advised by General Motors that the consummation of the Transactions will not result in any default or similar event under any loan agreement, instrument of indebtedness or other contract of General Motors or EDS that will not be waived. The terms of the Transactions were developed through a process of arms'- length negotiations between the GM Team and the EDS Team and were approved by the Capital Stock Committee and the GM Board. See "--Background of the Split- Off." No limitations were imposed by General Motors or the GM Board with respect to the investigations made or procedures followed by Merrill Lynch in rendering its opinion, except that 50 Merrill Lynch was not authorized by General Motors or the GM Board to solicit, nor did Merrill Lynch solicit, third-party indications of interest with respect to a business combination or other extraordinary transaction involving EDS or any of its assets. The following paragraphs contain a summary of certain financial and comparative analyses performed by Merrill Lynch in connection with the preparation of the Merrill Lynch Fairness Opinion and presented to the GM Board and the Capital Stock Committee. The summary does not purport to be a complete description of the analyses conducted by Merrill Lynch in arriving at its opinion. In addition, Merrill Lynch believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it, without considering all such factors and analyses, could create an incomplete view of the processes underlying its opinion. Merrill Lynch did not assign relative weights to any of its analyses in preparing its opinion. The preparation of a fairness opinion is a complex process, and a summary description does not capture the full analysis. In performing its analyses, Merrill Lynch made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of General Motors and EDS. In addition, certain elements of the Transactions were not susceptible to precise quantification and, in preparing its opinion, Merrill Lynch made judgments and estimates that it considered reasonable and appropriate under the circumstances. Any estimates incorporated in the analyses performed by Merrill Lynch are not necessarily indicative of actual past or future values or results, which may be significantly more or less favorable than suggested by such estimates or analyses. Because such estimates are inherently subject to uncertainty, none of General Motors, EDS, Merrill Lynch or any other person assumes responsibility for their accuracy. In addition, analyses relating to the value of businesses do not purport to be appraisals and do not necessarily reflect the prices at which businesses may be sold in the future or at which their shares of capital stock may trade in the future. Overview of Analyses of the Financial Effects of the Transactions. Merrill Lynch analyzed the value of the financial effects on General Motors (excluding EDS) of the MSA Modifications and of the Funding Effect (as defined below under "--Analysis of the Financial Effects of the Transactions on the Plan Holdings") by calculating ranges of values of such financial effects, as described below. By adding the amount of the Special Inter-Company Payment to the sum of such ranges of values, and by subtracting a range of from $70 million to $50 million on account of the $50 million allowance provided to EDS under the Separation Agreement and for the expenses of implementing the Transactions to be borne by General Motors, Merrill Lynch calculated a range of values for such financial effects of $970 million to $2.29 billion, or from 3.6% to 8.5% of the aggregate market value of the Class E Common Stock (the "Class E Aggregate Market Value"), based on 483 million shares outstanding and the closing market price on March 26, 1996 of $55.875 per share. Merrill Lynch reviewed such range of percentages of the Class E Aggregate Market Value against reference ranges of Percentage Premiums (as defined and described below under "--Analysis of the Financial Effects of the Class E Common Stock Conversion") developed from analyses of certain Comparable Transactions (as defined and described below). The analyses of the Comparable Transactions were undertaken in order to quantify the financial benefits to General Motors from its control of EDS, all of which would terminate as a result of the Class E Common Stock Conversion. In addition, Merrill Lynch discussed with the GM Board and the Capital Stock Committee (as described below), but did not attempt to quantify, (a) certain financial benefits to General Motors of the Transactions, including financial benefits to General Motors (excluding EDS) arising out of the removal of certain potential conflicts between the business of EDS and certain other businesses of General Motors and its subsidiaries and a reduction in goodwill amortization and (b) certain financial benefits that General Motors would cease to have as a result of the Class E Common Stock Conversion, including the ability of General Motors to elect to recapitalize shares of Class E Common Stock as shares of $1 2/3 Common Stock under certain circumstances (as described below under "Class E Common Stock-- Recapitalization") and the ability of General Motors to capture and retain dividends paid by EDS to General Motors. Analysis of the Financial Effects of the MSA Modifications. In order to quantify the financial effects on General Motors (excluding EDS) of the MSA Modifications, Merrill Lynch calculated: (a) ranges of values of the financial effects of the MSA Modifications (i) giving General Motors and its affiliates the option, with respect 51 to purchases of information technology services covered under the Master Services Agreement, to subject a portion of such purchases to competitive bidding and to source such purchases with bidders other than EDS (the "Outsourcing Modification"), (ii) providing certain goals for EDS to meet in reducing the cost to General Motors and its affiliates of the services to be provided by EDS (the "Structural Cost Reductions"), (iii) lengthening, commencing in 1997, the time available to General Motors and its affiliates to make payments for services (the "Payment Terms Modification") and (iv) providing for an initial term of 10 years following the consummation of the Split-Off (the "Primary Term"), subject to renewal; and (b) ranges of values of the financial effects of the MSA Modifications based on assumptions regarding possible changes to the terms on which IT services are currently provided by EDS to General Motors that might have been implemented in the absence of a split-off of EDS. In addition, Merrill Lynch discussed with the GM Board and the Capital Stock Committee, but did not attempt to quantify, the financial effects on General Motors (excluding EDS) of certain other MSA Modifications, including the extension of certain of the Existing IT Services Agreements for additional terms of approximately one and two years beyond their current expiration dates, the inclusion in MSA Services of plant floor automation services in General Motors manufacturing facilities that are currently contracted for outside the scope of the Existing Master Services Agreement, and certain changes to the pricing of commodity items. . Outsourcing Modification--Primary Term. Merrill Lynch calculated a range of values for the financial effects of the Outsourcing Modification during the Primary Term, based on the after-tax present value of assumed price reductions resulting from the opportunity to expose certain MSA Services to competitive bidding and the assumption that there would be no such opportunity to outsource during the Primary Term absent the Split-Off. Based on discussions with General Motors management, Merrill Lynch made certain additional assumptions for purposes of its analysis, including that (a) price reductions of from 12% to 20% would occur on services that were actually outsourced as a result of competitive bidding, (b) price reductions of from 6% to 10% would occur on services that EDS would continue to provide as a result of its being awarded a contract on the basis of its bid (which was assumed to occur with respect to 75% of the contracts awarded after competitive bidding), (c) average growth of expenditures by GM for IT services would be approximately 2% per year (taking into account the assumptions regarding price reductions described above), (d) General Motors' tax rate would be 35% and (e) General Motors' after-tax cost of capital would be 11%. Based on such assumptions, Merrill Lynch calculated a range of values for the financial effects on General Motors (excluding EDS) of the Outsourcing Modification during the Primary Term of from $165 million to $274 million (of which between $1 million and $2 million would be benefits allocable to holders of the Class H Common Stock). In the absence of information as to the likelihood that terms similar to the Outsourcing Modification would be implemented in the absence of the Split-Off, Merrill Lynch noted that the value of the financial effects of the Outsourcing Modification would, if and to the extent that such similar terms were implemented, be less than the value reflected in the analysis described above, and could be zero. . Outsourcing Modification--After the Primary Term. Merrill Lynch calculated a range of values for the financial effects of the Outsourcing Modification after the Primary Term, based on the after-tax present value of assumed price reductions resulting from the opportunity to expose certain MSA Services to competitive bidding under the Master Services Agreement (the "Split-Off Case") and the following two cases: one premised on the assumption that there would be no such opportunity to outsource after the Primary Term absent the Split- Off (the "No Outsourcing Case"); and the other premised on the assumption that there would be a limited opportunity to outsource after the Primary Term absent the Split-Off (the "Limited Outsourcing Case"). Based on discussions with General Motors management, Merrill Lynch also assumed that expenditures for IT services by General Motors would grow by 2% per year after 2005 and made certain additional assumptions for purposes of its analysis of: (a) the Split-Off Case, including that (i) 6.8% of General Motors' expenditures for IT services would be outsourced in 2005 and such percentage would increase linearly to a constant percentage within a range between 20% and 40% after 2014 and (ii) all of General Motors' expenditures for IT services would be exposed to outsourcing after 2005; (b) the Limited Outsourcing Case, including that (i) a constant 6.8% of General Motors' expenditures for IT services would be outsourced after 2005 and (ii) 27.2% of General Motors' 52 expenditures for IT services would be exposed to outsourcing after 2005; and (c) for each of the Split-Off Case, the No Outsourcing Case and the Limited Outsourcing Case, including that (i) price reductions of from 6% to 10% would occur on services that were actually outsourced as a result of competitive bidding, (ii) price reductions of from 3% to 5% would occur on services that EDS would continue to provide as a result of its being awarded a contract on the basis of its bid, (iii) General Motors' tax rate would be 35% and (iv) General Motors' after-tax cost of capital would be 11%. Based on such assumptions, Merrill Lynch calculated a range of values for the financial effects of the Outsourcing Modification after the Primary Term of from $396 million to $744 million assuming that the No Outsourcing Case would have occurred in the absence of the Split-Off (of which between $3 million and $5 million would be benefits allocable to holders of the Class H Common Stock) and $279 million to $546 million assuming that the Limited Outsourcing Case would have occurred in the absence of the Split-Off (of which between $2 million and $4 million would be benefits allocable to holders of the Class H Common Stock). . Structural Cost Reductions. Merrill Lynch calculated that the financial benefits to General Motors (excluding EDS) of the Structural Cost Reductions would be $163 million, based on the after-tax present value of the amount by which (a) the targeted amounts of Structural Cost Reductions in the IT Services Agreements exceed (b) the targeted amounts of cost reductions under the Existing IT Services Agreements. To the extent that the amounts targeted under the Structural Cost Reductions would have been achieved in the absence of the Split-Off but would have been required to be shared with EDS under the Existing IT Services Agreements until the expiration of such agreements, the value of the Structural Cost Reductions to General Motors would be $73 million. In making the calculations of the financial effect of the Structural Cost Reductions described above, Merrill Lynch assumed that the IT Services Agreements would, even in the absence of the Split-Off, be renegotiated as they expire to include terms identical to the Structural Cost Reductions. In the absence of information as to the likelihood that terms similar to the Structural Cost Reductions would, in the absence of the Split-Off, be implemented prior to the expiration dates of the respective Existing IT Services Agreements, Merrill Lynch noted that the value of the financial effects of the Structural Cost Reductions would, if and to the extent that such similar terms were implemented prior to such dates, be less than the value reflected in the analysis described above, and could be zero. . Payment Terms Modification. Merrill Lynch analyzed the financial effects on General Motors (excluding EDS) of the Payment Terms Modification by calculating a range of present values of the positive cash flows from increased days receivable during the Primary Term of from $64 million to $123 million, using the following assumptions, based on discussions with General Motors management: (a) averages of 15 additional days before payments are rendered by General Motors to EDS during 1997, 19.3 such additional days during 1998 and 35 such additional days during the years from 1999 to 2005, (b) a range of after-tax funding rates for General Motors of from 4% to 12%, and (c) expenditures by General Motors for IT services as described under "-- Outsourcing Modification--Primary Term" and applicability of the Payment Terms Modification to 71% of such expenditures (principally in North America). In addition, Merrill Lynch assumed that, even if there were no Split-Off, terms of payment would, at the point in time equivalent to the end of the Primary Term, be conformed to those in the Master Services Agreement. In the absence of information as to the likelihood that terms similar to the Payment Terms Modification would, in the absence of the Split-Off, be implemented prior to the equivalent of the end of the Primary Term, Merrill Lynch noted that the value of the financial effects of the Payment Terms Modification would, if and to the extent that such similar terms were implemented prior to such time, be less than the value reflected in the analysis described above, and could be zero. Analysis of the Financial Effects of the Transactions on the Plan Holdings. In order to quantify the financial effects on General Motors (excluding EDS) of the financial effects of the Transactions on the Plan Holdings, Merrill Lynch analyzed the potential effect of the Split-Off on the per share market price of the Class E Common Stock to be converted in the Merger into EDS Common Stock (the "Pricing Effect"), using the following assumptions, based on discussions with General Motors management (except as otherwise noted below): (a) 53 earnings per share ("EPS") for EDS of $2.27 in 1996 and growth in EPS ("Future Growth") of 15% per year for the following five years, in each case absent the Split-Off (based on analyst expectations as compiled by I/B/E/S, February 1996); (b) EDS revenue from sources other than General Motors ("Non-GM Revenue") of $9.871 billion in 1996 (based on Merrill Lynch's estimate), growth in Non-GM Revenue of approximately 19% per year for the following 5 years absent the Split-Off, increases in growth of such revenue of from 0% to 4% as a result of the Split-Off (focusing in the analyses, as described below, on increases in growth of 1% to 2%) and a constant pre-tax margin of 14% on such EDS revenue; (c) increases in EDS revenue from General Motors resulting from the Plant Floor Agreement and a constant pre-tax margin of 14% on such EDS revenue; (d) increases in EDS interest expense at a pre-tax rate of 6% as a result of the Special Inter-Company Payment and the Payment Terms Modification; and (e) the following two cases: (i) one premised on assumptions consistent with no financial benefits to General Motors during the first five years of the Primary Term as a result of the MSA Modifications ("MSA Case 1") and (ii) the other premised on assumptions consistent with the maximum amount of financial benefits to General Motors as a result of the MSA Modifications ("MSA Case 2"), in each case as summarized above under "--Analysis of the Financial Effects of the MSA Modifications." In its analysis, Merrill Lynch also assumed that: (1) any appreciation in the market price of the Plan Holdings as a result of the Transactions would directly reduce General Motors' pension expense and unfunded pension liability; (2) reductions in pension funding would reduce future tax benefits to General Motors at a marginal rate of 35%; and (3) General Motors' after-tax cost of capital would equal the investment return of the GM Pension Plans (as defined below). Merrill Lynch calculated ranges of Pricing Effect using the above assumptions and the following equation: Price = (Price/EPS / Future Growth) X (Future Growth X Earnings). In addition, Merrill Lynch calculated the Pricing Effect of inclusion of EDS Common Stock in the S&P 500 Index (the "S&P 500 Inclusion Effect") by calculating the effect of an increase of up to 2% in the ratio of Price/EPS to Future Growth included in such equation, based on historical data reviewed by Merrill Lynch regarding the effect of such inclusion on pricing of the capital stock of other issuers. Based on the above methodology, Merrill Lynch calculated ranges (the high and low ends of such ranges corresponding to assumptions of the high and low S&P 500 Inclusion Effect) of the Pricing Effect and ranges of amounts of after-tax savings to General Motors from reductions in General Motors' pension expense and unfunded pension liability (the "Funding Effect") as follows: (a) with respect to MSA Case 1, (i) assuming a 0% increase in growth of Non-GM Revenue, (A) a $(0.98) to $0.12 Pricing Effect and (B) a $(99) million to $12 million Funding Effect, (ii) assuming a 1% increase in growth of Non-GM Revenue, (A) a $2.51 to $3.68 Pricing Effect and (B) a $255 million to $373 million Funding Effect, (iii) assuming a 2% increase in growth of Non-GM Revenue, (A) a $6.06 to $7.30 Pricing Effect and (B) a $615 million to $740 million Funding Effect, (iv) assuming a 3% increase in growth of Non-GM Revenue, (A) a $9.68 to $10.99 Pricing Effect and (B) a $982 million to $1.12 billion Funding Effect, and (v) assuming a 4% increase in growth of Non-GM Revenue, (A) a $13.36 to $14.75 Pricing Effect and (B) a $1.36 billion to $1.50 billion Funding Effect; and (b) with respect to MSA Case 2, (i) assuming a 0% increase in growth of Non-GM Revenue, (A) a $(2.71) to $(1.64) Pricing Effect and (B) a $(274) million to $(166) million Funding Effect, (ii) assuming a 1% increase in growth of Non-GM Revenue, (A) a $0.71 to $1.85 Pricing Effect and (B) a $72 million to $187 million Funding Effect, (iii) assuming a 2% increase in growth of Non-GM Revenue, (A) a $4.20 to $5.40 Pricing Effect and (B) a $426 million to $548 million Funding Effect, (iv) assuming a 3% increase in growth of Non-GM Revenue, (A) a $7.75 to $9.02 Pricing Effect and (B) a $786 million to $915 million Funding Effect, and (v) assuming a 4% increase in growth of Non-GM Revenue, (A) a $11.36 to $12.70 Pricing Effect and (B) a $1.15 billion to $1.29 billion Funding Effect. Merrill Lynch indicated, however, that it believed that the increase in growth of Non-GM Revenue would probably be in the range of approximately 1% to 2% and, accordingly, focused on a range of Funding Effects of from $255 million to $548 million in its analyses. Merrill Lynch also reviewed data regarding the daily closing market price of the Class E Common Stock and the daily closing market price of an index of selected comparable companies during the periods from July 25, 1995 to August 22, 1995 and from December 15, 1995 to January 12, 1996 and, in connection therewith, considered the potential impact that certain announcements during such periods regarding the Split-Off had on the market price of the Class E Common Stock. Merrill Lynch noted, however, that such announcements 54 contained only then current information about the probability of the Split-Off and the terms thereof. The index of comparable companies included: Automatic Data Processing, Computer Sciences Corporation, First Data Corporation, Fiserv, Inc., Policy Management Systems Corp., Shared Medical Systems Corporation and SunGard Data Systems, Inc. Analysis of the Financial Effects of the Class E Common Stock Conversion. In order to analyze the financial effects on General Motors (excluding EDS) of the Class E Common Stock Conversion, Merrill Lynch considered the financial benefits to General Motors of its rights of ownership and control of EDS (taking into account the terms of the Class E Common Stock and the GM Board's policies with respect to the exercise of such rights), all of which would terminate as a result of the Class E Common Stock Conversion. Merrill Lynch considered the financial benefits to General Motors of its ability to elect to recapitalize shares of Class E Common Stock as shares of $1 2/3 Common Stock under certain circumstances (as described below under "Class E Common Stock-- Recapitalization") and its ability to capture and retain dividends paid by EDS to General Motors, both of which would terminate as a result of the Class E Common Stock Conversion. However, Merrill did not attempt to quantify such financial benefits because of the low probability, according to management of General Motors, that General Motors would undertake such a recapitalization or attempt to capture and retain such dividends. Merrill Lynch analyzed the financial benefits to General Motors of control of EDS by comparing the financial terms of the Split-Off with the financial terms of certain recapitalization and acquisition transactions in which either (a) holders of shares of common stock issued by companies with dual class common stock received different consideration depending on whether they were holders of the shares having a greater number of votes per share ("High Vote Shares") or (b) holders of a significant block (a "Blocking Position") of the common stock of a company received different consideration than other such holders. Merrill Lynch reviewed the premiums paid to the holders of High Vote Shares or Blocking Positions in the following transactions (the "Comparable Transactions"): (a) the recapitalization of Fischer & Porter in 1993 and the recapitalization of Bergen Brunswig Corp. in 1988 (the "Recapitalization Transactions"), (b) the acquisition of Resorts International Inc. by The Merv Griffin Company in 1988 and the acquisition of Sealand by CSX in 1986 (the "Competitive Acquisitions") and (c) the acquisition by Silver King Communications of a 41% stake in Home Shopping Network, Inc. in 1995, the 1993 proposed (but not consummated) acquisition by Bell Atlantic of Tele- Communications, Inc., the 1993 proposed (but not consummated) acquisition by AT&T of McCaw Cellular, the acquisition by Premark International Inc. of Sikes Corporation in 1990 and the acquisition by Trumps of Pay 'n Save in 1984 (the "Negotiated Acquisitions"). The High Vote Shares in each applicable transaction represented more than 50% of the outstanding voting power of the common stock. The Blocking Position in Trumps/Pay 'n Save was 18.4% and in CSX/Sealand was 39.2%. Merrill Lynch calculated the aggregate premium paid or to be paid in each Comparable Transaction to the holders of High Vote Shares or Blocking Positions, as a percentage of the total consideration (the "Percentage Premium"). While there were numerous other instances of acquisitions of companies with dual classes of stock or with shareholders having Blocking Positions, such other transactions reviewed by Merrill Lynch did not involve the payment of a premium to the holders of High Vote Shares or Blocking Positions. The high, low and mean of the Percentage Premiums in the Recapitalization Transactions were 11.6% (Bergen Brunswig), 2.9% (Fischer & Porter) and 7.3%, respectively. The high, low and mean of the Percentage Premiums in the Competitive Acquisitions were 23.1% (The Merv Griffin Company/Resorts International Inc.), 7.1% (CSX/Sealand) and 15.1%, respectively. The high, low, mean and median of the Percentage Premiums in the Negotiated Acquisitions were 5.8% (AT&T/McCaw), 1.2% (Trumps/Pay 'n Save), 3.0% and 2.2%. The foregoing analysis of the Comparable Transactions takes into account solely the purchase price paid for the equity interest in the target company and does not take into account any value or detriment inherent in any strategic arrangements or other agreements that may have been entered into in connection with the Comparable Transactions. As part of its investment banking business, Merrill Lynch is engaged continually in the valuation of businesses and their securities in connection with mergers and acquisitions and strategic transactions and for other purposes. Merrill Lynch was selected by the GM Team to act as financial advisor to General Motors, the GM Board and the GM Team because Merrill Lynch is an internationally recognized investment banking firm, with substantial experience in complex strategic transactions, and because Merrill Lynch was familiar with 55 General Motors (including its capital structure) and EDS. Pursuant to an engagement letter dated December 13, 1995 (the "Engagement Letter"), General Motors has agreed to pay Merrill Lynch a fee of $12,500,000, contingent upon the consummation of the Split-Off. In addition, under certain circumstances, General Motors would be obligated to pay Merrill Lynch an additional fee of $10,000,000 in connection with a Business Combination (as defined below) between EDS and any third party entered into after the Split-Off but that was agreed to, proposed or as to which substantive discussions were held prior to consummation of the Split-Off. A fee of $2,500,000 would become payable upon execution of a definitive agreement with respect to any such Business Combination, but would be credited against the first to be paid of the other fees described above. A "Business Combination" is defined in the Engagement Letter as a merger or other business combination pursuant to which all or a substantial portion of the business of EDS would be combined with that of another business entity the value of which exceeds $2.5 billion. A fee in line with compensation paid to major investment banking firms for similar services would be payable for transactions, other than a Business Combination, between EDS and a third party. The engagement letter also provides that General Motors will reimburse Merrill Lynch for its reasonable out-of-pocket expenses (including reasonable fees and disbursements of its legal counsel) and will indemnify Merrill Lynch and certain related persons against certain liabilities arising out of its engagement. Merrill Lynch has, in the past, provided financial advisory, financing and other services to General Motors and its affiliates (including financial advisory services in connection with General Motors' contribution of Class E Common Stock to the GM Hourly Plan Special Trust) and has received fees for the rendering of such services in the past two years in the aggregate amount of approximately $40,000,000. In the ordinary course of its business, Merrill Lynch may actively trade in securities of General Motors for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. EDS Team Financial Advisors Fairness Opinions The EDS Team Financial Advisors were engaged by General Motors to act as financial advisors to the EDS Team in connection with the Split-Off. The EDS Team Financial Advisors provided financial advice to the EDS Team in connection with its consideration of the Split-Off and the negotiation of certain terms thereof, and were requested to evaluate, and provide their respective opinions to the GM Board as to, the fairness, from a financial point of view, of the financial effect of the Split-Off Transactions (as defined below) taken as a whole, to the holders of Class E Common Stock. The Merger and the related transactions, including the Special Inter-Company Payment, the Split-Off Changes (as defined below) effected pursuant to the execution and delivery of the Master Services Agreement and the execution and delivery of the Separation Agreement are collectively referred to as the "Split-Off Transactions." At a meeting of the GM Board held on March 31, 1996, at which the GM Board approved the terms of the Split-Off, the EDS Team Financial Advisors rendered their respective opinions to the GM Board to the effect that, based upon and subject to the assumptions, limitations and other matters described in their respective written opinions, the financial effect of the Split-Off Transactions taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock. Prior to the time such opinions were rendered to the GM Board, each of the EDS Team and the Capital Stock Committee were advised of the substance of the opinions that the EDS Team Financial Advisors expected to render to the GM Board, and that such opinions would also be for the use and benefit of each of the EDS Team, the EDS Board and the Capital Stock Committee. A copy of the written opinion of Lehman Brothers is attached as Appendix B-2 and a copy of the written opinion of Morgan Stanley is attached as Appendix B-3 to this Solicitation Statement/Prospectus, and each of such opinions is incorporated herein by reference. STOCKHOLDERS MAY READ THE WRITTEN OPINIONS OF THE EDS TEAM FINANCIAL ADVISORS IN THEIR ENTIRETY FOR A DISCUSSION OF ASSUMPTIONS MADE, MATTERS CONSIDERED AND THE SCOPE OF REVIEW UNDERTAKEN BY THE EDS TEAM FINANCIAL ADVISORS IN RENDERING SUCH OPINIONS. The summary of the written opinions of Morgan Stanley and Lehman Brothers set forth in this Solicitation Statement/Prospectus is qualified in its entirety by reference to the full text of such opinions. A copy of the EDS Team Financial Advisors' written presentation to the GM Board has been filed as an exhibit to the Schedule 13E-3. In addition, copies thereof will be made available for inspection and copying at the principal executive offices of General Motors during their 56 regular business hours by any interested stockholder or any representative of a stockholder who has been so designated in writing. The opinions of Morgan Stanley and Lehman Brothers speak only as of the date thereof and were provided for the use and benefit of the GM Board, the EDS Team, the Capital Stock Committee and the EDS Board in connection with consideration of the Split-Off Transactions. Such opinions do not constitute a recommendation to any holder of Class E Common Stock, or any other class of capital stock of General Motors, as to whether such stockholder should consent to the Transactions. No limitations were imposed by the GM Board, the Capital Stock Committee or the EDS Team on the scope of the EDS Team Financial Advisors' investigation or the procedures to be followed by the EDS Team Financial Advisors in rendering their respective opinions, except as described herein. The EDS Team Financial Advisors were not authorized to solicit, and did not solicit, any indications of interest from any third party with respect to the purchase of all or a part of EDS, its business or the Class E Common Stock. The EDS Team Financial Advisors were not asked to, and did not, express an opinion as to the prices at which EDS Common Stock will actually trade following the Merger, and the EDS Team Financial Advisors can provide no assurance that the trading price of a share of EDS Common Stock following the Split-Off will be equal to or in excess of the trading price of a share of Class E Common Stock prior to the Split-Off. The EDS Team Financial Advisors were not requested to, and did not, recommend the terms of the Transactions, including the form or amount of the Special Inter-Company Payment, the terms of the Master Services Agreement or the form or amount of the consideration to be received by holders of Class E Common Stock in the Merger, all of which were determined by the GM Board following the negotiations and other procedures discussed under "--Background of the Split-Off." The EDS Team Financial Advisors were not requested to opine as to, and their respective opinions do not address, the underlying business decision to proceed with or effect the proposed Split-Off Transactions. In arriving at their respective opinions, the EDS Team Financial Advisors reviewed, among other things, (i) historical financial statements of EDS and certain other financial and operating data of EDS, (ii) historical financial statements of General Motors, (iii) certain publicly available information with respect to EDS and General Motors, (iv) certain projected financial data with respect to EDS, both with and without giving effect to the Split-Off, prepared by EDS management, (v) reported prices and trading activity for the Class E Common Stock, (vi) drafts of this Solicitation Statement/Prospectus, (vii) the terms of the Class E Common Stock as set forth in the General Motors Certificate of Incorporation as currently in effect, (viii) the terms of the EDS Common Stock as set forth in the EDS Certificate of Incorporation as currently in effect, (ix) the Tax Ruling, (x) a summary of terms for the Master Services Agreement provided to the GM Board in connection with its March 31, 1996 meeting, (xi) the Registration Rights Agreement and (xii) the EDS Rights Agreement. In addition, the EDS Team Financial Advisors held discussions with management of EDS, and in certain cases management of General Motors, with respect to, among other things, (i) the operations and financial condition of EDS and the plans of EDS management with respect to the business and affairs of EDS both prior to and after the Split-Off, (ii) the projected financial data for EDS prepared by EDS management, (iii) the benefits and detriments to EDS of ownership by General Motors, (iv) the expected impact of the Split-Off Transactions on EDS' operations and the financial and strategic flexibility of EDS, and the new business opportunities available to EDS, after the Split-Off, (v) certain terms of (A) the GM-PBGC Agreement, (B) the Existing Master Services Agreement and the proposed Master Services Agreement and certain other IT Services Agreements to be entered into in connection with the Master Services Agreement, and (C) the proposed Separation Agreement and (vi) the effect of the Master Services Agreement (including the related changes to the terms of the underlying services agreements, and certain other IT Services Agreements to be entered into in connection with the Master Services Agreement, to the extent that they relate to the financial effect of the Master Services Agreement as projected by EDS management, as discussed under "Discounted Cash Flow Analysis--Master Services Agreement") and the Separation Agreement on the business, results of operations and financial condition of EDS and on the business relationship between General Motors and EDS (including, but not limited to, their relationship as customer and vendor, respectively). In addition, the EDS Team Financial Advisors undertook such other studies, analyses and investigations as they deemed appropriate for purposes of rendering their respective opinions. 57 In arriving at their respective opinions, the EDS Team Financial Advisors assumed and relied upon the accuracy and completeness of all of the financial and other information used by them without assuming any responsibility for independent verification of such information and further relied upon the assurances of management of EDS and General Motors that they are not aware of any facts that would make such information inaccurate or misleading. With respect to the projected financial data of EDS prepared by EDS management (which reflect, among other things, with respect to periods following the Split-Off, estimates of the expected value of certain benefits to be derived by EDS from the Split-Off), upon the advice of EDS management and with the consent of the GM Board, the EDS Team Financial Advisors assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of EDS management as to expected future prospects and financial performance of EDS, and the EDS Team Financial Advisors relied on such projections in rendering their respective opinions. With respect to the estimates prepared by EDS management of the value of certain benefits and detriments of the Split-Off to EDS, with the consent of the GM Board, the EDS Team Financial Advisors relied on such estimates and assumed that they were reasonably prepared and reflected the best currently available judgments of EDS management as to such benefits and detriments. The EDS Team Financial Advisors also took into account and considered the determination of the GM Board, as described in this Solicitation Statement/Prospectus, that a split-off of EDS would be proposed only in a transaction that would not result in the recapitalization of shares of Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio as provided for under certain circumstances under the terms of the General Motors Certificate of Incorporation. See "--Background of the Split-Off." Furthermore, the EDS Team Financial Advisors believe that following the Split-Off, the EDS Common Stock would very likely be included in the Standard and Poor's 500 Index and the EDS Team Financial Advisors rendered their respective opinions on that basis. The EDS Team Financial Advisors did not conduct a physical inspection of the properties and facilities of EDS and did not make or obtain any evaluation or appraisal of the assets or liabilities of EDS. The respective opinions of the EDS Team Financial Advisors are necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date thereof. In connection with the review of the financial effect on EDS of the Master Services Agreement, both EDS management and General Motors management advised the EDS Team Financial Advisors that certain changes would have been made to the Existing Master Services Agreement commencing in 1996 even in the absence of the Split-Off. EDS management identified to the EDS Team Financial Advisors those changes that EDS management believed would have been made to the Existing Master Services Agreement commencing in 1996 even in the absence of the Split-Off, the financial effect of which, as projected by EDS management, would begin to impact EDS in 1996 and continue over time as reflected in the analyses described under "Discounted Cash Flow Analysis." The changes to the Existing Master Services Agreement which would have been made in the absence of the Split-Off are referred to herein as the "Base Changes." Under different base cases identified by EDS management and described under "--Discounted Cash Flow Analysis," the Base Changes assumed to occur vary to the extent they reflect different assumptions regarding certain rate reductions and changes in payment terms. General Motors management advised the EDS Team Financial Advisors that General Motors management believed that changes that differ from or are in addition to the Base Changes identified by EDS management, which changes, taken as a whole, would have been more favorable to General Motors and less favorable to EDS than the Base Changes identified by EDS management, would have been made to the Existing Master Services Agreement even in the absence of the Split-Off. No assurances can be given as to exactly which changes to the Existing Master Services Agreement would have been implemented absent the Split-Off or which changes might be implemented in the future if the Split-Off is not consummated. At the request of the EDS Team, and with the consent of the GM Board, the EDS Team Financial Advisors assumed that the Base Changes would have been made to the Existing Master Services Agreement in 1996 even in the absence of the Split-Off (or any other change in the nature of General Motors' ownership of EDS), and that the financial effect thereof would begin in 1996 and continue over time as reflected in the projections prepared by EDS management and described under "--Discounted Cash Flow Analysis," and therefore, in performing their analyses in connection with rendering their respective opinions, at the request of the EDS Team and with the consent of the GM Board, the EDS Team Financial Advisors did not address, and gave no effect to, 58 the financial effect on EDS or holders of Class E Common Stock of the Base Changes effected pursuant to the Master Services Agreement. At the request of the EDS Team and with the consent of the GM Board, the EDS Team Financial Advisors did not consider, and gave no effect to, contingent liabilities or indemnification obligations of EDS arising under the Separation Agreement or otherwise in connection with the Split-Off. At the request of the EDS Team, upon the advice of General Motors management and its legal and accounting advisors, and with the consent of the GM Board, the EDS Team Financial Advisors also assumed that the proposed Merger would be tax free to the holders of Class E Common Stock receiving EDS Common Stock in the Merger and that the Unconditional Releases under the GM-PBGC Agreement would become effective as of the effectiveness of the Merger. The following is a summary of certain financial analyses which were reviewed by the EDS Team Financial Advisors with the EDS Team, the Capital Stock Committee and the GM Board in connection with the respective opinions of the EDS Team Financial Advisors, and does not purport to be a complete description of the analyses conducted by the EDS Team Financial Advisors in arriving at such opinions. In arriving at their respective opinions, the EDS Team Financial Advisors did not attribute any particular weight to any analysis or factor considered by them, but rather considered all of these analyses and factors together and made qualitative judgments as to the significance and relevance thereof. Although in connection with their financial analyses the EDS Team Financial Advisors considered various value differentials and ranges, they did not ascribe a specific value or range of values to Class E Common Stock or the EDS Common Stock. Although the EDS Team Financial Advisors performed independent, as well as cooperative, analyses in connection with providing their respective opinions, the presentations made to the Capital Stock Committee and the GM Board described herein were made jointly by the EDS Team Financial Advisors. Benefits and Detriments Analysis. In considering the fairness, from a financial point of view, to the holders of Class E Common Stock, of the financial effect of the Split-Off Transactions taken as a whole, the EDS Team Financial Advisors considered, among other things, (i) the $500 million Special Inter-Company Payment, (ii) the $50 million allowance provided to EDS under the Separation Agreement (and, with the consent of the GM Board, in rendering their respective opinions, the EDS Team Financial Advisors assumed that a substantial amount of such allowance will be used for the benefit of EDS under the Separation Agreement), (iii) that EDS management has estimated that, as a result of the allowance identified in the immediately preceding clause, there will be no net payments made by EDS to General Motors under the terms of the Separation Agreement (other than payments, if any, to be made under the provisions thereof with respect to indemnification obligations or the allocation of contingent liabilities, to which the EDS Team Financial Advisors gave no effect in rendering their respective opinions), (iv) the financial effect on EDS, as projected by EDS management, of the changes other than the Base Changes (such changes being referred to herein as the "Split-Off Changes") effected pursuant to the Master Services Agreement as discussed under "--Discounted Cash Flow Analysis--Master Services Agreement" and "Relationship Between General Motors and EDS--Post Split-Off Arrangements--IT Services Agreements," (v) the financial effect, as projected by EDS management, of projected declines following the Split-Off in sales of certain goods and services provided by EDS to General Motors and its affiliates other than under the Existing Master Services Agreement or the Master Services Agreement, as the case may be, (vi) transaction costs, estimated by EDS management, of between $25 million and $38 million payable by EDS in connection with the Split-Off and (vii) certain estimated benefits of the Split-Off to EDS or holders of Class E Common Stock, including (A) the Derivative Stock Differential (as defined below) as discussed under "-- Derivative Security vs. Capital Stock Analysis," (B) the value of the inclusion of EDS Common Stock in the Standard & Poor's 500 Index, as discussed under "--Certain Other Analyses," (C) the value to EDS of the removal of certain limitations on EDS' ability to participate in major strategic alliances (including, among others, mergers and acquisitions which can be effected using EDS Common Stock), which was estimated by EDS management as discussed under "--Discounted Cash Flow Analysis--Consideration of Strategic Benefits" and (D) the present value to EDS of projected new business growth and customer relationships, which was estimated by EDS management, as discussed under "--Discounted Cash Flow Analysis--Consolidated Company." Accordingly, to the extent described herein, the EDS Team Financial Advisors took into account and considered certain benefits as estimated by EDS management that may be realized by EDS as a result of the opportunity to pursue the business purposes of the Split-Off. 59 Derivative Security vs. Capital Stock Analysis. The EDS Team Financial Advisors identified certain significant components of value of a derivative security having the general terms of the Class E Common Stock and of capital stock having the general terms of the EDS Common Stock and then analyzed the valuation impact of such differences. The primary components of the value of such differences identified were (i) voting rights, (ii) liquidation rights and credit risks and (iii) redemption rights. In their analysis of voting rights differences, the EDS Team Financial Advisors considered, among other things, (i) the voting rights of the Class E Common Stock, (ii) the voting rights of the EDS Common Stock, including that holders of EDS Common Stock will not have the right to vote with General Motors stockholders, (iii) that Class E Common Stock has relatively lesser voting rights compared to more typical common stock, primarily because holders of Class E Common Stock do not have the ability to vote for directors of EDS (and consequently have limited ability to direct EDS policies as set by the EDS Board) and because the voting power in General Motors of holders of Class E Common Stock is disproportionately low compared to the economic value of the outstanding Class E Common Stock relative to the other classes of General Motors common stock, (iv) factors related to selected dual class common stocks, including trading differentials, amounts paid in merger and acquisition transactions and the impact on trading value of selected recapitalizations creating or eliminating a class of common stock and (v) the impact of ownership of a substantial portion of the Class E Common Stock prior to, and the EDS Common Stock following, the Split-Off by the GM Hourly Plan Special Trust. Based on their voting rights analysis, the EDS Team Financial Advisors concluded that the voting rights of the EDS Common Stock should be perceived as more valuable than the voting rights of the Class E Common Stock. In their analysis of liquidation rights and credit risk differences, the EDS Team Financial Advisors considered, among other things, (i) the liquidation rights of the Class E Common Stock, (ii) the liquidation rights of the EDS Common Stock, (iii) that Class E Common Stock has relatively lesser liquidation rights compared to more typical common stock, primarily because the liquidation rights in General Motors of holders of Class E Common Stock are disproportionately low in relation to the economic value of the outstanding Class E Common Stock relative to the other classes of General Motors common stock, (iv) the absence of any direct claim by holders of Class E Common Stock on the assets of EDS upon liquidation of EDS, (v) that the new EDS Common Stock would be entitled to a direct claim on assets of EDS upon liquidation of EDS, and would not be entitled to any claim on assets of General Motors upon liquidation of General Motors, (vi) the possibility that earnings and cash flow generated by EDS might not be available to, or used for the benefit of, EDS or holders of Class E Common Stock, (vii) analyses performed by the EDS Team Financial Advisors suggesting that the trading value of the Class E Common Stock is not currently adversely impacted by General Motors' liquidation risk or the theoretical structural disadvantage of the Class E Common Stock, which does not provide its holders with a direct claim on the assets or cash flow of EDS and (viii) various factors indicative of General Motors' perceived credit risk. Based on their liquidation rights and credit risks analysis, the EDS Team Financial Advisors concluded that the liquidation rights of the EDS Common Stock should be perceived as more valuable than the liquidation rights of the Class E Common Stock. In their analysis of redemption rights differences, the EDS Team Financial Advisors considered, among other things, (i) the redemption rights that could result in the recapitalization of Class E Common Stock as shares of $1 2/3 Common Stock at a 120% exchange ratio at the option of General Motors or automatically upon the occurrence of certain events, including a sale, transfer, assignment or other disposition by General Motors of the business of EDS substantially as an entirety (whether by merger, consolidation, sale of assets or stock, liquidation, dissolution, winding up or otherwise) relative to the ability of EDS Common Stock to obtain the entire amount of any control premium associated with a change in control of EDS unrestricted by the redemption rights of General Motors, (ii) the absence of corresponding rights with respect to the EDS Common Stock and (iii) the potential economic impact on General Motors of redemption of the Class E Common Stock under various scenarios. Based on their redemption rights analysis, the EDS Team Financial Advisors concluded that the redemption rights of the Class E Common Stock should be perceived as more valuable than the absence of redemption rights in the EDS Common Stock. As a result of their derivative security versus capital stock differential analysis, the EDS Team Financial Advisors concluded that capital stock having the general characteristics of EDS Common Stock would be 60 expected to have a value in excess of a derivative security having the general characteristics of the Class E Common Stock and that such differential (the "Derivative Security Differential") would be expected to be in the range of $0 to $172 million, based on the March 29, 1996, $57.00 per share closing price of the Class E Common Stock as reported on the NYSE. Discounted Cash Flow Analysis. Based on projected financial data prepared by EDS management, the EDS Team Financial Advisors reviewed discounted cash flow analyses both on a "consolidated company" basis for EDS (including goods and services provided to General Motors and its affiliates, whether or not under the Existing Master Services Agreement or the Master Services Agreement, and to all other customers) and with respect only to goods and services provided to General Motors and its affiliates under the Existing Master Services Agreement, after giving effect to the Base Changes reflected in the Master Services Agreement with respect to non-Split-Off cases, or the Master Services Agreement with respect to post-Split-Off cases. In addition, the EDS Team Financial Advisors considered the estimates by EDS management of the value of certain strategic benefits discussed under "--Consideration of Strategic Benefits." Consolidated Company. Based on projected financial data prepared by EDS management, the EDS Team Financial Advisors performed analyses calculating the present value of future streams of cash flows both as projected by management for EDS on a consolidated company basis following the Split-Off and as adjusted for EDS on a consolidated company basis if the Split-Off were not to occur. EDS management advised the EDS Team Financial Advisors that the only material differences between the categories of items included in pre-Split-Off projected financial data and the post-Split-Off projected financial data were the financial effect of inclusion in the post-Split-Off projected financial data of (i) the Split-Off Changes reflected in the Master Services Agreement and projected declines in sales of certain goods and services provided by EDS to General Motors and its affiliates other than under the Existing Master Services Agreement or the Master Services Agreement, as the case may be, (ii) new business assumed to be available to EDS only if the Split-Off is completed and (iii) the impact of the Special Inter-Company Payment; although various assumptions within categories of items differed among different projected cases. Estimates prepared by EDS management of the value of the removal of certain limitations on EDS' ability to participate in major strategic alliances, as discussed under "--Consideration of Strategic Benefits" were not included in such projected financial data. The EDS Team Financial Advisors compared (A) the present value of the projected cash flows of EDS on a consolidated company basis plus a terminal value under a weighted average of two base cases each of which assumed, among other things, the non-consummation of the Split-Off and the modification of the Existing Master Services Agreement to effect the Base Changes, determined under two different scenarios, the first of which (the "Lower Base Case") assumed certain Base Changes (with respect to certain rate reductions and changes in payment terms) additional to the Base Changes assumed under the other case (the "Higher Base Case") (the weighted average under such cases (the weight attributed by EDS management to the Lower Base Case being 60% and the weight attributed by EDS management to the Higher Base Case being 40%) being referred to as "the Base Case") with (B) the present value of the projected cash flows of EDS on a consolidated company basis plus terminal values under a post- Split-Off case projected by management which was derived as the weighted average of three post-Split-Off cases (the "Weighted Average Case"). The three post-Split-Off cases projected by EDS management were a "Favorable Case", an "Intermediate Case" and a "Low Case", each of which applied varying assumptions. These assumptions included different assumptions with respect to the term of the Master Services Agreement (including renewals and post-contract provision of goods and services), revenue growth, outsourcing, pricing and structural cost reductions. In deriving the Weighted Average Case, the weight attributed by EDS management to the Favorable Case was 40%, to the Intermediate Case was 50% and to the Low Case was 10%. The consolidated company projected financial data were projected for a ten-year period, and therefore do not reflect the financial effect of a significant portion of the changes to the Existing Master Services Agreement reflected in the Master Services Agreement, to the extent that such effect is projected to occur following such ten-year period. Each of the Weighted Average Case, and the three other post-Split-Off cases underlying that case assumed, among other things, the occurrence of the Split- Off and gave effect to, among other things, both the Base Changes and the Split-Off Changes effected pursuant to the Master Services Agreement. None of the non-Split- 61 Off or post-Split-Off projected financial data reflected estimates of the value of the removal of certain limitations on EDS' ability to participate in major strategic alliances, as discussed under "--Consideration of Strategic Benefits." However, all post-Split-Off cases did include new business growth and customer relationships believed to be available to EDS only if the Split- Off is completed. In this regard, the projected financial data prepared on a consolidated company basis for post-Split-Off periods reflected that the present value of EDS management's estimates of (i) such new business growth and customer relationships, at discount rates from 11% to 13%, as calculated by the EDS Team Financial Advisors, was in the range of $769 million to $1,121 million and (ii) projected declines in sales of certain goods and services provided by EDS to General Motors and its affiliates other than under the Existing Master Services Agreement or the Master Services Agreement, as the case may be, at discount rates from 11% to 13%, as calculated by the EDS Team Financial Advisors, was in the range of $133 million to $167 million. The discount rates utilized by the EDS Team Financial Advisors in performing their analyses were selected based on a number of factors, including the interest rate environment at the time of the opinion, required rates of return of investors in the common stock of EDS and of similar companies, the risks associated with an investment in the stock of similar companies, and the weighted average cost of capital for EDS. Cash flows were calculated as net income plus interest expense net of tax benefit plus non-cash expense items less non-cash income items, less capital expenditures plus or minus (as appropriate) changes in working capital and plus or minus certain changes in other assets and liabilities. Terminal values were calculated under the market multiple method (by applying to terminal year earnings before interest, taxes, depreciation and amortization, multiples based on enterprise value/cash flow multiples of selected comparable companies). The cash flow streams and terminal values were then discounted to present values using discount rates ranging from 11% to 13%. The present values of the projected cash flows for all of EDS' business, including new business that was assumed to be available to EDS only if the Split-Off is completed, plus terminal values for all of EDS' business on a consolidated company basis were, at discount rates from 11% to 13%, from $0.8 billion to $0.9 billion lower under the Weighted Average Case than the present values of projected cash flows plus terminal values for all of EDS' business on a consolidated company basis (excluding the new business assumed to be available only if the Split-Off is completed) under the Base Case using the same terminal value price/earnings ratio and discount rate in various scenarios. As noted above, General Motors management advised the EDS Team Financial Advisors that such management believed that changes to the Existing Master Services Agreement that are different from or in addition to the Base Changes identified by EDS management would have been made even in the absence of a Split-Off, which changes, taken as a whole, would have been more favorable to General Motors and less favorable to EDS than the Base Changes identified by EDS management. The EDS Team Financial Advisors noted that, using the assumptions embodied in the projected cash flow models prepared by EDS management, this would imply a smaller decrement between the Base Case and the Weighted Average Case than is reflected either in the above analysis or in the analysis below under "--Master Services Agreement." Master Services Agreement. EDS management provided to the EDS Team Financial Advisors projected financial data reflecting only goods and services provided to General Motors and its affiliates under the Master Services Agreement. Unlike the ten-year period covered in the consolidated company projections, the period covered by these projections extended to the assumed termination of the provision of goods and services under the Master Services Agreement. Based on the projected financial data prepared by EDS management with respect to the Master Services Agreement, the present value of the projected cash flows of EDS attributable to goods and services provided to General Motors and its affiliates under the Master Services Agreement as calculated under the Weighted Average Case was, at discount rates from 11% to 13%, in a range from $517 million to $654 million lower than the present value calculated under the Base Case using the same discount rate in various scenarios. Because this analysis dealt only with projected financial data with respect to goods and services provided under the Master Services Agreement, the $769 million to $1,121 million new business opportunities referred to under "--Consolidated Company" are not reflected in this analysis. Based on information regarding the historical financial and operating results of EDS and discussions with EDS management, the EDS Team 62 Financial Advisors noted that if neither the Base Changes nor any other significant modifications to the terms of the Existing Master Services Agreement would have been made in the absence of a Split-Off, then the decrement in the present value of cash flows attributable to goods and services projected by EDS management to be provided to General Motors and its affiliates in accordance with the terms of the Existing Master Services Agreement (both under analyses performed on a consolidated company basis for EDS (including goods and services provided to General Motors and its affiliates and to all other customers) and under analyses performed on a basis reflecting only goods and services provided to General Motors and affiliates in accordance with the terms of the Existing Master Services Agreement) resulting from changes to the Existing Master Services Agreement arising as a result of the Split-Off would have been significantly larger than under the analyses conducted by the EDS Team Financial Advisors. Consideration of Strategic Benefits. The EDS Team Financial Advisors were advised by EDS management that it estimates (and the EDS Team Financial Advisors took into account for purposes of their respective opinions), based in part on an analysis prepared by McKinsey, that the value to EDS of the removal of certain limitations on EDS' ability to participate in major strategic alliances (including, among others, mergers and acquisitions which can be effected using EDS Common Stock) prior to the Split-Off is at least $500 million. However, in arriving at such estimates, EDS management noted that the benefits derived from the resolution of such factors are inherently subject to uncertainty and are not susceptible of precise quantification. As a result, the effect of these separate benefits was not included in EDS' post- Split-Off projections and is therefore not reflected in the analysis above. In connection with their consideration of the strategic benefits analysis prepared by EDS management, the EDS Team Financial Advisors considered EDS' historic pursuit of strategic transactions, the nature of the impediments which have in the past prevented the consummation of a major business alliance as well as the fact that one of the principal business strategies of EDS after the Split-Off, as articulated by EDS management, will be to pursue opportunities for major strategic transactions. Certain Other Analyses. Based on the projected financial data prepared by EDS management, the EDS Team Financial Advisors analyzed the projected earnings and earnings per share of EDS under the Base Case and the Weighted Average Case. The EDS Team Financial Advisors also reviewed various multiples of earnings based on historical and projected multiples applicable to the Class E Common Stock, multiples applicable to certain other companies and other factors. Management's projections for 1996, and pro forma calculation for 1995, of EDS' earnings and earnings per share on a consolidated company basis under the Weighted Average Case (including the benefits of new business believed to be available to EDS only if the Split-Off is completed) was 3.6% lower than under the Base Case for 1996 and was 5.2% lower than under the Base Case on a pro forma basis for 1995. The financial effect of certain of the changes to the Existing Master Services Agreement made pursuant to the Master Services Agreement are not reflected in earnings projections for 1996 or in pro forma 1995 earnings because such financial effect is projected to occur following 1996. Based on the projected financial data prepared by EDS management, the EDS Team Financial Advisors also considered the financial effect of the increased leverage of EDS on EDS' credit rating and other indicia of creditworthiness following the Split-Off. The EDS Team Financial Advisors considered various criteria that currently appear to forestall inclusion of the Class E Common Stock in the Standard & Poor's 500 Index, including status as a subsidiary of General Motors, trading liquidity in the Class E Common Stock and the percentage holdings of Class E Common Stock of the GM Hourly Plan Special Trust. The EDS Team Financial Advisors noted that there could be no assurance that EDS would be included in the Standard & Poor's 500 Index. However, based upon factors including elimination of subsidiary status of EDS upon the Split-Off, and anticipated improvements in liquidity and percentage ownership following the Split-Off, the EDS Team Financial Advisors considered it very likely that following the Split-Off, the EDS Common Stock will be included in the Standard & Poor's 500 Index and the EDS Team Financial Advisors rendered their respective opinions on that basis. Based on a review of historical stock price impact when various companies have been included in the Standard & Poor's 500 Index, the EDS 63 Team Financial Advisors estimated the value of such inclusion to be in the range of 1.5% to 2.5% of the market capitalization of the EDS Common Stock after adjustment for the Derivative Stock Differential. Certain Other Benefits and Detriments to EDS. The EDS Team Financial Advisors considered certain potential benefits and detriments of the Split-Off to EDS in addition to those discussed above. Factors considered by the EDS Team Financial Advisors included, among other things, (i) the PBGC release of EDS from the General Motors control group under certain circumstances following the Split-Off, which would relieve EDS of a large potential liability, (ii) the increased financial flexibility of EDS resulting from the Split-Off and (iii) the ownership of a significant portion of the Class E Common Stock before the Split-Off, and of the EDS Common Stock following the Split-Off, by the GM Hourly Plan Special Trust. The EDS Team Financial Advisors did not attempt to quantify the impact on the value of the Class E Common Stock or the EDS Common Stock of the factors referred to in this paragraph. The foregoing summary does not purport to be a complete description all of the analyses performed by the EDS Team Financial Advisors. The preparation of fairness opinions is a complex process and is not susceptible to partial analysis or summary description. Selecting portions of the EDS Team Financial Advisors' analyses or any of the factors considered by the EDS Team Financial Advisors, without considering the analyses and factors considered as a whole, could create an incomplete or incorrect view of the processes underlying the respective opinions of the EDS Team Financial Advisors. In arriving at their respective opinions, the EDS Team Financial Advisors considered the results of all such analyses. No company, security or transaction used in the analyses described above as a comparison is identical to General Motors or EDS, the Class E Common Stock or the EDS Common Stock, or the Split-Off. Accordingly, a review of the results of the analyses and factors discussed above is not mathematical; rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of EDS, the behavior of persons other than EDS, trading of the Class E Common Stock and EDS Common Stock and a number of other factors and assumptions, many of which are beyond the control of General Motors and EDS. The analyses described above were prepared for the purposes of, and in connection with, assisting the EDS Team in its review of the terms of the Split-Off Transactions and the preparation by the EDS Team Financial Advisors of their respective opinions to the General Motors Board as to the fairness, from a financial point of view, of the financial effect of the Split-Off Transactions taken as a whole to the holders of Class E Common Stock. These analyses do not purport to be appraisals or to reflect the prices at which the Class E Common Stock or EDS Common Stock should or will trade. Analyses based on forecasts of future results are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. Because such analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties or their respective advisors, the EDS Team Financial Advisors assume no responsibility if future results are materially different from those forecast. The EDS Team selected the EDS Team Financial Advisors to render financial advisory services to the EDS Team based upon their familiarity with General Motors and its subsidiaries, including EDS, and their investment banking experience and expertise, including expertise with regard to the information technology business. As part of their investment banking business, the EDS Team Financial Advisors regularly engage in the valuation of businesses and securities in connection with mergers, acquisitions, underwritings, competitive biddings, sales and distributions of listed and unlisted securities, private placements and valuations for corporate, estate and other purposes. Pursuant to separate engagement letters between General Motors and each of Morgan Stanley and Lehman Brothers, each of Morgan Stanley and Lehman Brothers will receive a fee of $7,500,000 in connection with the Transactions, payable as follows: $1,000,000 was paid to each of Morgan Stanley and Lehman Brothers on rendering their respective opinions and $6,500,000 is payable to each of Morgan Stanley and Lehman Brothers on consummation of the Split-Off. Therefore, a significant portion of the fees of the EDS Team Financial Advisors is contingent on consummation of the Split-Off. The engagement letters also provide for reimbursement of the EDS Team Financial Advisors for certain out-of-pocket expenses, including certain fees and expenses of 64 legal counsel, and indemnification of the EDS Team Financial Advisors against certain expenses and liabilities (and EDS has agreed to exculpate the EDS Team Financial Advisors) in connection with their services as financial advisors, including those arising under the federal securities laws. Under the Separation Agreement, EDS has agreed to pay the fees and expenses of the EDS Team Financial Advisors. See "Relationship Between General Motors and EDS-- Post-Split-Off Arrangements--Separation Agreement." Lehman Brothers and Morgan Stanley have performed investment banking and financial advisory services for General Motors, and Lehman Brothers has performed such services for EDS, in the past and have received customary compensation in connection therewith, including approximately $17,000,000 and $10,400,000, respectively, during the last two years. In particular, in 1995, at the time of General Motors' contribution of shares of Class E Common Stock to the GM Hourly Plan Special Trust, Lehman Brothers received $5,000,000 from EDS for financial advisory services. In addition, certain senior personnel providing financial advice to the EDS Team and involved in rendering the opinion of Morgan Stanley represented General Motors in connection with its acquisition of EDS and the related creation and issuance of the Class E Common Stock. In March 1996, two of the senior investment bankers actively involved in the transaction for Lehman Brothers in its capacity as financial advisor to the EDS Team joined Morgan Stanley, at which time Morgan Stanley also began advising the EDS Team. Since such time as Morgan Stanley also began acting in this capacity, it and Lehman Brothers have performed their services in cooperation, with Lehman Brothers relying to a significant degree on the due diligence performed, and Morgan Stanley relying to a significant degree on the work performed, by the same individuals. However, each firm performed its own independent internal review and analysis in arriving at its opinion. In the ordinary course of business, both Morgan Stanley and Lehman Brothers actively trade in the debt and equity securities of General Motors, including the Class E Common Stock, for their own accounts and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. REQUISITE VOTE FOR THE TRANSACTIONS Consummation of the Transactions is conditioned upon receiving the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors' common stock, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. See "Solicitation of Written Consent of General Motors Common Stockholders." In light of such requisite stockholder votes, as well as the process by which the terms of the Split-Off were determined, General Motors has not retained any unaffiliated representative to act solely on behalf of its unaffiliated stockholders in negotiating the Split-Off or to prepare a report for such stockholders as to the fairness thereof. See "-- Negotiating Teams." CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS The following discussion summarizes those U.S. federal income tax considerations resulting from the Split-Off that materially affect General Motors and its stockholders. This discussion is based on currently existing provisions of the Code, existing and proposed Treasury Regulations thereunder and current administrative rulings and court decisions, all of which are subject to change. Any such change, which may or may not be retroactive, could alter the tax consequences to General Motors or its stockholders as described herein. Stockholders of General Motors should be aware that this discussion does not deal with all federal income tax considerations that may be relevant to particular stockholders in light of their particular circumstances, such as stockholders who are dealers in securities, banks, insurance companies, tax- exempt organizations and non-United States persons. In addition, the following discussion does not address the tax consequences of the Split-Off under U.S. state or local and non-U.S. tax laws or the tax consequences of transactions (if any) effectuated 65 prior to or after the Split-Off (whether or not such transactions are undertaken in connection with the Split-Off). ACCORDINGLY, STOCKHOLDERS OF GENERAL MOTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE SPLIT-OFF TO THEM. General Motors has received the Tax Ruling with regard to the U.S. federal income tax consequences of the Split-Off to the effect that the Split-Off will be treated as a tax-free exchange under Section 355 of the Code and that, accordingly, for U.S. federal income tax purposes: (i) no gain or loss will be recognized by General Motors upon the exchange of EDS Common Stock for Class E Common Stock pursuant to the Split-Off, (ii) no gain or loss will be recognized by (and no amount will be included in the income of) the holders of Class E Common Stock upon the receipt of EDS Common Stock in exchange for Class E Common Stock pursuant to the Split-Off, (iii) the basis of EDS Common Stock received by each holder of Class E Common Stock pursuant to the Split- Off will be the same as the basis of the Class E Common Stock held by such holder immediately before the Split-Off, and (iv) the holding period of the EDS Common Stock received by each holder of Class E Common Stock will include the holding period of the Class E Common Stock surrendered by such stockholder pursuant to the Split-Off, provided that such stock is held as a capital asset on the date of the Split-Off. The Tax Ruling does not specifically address how tax bases and holding periods should be allocated among shares of EDS Common Stock received in the Split-Off by holders who own two or more blocks of Class E Common Stock with different per share bases and/or holding periods. Such holders are encouraged to consult with their own tax advisors regarding the possible tax basis and holding period consequences of the Split-Off. The Tax Ruling, while generally binding on the IRS, is based upon certain factual representations and assumptions described in the Tax Ruling, including the representation that Class E Common Stock is stock of General Motors and not of EDS, and the written application therefor. If any such factual representations or assumptions are incorrect or untrue in any material respect, the Tax Ruling may be invalidated. General Motors is not aware of any facts or circumstances which would cause any such representations or assumptions to be incorrect or untrue in any material respect. Nevertheless, if General Motors consummates the Split-Off and the Split-Off is held to be taxable, both General Motors and holders of Class E Common Stock would in all probability incur material tax liabilities. On March 19, 1996, the Clinton administration proposed new legislation that would, under certain circumstances, cause a parent corporation to recognize gain on the distribution of the stock of a subsidiary in a split-off transaction. Even if such legislation were enacted, General Motors believes that such legislation would not apply to the Split-Off. Current Treasury Regulations require each General Motors stockholder who receives EDS Common Stock pursuant to the Split-Off to attach to such stockholder's federal income tax return for the year in which the Split-Off occurs a detailed statement setting forth such data as may be appropriate in order to show the applicability of Section 355 of the Code to the Split-Off. At the time that the letter of transmittal regarding exchange of certificates is sent to all current holders of Class E Common Stock, General Motors will provide such information to each holder of Class E Common Stock receiving EDS Common Stock in the Split-Off in order to enable each such holder to comply with such regulations. GM-PBGC AGREEMENT General Motors and certain of its subsidiaries sponsor U.S. defined benefit pension plans covered by Title IV of ERISA (the "GM Pension Plans"). As of December 31, 1995, measured on an SFAS No. 87 basis, the GM Pension Plans were underfunded, and the projected benefit obligations exceeded plan assets, by approximately $3 billion in the aggregate. If any of the GM Pension Plans were to terminate at a time that they had unfunded benefit liabilities, the PBGC would have a statutory claim to recover such unfunded benefit liabilities. The PBGC's claim would extend to the company or companies that sponsored the terminated GM Pension Plan(s) and to all other persons within the sponsoring company's "controlled group," as that term is defined under Title IV of ERISA. 66 EDS is currently a company within General Motors' "controlled group" for purposes of ERISA. As such, EDS would potentially be among the companies against which the PBGC could have a claim to recover unfunded benefit liabilities with respect to a GM Pension Plan if such GM Pension Plan were to terminate at a time when it had unfunded benefit liabilities. In March 1995, in connection with the contribution of approximately 173 million shares of Class E Common Stock and $4 billion in cash to the GM Hourly Plan as described herein (see "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust"), General Motors and the PBGC entered into the GM-PBGC Agreement, which provides, among other things, for the PBGC to release EDS and EDS' subsidiaries from all liabilities or obligations now existing or hereafter arising under Title IV of ERISA with respect to the GM Pension Plans if a transaction such as the Split-Off were to occur. Under the GM-PBGC Agreement, the PBGC's releases become effective upon the occurrence of a "Qualified EDS Transaction," provided that certain other conditions have not occurred. The GM-PBGC Agreement defines "Qualified EDS Transaction" to mean any transaction or series of transactions (including one by which Class E Common Stock is exchanged, converted or redeemed for capital stock of EDS) by which EDS ceases to be a member of General Motors' "controlled group," unless immediately after the transaction, the GM Hourly Plan continues to hold certain types of securities in certain specified amounts. The PBGC's releases in connection with a Qualified EDS Transaction are documented in two ways. Initial release instruments, which become effective upon the occurrence of a Qualified EDS Transaction, provided that certain conditions have not occurred, were delivered to GM and EDS by the PBGC on March 24, 1995. In addition, under the GM-PBGC Agreement, a second set of release instruments, which are not subject to any conditions (the "Unconditional Releases") are to be delivered to GM and EDS by the PBGC following the consummation of a Qualified EDS Transaction through the certification procedure described below. The GM-PBGC Agreement includes a procedure by which General Motors may obtain certification that a proposed transaction constitutes a Qualified EDS Transaction (the "Certification Process"). Under the Certification Process, the PBGC is required to deliver written notice to General Motors within a specified period of time if it disagrees with General Motors' determination that a transaction proposed by General Motors constitutes or will constitute a Qualified EDS Transaction. In the absence of such disagreement, the PBGC is required to execute the Unconditional Releases and deliver them to an escrow agent for delivery to GM and EDS upon notification of consummation of the Split-Off and instruction from the PBGC. General Motors has determined that the Split-Off, if and when consummated, will constitute a Qualified EDS Transaction. General Motors has initiated the Certification Process described above, and the PBGC has not notified General Motors of any disagreement with such determination. The PBGC has delivered the Unconditional Releases to an escrow agent for delivery to GM and EDS upon notification of consummation of the Split-Off and instruction from the PBGC. Such instruction must, under the GM-PBGC Agreement, be given by the PBGC no more than two (or, in certain circumstances, fourteen) business days after receipt of certain additional documentation from GM. In the Separation Agreement, General Motors has agreed to deliver such documentation as soon as practicable after the effective time of the Merger and to use commercially reasonable efforts to do all things necessary pursuant to the GM-PBGC Agreement to effect the delivery to EDS of the Unconditional Releases. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements-- Separation Agreement." Accordingly, General Motors expects the PBGC's releases of EDS and its subsidiaries to be effective immediately upon consummation of the Split-Off, and further that the Unconditional Releases will be delivered to EDS shortly after consummation of the Split-Off. CERTAIN LITIGATION Two suits, Solomon v. General Motors Corporation, et al. and TRV Holding Company v. General Motors Corporation et al., were filed in Delaware Chancery Court on May 13 and 18, 1994, respectively. Such actions have been consolidated, and a consolidated amended complaint ("Solomon/TRV") was filed on April 2, 1996. Another lawsuit, Ward et al., as Trustees for the Eisenberg Children's Irrevocable Trust II v. General Motors 67 Corporation, et al. ("Ward"), was filed in Delaware Chancery Court on November 15, 1995. Both of these actions purport to be class actions brought on behalf of holders of Class E Common Stock against General Motors and its directors. The complaints make essentially the same allegations, namely, that defendants have breached and are continuing to breach their fiduciary duties to holders of Class E Common Stock by proposing and pursuing the Split-Off, which plaintiffs contend would unfairly benefit General Motors to the detriment of such holders. Specifically, the complaints allege that the Split-Off unfairly effects a disposition of EDS without providing for a recapitalization of the Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio, as currently provided in the General Motors Certificate of Incorporation upon a disposition by GM of substantially all of the business of EDS and under certain other circumstances. The actions allege that the shares of EDS Common Stock to be received by holders of Class E Common Stock in the Split-Off are substantially less valuable than the shares of $1 2/3 Common Stock that such holders would receive in a recapitalization, and that the value of EDS will be further eroded by the Special Inter-Company Payment and, according to Solomon/TRV, by the terms of the IT Services Agreements. Ward seeks a preliminary and permanent injunction against the Split-Off (or any other disposition of EDS in the absence of a recapitalization of the Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio) and against any equalizing payment from EDS to General Motors. Solomon/TRV seeks monetary damages as well as injunctive relief against the Split-Off. General Motors believes that the suits are without merit and intends to defend against them vigorously. 68 THE SPLIT-OFF GENERAL The common stockholders of General Motors are being asked to approve the Transactions, including the adoption of the Merger Agreement whereby the Split-Off of EDS from General Motors will be accomplished. Pursuant to the Merger Agreement, among other things, (i) Mergeco will be merged with and into General Motors, with General Motors being the surviving corporation, (ii) each outstanding share of Class E Common Stock will be converted automatically into one share of EDS Common Stock and (iii) provisions in the General Motors Certificate of Incorporation regarding the Class E Common Stock will be deleted (including the provisions that require Class E Common Stock to be recapitalized into $1 2/3 Common Stock at a 120% exchange ratio upon a disposition by General Motors of substantially all of the business of EDS and under certain other circumstances) and certain other provisions therein will be amended as described herein. As a result of the Merger, EDS will become an independent, publicly held company. THE DESCRIPTION OF THE MERGER AGREEMENT SET FORTH BELOW DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX A TO THIS SOLICITATION STATEMENT/PROSPECTUS AND INCORPORATED HEREIN BY REFERENCE. Consummation of the Transactions is conditioned upon, among other things, receiving the consent of the common stockholders of General Motors. Approval of the Transactions is independent of the vote on the Amended EDS Incentive Plan and will require the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors' common stock, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. See "Solicitation of Written Consent of General Motors Common Stockholders." If the Transactions, including the Merger Agreement, are so approved, the Merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware. The Split-Off and related Transactions, including the consummation of the Merger, the making of the Special Inter-Company Payment, the execution and delivery of the Master Services Agreement and certain other IT Services Agreements to be entered into in connection therewith and the Separation Agreement and the consummation of the other transactions and events contemplated by the Merger Agreement, are all part of a single plan. By voting in favor of the Transactions, General Motors' common stockholders will be ratifying each of the Transactions. If the Transactions are not approved by General Motors common stockholders, none of the Transactions will be consummated. If the Transactions are not consummated, the Existing IT Services Agreements will continue, with such changes beginning in 1996 as General Motors and EDS may agree or as the GM Board, upon recommendation of the Capital Stock Committee, may from time to time consider fair to all classes of General Motors common stockholders. In this regard, EDS management believes that substantial changes would be made to the Existing Master Services Agreement in 1996 even in the absence of the Split-Off. GM management has determined, and has advised EDS management, that in the absence of the Split-Off it would seek substantial changes in the Existing IT Services Agreements, including implementation of substantially all of the changes provided for by the Master Services Agreement. Neither the GM Board nor the Capital Stock Committee has determined whether to require such changes to the Existing IT Services Agreements if the Split-Off is not consummated, but they anticipate considering such changes if such circumstances arise. See "Risk Factors Regarding Non-Consummation of the Split-Off--Changes in Terms of Existing IT Services Agreements." THE GM BOARD HAS UNANIMOUSLY APPROVED THE TRANSACTIONS. THE GM BOARD HAS DETERMINED THAT THE TRANSACTIONS ARE IN THE BEST INTERESTS OF, AND FAIR TO, GENERAL MOTORS AND EACH CLASS OF GM COMMON STOCKHOLDERS. THE GM BOARD RECOMMENDS THAT GENERAL MOTORS COMMON STOCKHOLDERS EXECUTE CONSENTS TO APPROVE THE TRANSACTIONS, INCLUDING THE ADOPTION OF THE MERGER AGREEMENT. 69 MERGER AGREEMENT Effect of the Merger Subject to the terms and conditions of the Merger Agreement, Mergeco will merge with and into General Motors, with General Motors being the corporation surviving the Merger. Promptly following the satisfaction or waiver of the conditions to the Merger, the parties will file a certificate of merger with the Secretary of State of the State of Delaware, at which time the Merger will be effective (the "Effective Time"). The separate corporate existence of Mergeco will then cease, and the internal corporate affairs of General Motors (sometimes referred to in this discussion as the "Surviving Corporation") will continue to be governed by the laws of the State of Delaware. By operation of the Merger, at the Effective Time, Article Fourth of the General Motors Certificate of Incorporation will be amended to remove Class E Common Stock as a class of authorized General Motors capital stock, to delete provisions therein regarding the Class E Common Stock and certain related provisions that will no longer be relevant and to make certain additional changes updating terms and provisions therein, such as reflecting the current name of Hughes and changing certain provisions relating to any Preferred Stock that may be issued by General Motors from time to time in the future. There are currently no shares of Preferred Stock outstanding. The changes to the General Motors Certificate of Incorporation relating to the Preferred Stock will allow the GM Board to determine the specific rights, preferences and limitations of each series of Preferred Stock if and when issued in the discretion of the GM Board and will cause the Preferred Stock to assume the characteristics of "blank-check" preferred stock, which the General Motors Preference Stock already possesses. Such changes include the deletion of a restrictive covenant limiting the payment of cash dividends on classes of General Motors stock other than the Preferred Stock based on a net quick assets test, the removal of a restriction on the placing of liens on General Motors property, the elimination of certain voting rights of the Preferred Stock and the deletion of a specified liquidation price of $100 per share of Preferred Stock. There will continue to be six million shares of Preferred Stock authorized under the General Motors Certificate of Incorporation immediately after the Merger. Under certain circumstances, the issuance of shares of such "blank-check" Preferred Stock could have the effect of delaying, deferring or preventing certain corporate transactions involving a change in control of General Motors, although the changes to the terms of the Preferred Stock to be effected by the Merger are not being made for such purpose. The terms of the three outstanding series of General Motors Preference Stock will be unaffected by the Merger. The General Motors Certificate of Incorporation, as so amended, will be the certificate of incorporation of the Surviving Corporation. Article Fourth of the General Motors Certificate of Incorporation, in the form proposed to be amended, is included in Appendix A of this Solicitation Statement/Prospectus as Exhibit A to the Merger Agreement. The By-Laws of General Motors will continue to be the By-Laws of the Surviving Corporation, with appropriate deletions of references to Class E Common Stock and EDS. The directors and officers of General Motors in office immediately prior to the Effective Time will be the directors and officers of the Surviving Corporation immediately after the Effective Time. Conversion of Class E Common Stock At the Effective Time, each issued and outstanding share of Class E Common Stock (each, a "Class E Share") will be converted into one share of EDS Common Stock (each, an "EDS Share"). Accordingly, immediately after the Effective Time, (i) for all purposes of determining the record holders of EDS Common Stock, the holders of Class E Common Stock immediately prior to the Effective Time shall be deemed to be holders of EDS Common Stock and (ii) subject to any transfer of such stock, such holders shall be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, EDS Common Stock. EDS will agree in the Separation Agreement to cause The Bank of New York, as exchange agent (the "Exchange Agent"), to mail, as promptly as practicable, to each record holder of Class E Shares as of the Effective Time a letter of transmittal for such holder to use in surrendering the certificates which represented such holder's Class E Shares in exchange for a certificate representing the number of EDS Shares to 70 which such holder is entitled. Holders of Class E Shares will be instructed to mail the certificates representing such shares to the Exchange Agent accompanied by such letter of transmittal. HOLDERS OF CLASS E SHARES SHOULD NOT RETURN SUCH CERTIFICATES WITH THE CONSENT CARD ENCLOSED WITH THIS SOLICITATION STATEMENT/PROSPECTUS. Conditions to Closing Under the Merger Agreement, the obligation of General Motors to consummate the Merger is subject to the satisfaction or waiver of the following conditions: (i) the absence of any action, suit or proceeding that would be reasonably likely to prevent consummation of the Merger, cause the Merger to be rescinded following consummation or cause General Motors or any of its officers or directors to become liable for any material damages; (ii) the approval of the Transactions, including adoption of the Merger Agreement, by (a) a majority of the voting power of all outstanding shares of all three classes of General Motors' common stock, voting together as a single class based on their respective voting rights, (b) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (c) a majority of the outstanding shares of Class E Common Stock, voting as a separate class; (iii) the absence of any notification from Merrill Lynch that the Merrill Lynch Fairness Opinion has been withdrawn or from Lehman Brothers or Morgan Stanley that either of their respective opinions has been withdrawn; (iv) the absence of any notification from the IRS that the Tax Ruling has been withdrawn or invalidated and of any determination by the GM Board that the representations and assumptions underlying such ruling are not true and correct in all material respects; (v) the merger of Electronic Data Systems Intermediate Corporation and Electronic Data Systems Corporation, respectively, into EDS; (vi) the receipt by Mergeco of cash in the amount of the Special Inter-Company Payment; and (vii) the execution and delivery by General Motors and EDS of the Master Services Agreement, the Separation Agreement and a succession agreement with respect to the Registration Rights Agreement. Termination The Merger Agreement may be terminated as follows: (i) by mutual written consent of General Motors and Mergeco prior to the Effective Time; (ii) by General Motors by giving written notice to Mergeco at any time prior to the Effective Time in the event that the GM Board concludes that termination would be in the best interests of General Motors and its stockholders; (iii) by General Motors in the event that either the Merrill Fairness Opinion or either of the respective opinions of Lehman Brothers or Morgan Stanley is withdrawn; (iv) by General Motors in the event that GM has been notified by the IRS or otherwise believes that the Split-Off would not be treated as a tax-free exchange under Section 355 of the Code; and (v) by General Motors in the event the Transactions are not approved by written consent of the holders of (a) a majority of the voting power of all outstanding shares of all three classes of General Motors' common stock, voting together as a single class based on their respective voting rights, (b) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (c) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. Amendment The Merger Agreement may be amended at any time and from time to time by a writing executed by General Motors and Mergeco; provided, however, that any such amendment made after the Merger Agreement is adopted by written consent of the common stockholders of GM as described herein shall not (a) alter or change the amount or kind of shares, securities, cash, property and/or rights to be received in exchange for or on conversion of the Class E Common Stock, (b) alter or change any term of the certificate of incorporation of the Surviving Corporation or (c) alter or change any of the terms and conditions of the Merger Agreement if such alteration or change would adversely affect the holders of any class or series of General Motors capital stock. NO APPRAISAL RIGHTS The Delaware General Corporation Law, as amended (the "DGCL"), does not provide appraisal rights to stockholders of General Motors in connection with the Transactions. Appraisal rights will not be available to 71 holders of Class E Common Stock because, among other things, the Class E Common Stock is, and the EDS Common Stock will be, listed on the NYSE. All other holders of GM capital stock will not be entitled to appraisal rights because, among other things, each class of such stock is listed on the NYSE and the holders thereof will not exchange or otherwise relinquish any such stock pursuant to the Merger. STOCK EXCHANGE LISTINGS FOR EDS COMMON STOCK Application has been made to list the EDS Common Stock on the NYSE, and such application has been granted pending notice of issuance. The trading symbol for the EDS Common Stock on the NYSE will be "EDS." EDS intends to seek to list the EDS Common Stock on the London Stock Exchange, with such listing to be effective upon the consummation of the Split-Off. ACCOUNTING TREATMENT General Motors will not recognize any accounting gain or loss as a result of the Split-Off. For accounting purposes, the assets and liabilities of EDS will continue to be accounted for by EDS at their existing carrying values after the consummation of the Split-Off. EDS' Consolidated Financial Statements exclude the effects of purchase accounting adjustments arising from the acquisition of EDS by GM in 1984, including GM's remaining carrying value of such purchase adjustments and the accumulated amortization of all such adjustments. The remaining carrying value of such adjustments would be immaterial to EDS' Consolidated Financial Statements. CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS For a description of the U.S. federal income tax consequences of the Split- Off for General Motors and its stockholders, see "Special Factors--Certain U.S. Federal Income Tax Considerations." REGULATORY REQUIREMENTS GM and EDS believe that no material U.S. federal or other regulatory requirements remain to be complied with by GM or EDS, and no material approvals thereunder must be obtained by GM or EDS, in order to consummate the Split-Off. However, there may be certain regulatory (e.g., securities and competition) requirements to be complied with and approvals to be obtained by GM and EDS outside of the United States in connection with the consummation of the Split-Off. GM and EDS are currently working together to evaluate and comply in all material respects with such requirements and to obtain all such approvals, and do not anticipate that any such foreign requirements will hinder, delay or restrict in any material respect consummation of the Transactions. 72 RELATIONSHIP BETWEEN GENERAL MOTORS AND EDS PRE-SPLIT-OFF RELATIONSHIP General EDS is currently a wholly owned subsidiary of General Motors, and the Class E Common Stock, which is a security of General Motors, is designed to provide financial returns based on the performance of EDS. See "Class E Common Stock." Because of GM's multi-class capital structure, it is GM's policy that a standard of fair dealing govern the prices, terms and conditions of commercial transactions between EDS and General Motors. The Capital Stock Committee of the GM Board is primarily responsible for reviewing, among other things, (i) the principal business and financial relationships and transactions among General Motors, EDS and Hughes, (ii) the dividend policies or practices of General Motors and (iii) such other matters as have the potential to have differing effects on holders of the three classes of General Motors common stock, all to the extent such Committee may deem appropriate. The Capital Stock Committee is comprised entirely of independent directors of General Motors. In addition, a majority of the members of the GM Board are independent directors. See "Class E Common Stock--Considerations Relating to Multi-Class Common Stock Capital Structure." The EDS Board is currently comprised of executive officers of EDS. As the sole stockholder of EDS, General Motors controls the EDS Board and, subject to Delaware law, is able to cause EDS to pay dividends and make advances to or otherwise enter into such transactions as GM deems desirable and appropriate. So long as General Motors is the sole stockholder of EDS, GM reserves the right to cause EDS to pay dividends to GM in such amounts as GM determines are desirable under the then prevailing facts and circumstances. Such amounts may be the same as, greater than, or less than the cash dividends paid by General Motors on the Class E Common Stock. There is no required fixed relationship, on a per share or aggregate basis, between the cash dividends that may be paid by GM to holders of the Class E Common Stock and the dividends or other amounts that may be paid by EDS to GM. However, it has been the consistent practice of the EDS Board to pay quarterly cash dividends on the outstanding shares of EDS Common Stock in an aggregate amount equal to the quarterly dividends per share paid by General Motors with respect to Class E Common Stock multiplied by the Class E Dividend Base, which is the denominator of the fraction used in allocating a portion of GM's earnings attributable to EDS to the Class E Common Stock for dividend purposes as described herein. See "Class E Common Stock." Existing IT Services Agreements General Motors and EDS are currently parties to the Existing Master Services Agreement under which EDS is responsible for substantially all of the worldwide IT services activities of General Motors and certain of its affiliates. The Existing Master Services Agreement, which was effective as of September 1, 1985 and was amended on May 29, 1987, establishes standard provisions that govern the contractual arrangements between EDS and General Motors with respect to a substantial portion of the IT services required by General Motors. In accordance with the framework established by the Existing Master Services Agreement, each GM subsidiary, division, group or other organization within the scope of such agreement negotiates and enters into a service agreement (a "Service Agreement") with EDS for the provision of IT services. Generally, each Service Agreement incorporates the standard provisions contained in the Existing Master Services Agreement (except to the extent that the contracting parties otherwise agree) and contains separately negotiated provisions regarding term, services to be provided, and payment for services, as well as other matters required to be addressed in connection with the applicable service or project. The Existing Master Services Agreement does not have a fixed term, but provides that it may be terminated by either party in the event of the sale of all or substantially all of the assets or stock of EDS to a non-GM entity. Each Service Agreement is effective for a fixed term, although in most cases a Service Agreement may be terminated by either party in the event of the termination of the Existing Master Services Agreement. 73 Under the Existing Master Services Agreement, General Motors and EDS have generally utilized one of three alternative pricing methods, as appropriate for a particular service or project. The pricing method for a particular service or project is negotiated by the parties. First, General Motors and EDS have utilized fixed-price arrangements for Service Agreements where the scope of work can be defined. Second, the parties have utilized a cost-plus management fee method of pricing for EDS' services where the scope of work is more difficult to define. Third, the parties have utilized uniform published rates for the pricing of off-the-shelf, commercially available products and services. The Existing Master Services Agreement provides that, in the absence of separately negotiated pricing terms set forth in a Service Agreement or as a default mechanism in the event that the parties are not able to reach agreement, EDS will be compensated for its services on a cost-plus management fee basis. POST-SPLIT-OFF ARRANGEMENTS General General Motors will continue to have certain contractual relationships with EDS after the Split-Off has been consummated. The Separation Agreement will establish certain transitional and other arrangements deemed necessary in connection with the Split-Off and the IT Services Agreements will provide for the continuation of a long-term customer-supplier relationship, in each case as described below. Additionally, GM will have a significant indirect stake in EDS' financial performance for a substantial period of time following the Split-Off as a result of the sizeable holdings of EDS Common Stock that the GM Hourly Plan Special Trust will possess after the Split-Off. See "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust." Appreciation or depreciation in the value of such holdings will affect the level of General Motors' pension expense and unfunded pension liability, which are actuarially determined and computed in accordance with generally accepted accounting principles. IT Services Agreements Immediately prior to and as a condition of the consummation of the Merger, General Motors and EDS will enter into the Master Services Agreement and certain related agreements pursuant to which EDS will continue to serve as General Motors' principal supplier of IT services on a worldwide basis for an initial term of 10 years following the Split-Off, which term may be extended by mutual agreement of the parties. In addition, GM and EDS will implement certain contractual changes which modify or otherwise affect the provisions of several existing Service Agreements. GM and EDS will also enter into agreements whereby the rates charged by EDS for certain information processing activities and communications services will be reduced. The terms of the Master Services Agreement are applicable to all IT Services Agreements between and among GM and its affiliates, on the one hand, and EDS and its affiliates, on the other hand, which relate to certain "in-scope" services as defined in the Master Services Agreement ("MSA Services"). Under the IT Services Agreements, EDS will provide to General Motors certain plant floor automation services in North America which had previously been provided by EDS and other vendors under a variety of agreements. IT services that will be considered to be MSA Services after the Split-Off accounted for approximately $3.4 billion of the approximately $3.9 billion of revenues in the aggregate received by EDS from GM in 1995. The balance of EDS' 1995 revenues from GM was attributable to goods and services provided to GM by EDS which would have been outside the scope of the Master Services Agreement. Following the Split-Off, the parties expect that EDS will continue to provide "out-of-scope" goods and services to GM under various types of contractual agreements other than the Master Services Agreement. Set forth below is a summary description of certain of the principal provisions of the IT Services Agreements. Such description does not purport to be complete, and to the extent it relates to the Master Services Agreement, is qualified in its entirety by reference to the Master Services Agreement, the form of which has been filed with the Commission as an exhibit to the Registration Statement of which this Solicitation Statement/Prospectus is a part. For a discussion of certain financial effects on General Motors and EDS of the terms of the IT Services Agreements, see "Special Factors--Fairness Opinions" and "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations." 74 Term. The term of the Master Services Agreement will commence upon the consummation of the Split-Off and will continue until the expiration of ten years thereafter. The term of the Master Services Agreement may be extended for an additional period or periods by mutual agreement between General Motors and EDS. Prior to the Split-Off, the Existing Master Services Agreement remained in effect indefinitely, subject to termination by either General Motors or EDS in the event of the sale of all or substantially all of the assets or stock of EDS to a non-GM entity. The change in the term of the Master Services Agreement was deemed appropriate in connection with the Split- Off because GM and EDS desire to continue the customer-supplier relationship after the Split-Off and independent IT service providers generally do not have contracts with their customers for indefinite terms. The length of EDS' largest customer contracts generally ranges from 8 to 12 years. Although EDS has historically been able to achieve high renewal rates with its customers upon the expiration of long-term contracts, there can be no assurance as to whether or to what extent EDS will continue to provide IT services to GM after the initial term of the Master Services Agreement. Service Agreements. As previously noted, pursuant to the Existing Master Services Agreement, GM business units and EDS have entered into a number of Service Agreements setting forth the terms and provisions applicable to specific services or projects undertaken by EDS on behalf of various GM organizations. See "--Pre-Split-Off Relationship--Existing IT Services Agreements." Such Service Agreements will remain in effect after the Split-Off and, in many cases, will be extended or otherwise modified as provided in the Master Services Agreement. In addition, it is contemplated that, under the Master Services Agreement, GM business units and EDS will continue to negotiate and enter into additional Service Agreements after the Split-Off providing for the performance of IT services on mutually agreed terms. Each future Service Agreement will set forth provisions with respect to, among other things, (i) the period of time for which EDS will perform services pursuant thereto, (ii) the nature and scope of the respective obligations of the parties thereunder and (iii) the pricing structure, method and amounts of payments to be made to EDS in accordance therewith. In negotiating future Service Agreements, the parties will endeavor to agree upon fixed-price service arrangements which meet the standards of competitiveness described below. See "--Competitiveness" and "--Pricing of Services" below. The provisions of the Master Services Agreement will apply to all Service Agreements, whether entered into prior to or after the consummation of the Split-Off. In connection with the execution of the Master Services Agreement, the terms of the largest domestic Service Agreements (accounting for approximately $2.4 billion in annual revenues in 1995) currently in effect will be extended for additional terms of between one and three years. In particular, the Service Agreement with Delphi Automotive Systems will be extended through December 31, 1998 and the Service Agreements with GM's North American Operations ("NAO"), General Motors Acceptance Corporation (U.S. and Canada) and Motors Insurance Corporation (U.S. and Canada) will each be extended through December 31, 1999. Each other Service Agreement entered into prior to the Split-Off will continue in effect for the duration of its agreed term. Scope of Services. The Master Services Agreement will establish a contractual framework for the provision on a worldwide basis of the MSA Services by EDS to General Motors and all entities (i) in which General Motors owns 65% or more of the outstanding equity and over which it exercises management control (if EDS was providing services in support of the business operations of that entity as of August 1, 1995) or (ii) in which General Motors owns 80% or more of the outstanding equity (if EDS was not providing services in support of the business operations of that entity as of August 1, 1995). The Master Services Agreement will contain a flexible description of the MSA Services that is based on functional service categories so as to take into account possible future changes in business operations or technologies that result in the replacement of existing processes and technologies. The MSA Services to be provided by EDS include IT goods and services related to the following functional service categories: (i) computing and communications infrastructure; (ii) development of application software and implementation of commercial off-the-shelf application software; (iii) data management; (iv) cross-functional IT-related services; and (v) certain services related to specified plant floor operations. Under the Master Services Agreement, services for certain GM units or operations or in certain geographic areas will be specifically excluded from the scope of work to be performed by EDS. In particular, such agreement 75 will provide that General Motors will not be required to obtain from EDS any MSA Services (i) for Hughes, with the exception of its subsidiary, Delco, (ii) for any other business or entity acquired by General Motors after January 1, 1985 (other than (x) GMAC Mortgage Corporation, with the exception of its subsidiary, Residential Funding Corporation, and (y) any other entity which executed a Service Agreement prior to August 1, 1995), (iii) in any country where the provision of such services by EDS would violate any national law of that country, (iv) in specified emerging geographic markets outside of North America and Western Europe where, as of August 1, 1995, EDS has not previously provided such services for the same GM business function and line of business in that emerging market, and (v) with respect to any plant floor services other than pursuant to the agreement described in "--Plant Floor Agreement" below or certain other arrangements currently in effect between the parties. Furthermore, the provisions of the Master Services Agreement relating to the scope of services to be provided by EDS will be subject to General Motors' right, under certain circumstances, to competitively bid and award a portion of such services to third party service providers. See "--Market Testing and Outsourcing" below. IT Strategy and Direction. The Master Services Agreement will provide that General Motors will be responsible for, and will decide and direct, its IT strategies and requirements, including its computing and communications architecture. EDS will be responsible for the performance of IT services pursuant to the Master Services Agreement in furtherance of General Motors' IT strategies and requirements. Competitiveness. In accordance with the Master Services Agreement, the MSA Services to be provided by EDS will be competitive with respect to quality, service, price and technology giving due consideration to General Motors' requirements and other relevant factors. The provisions of the Master Services Agreement with respect to competitiveness will apply to the negotiation or renegotiation of (i) new or replacement Service Agreements, (ii) the terms and conditions applicable to new or replacement MSA Services and (iii) the pricing of any MSA Services when such negotiation or renegotiation is contractually provided for in a Service Agreement. When the applicable EDS and GM organizations reach a mutually acceptable agreement as to the competitiveness of any services, the standards of competitiveness provided for in the Master Services Agreement will be deemed satisfied for the term of such agreement. In situations where the applicable GM and EDS organizations are unable to reach a mutually acceptable agreement as to the competitiveness of any MSA Services, the Master Services Agreement will provide a procedure whereby the negotiating impasse will be escalated to senior management, the services of a standing neutral mediator may (and, in some cases, must) be utilized, and, in the absence of an agreement, (i) any impasse as to uniform published rates for applicable items will be resolved by binding arbitration and (ii) any impasse as to any other services will be resolved by EDS providing the services on the basis of the standard terms and conditions provided in the Master Services Agreement and a modified cost-plus pricing methodology. Pricing of Services. In general, under the Master Services Agreement, the same methods of pricing will be available as are provided for under the Existing Master Services Agreement. See "--Pre-Split-Off Relationship-- Existing IT Services Agreements." As a result, depending on the type of services to be provided by EDS, the parties may utilize (i) fixed-price arrangements, (ii) cost-based pricing methods or (iii) uniform published rates for off-the-shelf, commercially available products and services. However, the parties have agreed to endeavor to incorporate fixed-price arrangements into new Service Agreements entered into under the Master Services Agreement to the extent practicable. With respect to certain information processing services to be performed by EDS, the parties have agreed to annual reductions in the rates to be charged by EDS to all GM organizations worldwide, which reduced rates will be applied retroactively as of January 1, 1996 and will be in effect through December 31, 2000. In addition, with respect to certain communication services to be performed by EDS, the parties have agreed to annual reductions in the rates to be charged by EDS to all GM organizations in the United States, which reduced rates will be applied retroactively as of January 1, 1996 and will be in effect through December 31, 1998. During the respective periods that these reduced rates are in effect, the information processing and communications services to which the reduced charges apply will not be subject to the provisions of the Master Services Agreement relating to market testing or outsourcing. See "--Market Testing and Outsourcing" below. 76 Market Testing and Outsourcing. The Master Services Agreement will provide for certain market testing procedures in order to test the competitiveness of the MSA Services provided by EDS given that after the Split-Off the Capital Stock Committee of GM's Board of Directors will no longer have the ability to monitor and ensure the continued fairness of the arrangements between GM and EDS. Under these procedures, EDS will have the opportunity to bid on any and all MSA Services and any bid submitted by EDS will be evaluated on the same criteria as bids submitted by other service providers. In each of 1996 and 1997, GM's International Operations unit ("GMIO") may expose to competitive bidding MSA Services that would otherwise be provided by EDS so long as the revenues that would be reasonably paid to EDS by GM for such MSA Services during each such year do not exceed $30 million. Following such competitive bidding, GMIO may award contracts to one or more third party service providers with respect to any or all of the MSA Services exposed to competitive bidding. Thereafter, during each year beginning in 1998, GM will be permitted to expose to competitive bidding specified percentages of the prior year's revenues paid to EDS for MSA Services. In each year from 1998 through 2000, GM may expose to competitive bidding and award to third parties contracts for MSA Services for which GM would otherwise have reasonably paid EDS up to an average of approximately 6% of the prior year's revenues paid to EDS for MSA Services. For the years 2001 through 2005, GM may expose to competitive bidding and award to third parties contracts for MSA Services for which GM would otherwise have reasonably paid EDS up to an average of approximately 2.4% of the prior year's revenues paid to EDS for MSA Services. Subject to certain limitations, GM will select the MSA Services to be exposed to competitive bidding after consultation with EDS. In addition to the aforementioned annual limitations, the following aggregate limitations apply: through the year 2000, in no single calendar year may the amount paid to third parties for MSA Services exceed 15% of the aggregate amount of revenue paid to EDS for MSA Services performed during the prior year; and after the year 2000, in no single calendar year may the amount paid to third parties for MSA Services exceed 25% of the aggregate amount of revenue paid to EDS for MSA Services performed during the prior year. Although EDS may bid on any and all of such MSA Services, it is expected that third party service providers will be awarded some portion of the MSA Services exposed to competitive bidding. Accordingly, there can be no assurance as to whether or to what extent EDS will be successful in bidding on such MSA Services. Structural Cost Reductions. The Master Services Agreement will establish specified structural cost reduction targets for the first four years of the Master Services Agreement. In each of the years 1996 through 1998, the annual cost reduction targets will be $100 million. In 1999, the target will be $50 million. These cost reduction targets are generally somewhat higher than the cost reduction targets set forth in the existing Service Agreements, which they are intended to replace. Unlike the cost reduction targets in the existing Service Agreements, however, the targets under the Master Services Agreement are not intended to be performance guarantees, but rather simply represent firm good faith business commitments on the part of General Motors and EDS. As such, the Master Services Agreement does not provide for any gain sharing or similar incentives in the event that the targets are exceeded and does not impose any penalties or other liabilities in the event that they are not met. No assurance can be given that any of the specific targets for structural cost reductions will be achieved. Payment Terms. The Existing IT Services Agreements provide for GM to pay EDS on the 15th day of the month in which services are provided with respect to a substantial portion of services, especially in North America. International payment terms in the Existing IT Services Agreements are often more favorable to GM and are generally governed by the commercial standards prevailing in each particular country. Under the IT Services Agreements, there will be a transition of payment terms to the 20th day of the month following service for all agreements which do not have payment terms at least that favorable to GM (principally in North America). The transition will be accomplished as follows: (i) through 1996, no change; (ii) beginning in 1997, payment on the 30th day of the month when services are provided; (iii) beginning in 1998, payment on the 20th day of the month following service for certain business units; and (iv) beginning in 1999, payment on the 20th day of the month following service for all remaining business units, including NAO. Termination. The Master Services Agreement provides that it may be terminated (i) by either party, if the other party defaults in any material respect in the performance of its obligations thereunder and such default is not cured as provided therein after notice thereof, (ii) by EDS, if General Motors defaults in the payment when 77 due of any material amount owing to EDS thereunder and such default is not cured as provided therein after notice thereof, (iii) by either party, if the other party becomes insolvent or (iv) by General Motors, if there occurs a "change of control" of EDS and certain additional conditions are met. For purposes of the termination provisions of the Master Services Agreement, a "change of control" means the occurrence of any of the following events: (i) any person files (or is required to file) a Schedule 13D or 14D-1 under the Exchange Act disclosing that such person has become the beneficial owner of EDS Common Stock representing 50% or more of the aggregate voting power of the outstanding shares of EDS Common Stock; (ii) any person files (or is required to file) a Schedule 13D or 14D-1 under the Exchange Act disclosing that such person has become the beneficial owner of EDS Common Stock representing 30% or more of the aggregate voting power of the outstanding shares of EDS Common Stock, or commences a proxy solicitation subject to Rule 14a-11 of the Exchange Act with respect to the election or removal of members of the EDS Board, and, within two years, individuals who constituted a majority of the members of the EDS Board at the time of such acquisition or solicitation (as applicable), together with certain persons elected, recommended or nominated by such directors, cease to constitute a majority of the EDS Board; or (iii) there is consummated any transaction (or transactions) resulting in a number of shares of EDS Common Stock which represents 50% or more of the aggregate voting power of the outstanding shares of EDS Common Stock being beneficially owned by persons who did not either own such securities as EDS Common Stock immediately prior to such transaction or receive such securities in respect of the conversion or exchange of EDS Common Stock in such transaction. In the event of a change of control, GM may elect to terminate the Master Services Agreement if the GM Board of Directors determines that there is substantial uncertainty about EDS' ability to perform its obligations under the IT Services Agreements in all material respects or any other significant threat to the business relationship between EDS and the GM units that are provided MSA Services by EDS. GM may also terminate the Master Services Agreement in the event of a change of control in which EDS is acquired by a manufacturer of cars or trucks that competes with GM (a "core competitor") and as a result of which GM determines that there is a reasonable likelihood of a significant competitive threat to GM. In addition, if there is a change of control in which EDS is acquired by a competitor of GM (other than a core competitor) and there is a reasonable likelihood of a significant competitive threat to one or more significant GM units that contract with EDS for MSA Services under the Master Services Agreement, GM may terminate the Service Agreements between EDS and such units; provided, that EDS may instead elect to terminate the Master Services Agreement if the revenues associated with those Service Agreements accounted for more than 60% of the revenues paid to EDS for MSA Services during the preceding year. In the event that General Motors elects to terminate the Master Services Agreement or any Service Agreement as a result of a change in control of EDS, then General Motors (i) will be obligated to pay EDS for transition services in accordance with the provisions therefor in the Master Services Agreement, and (ii) may, under certain circumstances, be obligated to pay for all or a portion (depending on the status of the party acquiring control of EDS) of certain cancellation charges intended to reimburse EDS for certain wind-down expenses, losses relating to capital assets and long-term leases, and personnel expenses. Plant Floor Agreement. GM and EDS will also enter into an agreement (the "Plant Floor Agreement") which covers plant floor systems services for NAO and Delphi North American entities (excluding Saturn) for an initial term of five years and for additional renewal periods under the Master Services Agreement (subject to possible termination at the end of a 2.5 year probationary period). The Plant Floor Agreement, which will be subject to the Master Services Agreement, is expected to account for approximately $200 million in revenue in 1997. Prior to the Plant Floor Agreement, GM procured plant floor services from EDS and other vendors under a variety of agreements. Separation Agreement As a condition to the consummation of the Merger, General Motors and EDS will enter into the Separation Agreement, which will establish certain arrangements between General Motors and EDS deemed necessary in order to deal with various business, legal and regulatory issues following the Split-Off, and the Tax Allocation 78 Agreement, which replaces both the Agreement for the Allocation of United States Federal Income Taxes and the Agreement for the Allocation of United States State and Local Income Taxes, between General Motors and EDS, each entered into effective as of December 31, 1984. The Separation Agreement will be entered into immediately prior to the consummation of the Merger. Set forth below is a summary description of certain of the principal provisions of the Separation Agreement and the Tax Allocation Agreement. Such description does not purport to be complete and is qualified in its entirety by reference to such agreements. The form of the Separation Agreement and a copy of the Tax Allocation Agreement have been filed with the Commission as exhibits to the Registration Statement of which this Solicitation Statement/Prospectus is a part. The Separation Agreement will contain covenants intended to protect the tax- free status of the Split-Off. EDS will agree with General Motors that, until after the two-year anniversary of the Effective Time, EDS will not (i) enter into certain secondary capital stock transactions, or permit such transactions to occur, whereby a person would acquire, from holders of outstanding shares of EDS capital stock, a number of shares of EDS capital stock that would comprise more than 15% of the number of issued and outstanding shares of EDS Common Stock, unless either (a) General Motors has determined that any such proposed transaction would constitute a tax-free reorganization under the Code or would not otherwise jeopardize the tax-free status of the Split-Off or (b) the IRS has issued a ruling to the effect that any such proposed transaction would constitute a tax-free reorganization under the Code; (ii) fail to continue the active conduct of the trade or business conducted by EDS at the Effective Time (or liquidate, dispose of, or otherwise discontinue the conduct of any material portion of such trade or business); (iii) voluntarily dissolve or liquidate or, except in the ordinary course of business, sell or otherwise dispose of more than 60% of the gross assets of EDS or more than 60% of the consolidated gross assets of EDS and its subsidiaries, unless General Motors determines that such transaction would not jeopardize the tax-free status of the Split-Off; or (iv) take any other action or enter into any transaction that would be reasonably likely to jeopardize the tax-free status of the Split-Off, unless GM has determined that such action or transaction would not jeopardize the tax-free status of the Split-Off. In addition, EDS has agreed with General Motors that, until after the six-month anniversary of the Effective Time, EDS will not enter into any transaction that would result in any person acquiring from EDS a number of shares of EDS capital stock that, when aggregated with all other shares of EDS capital stock then owned by such person, would constitute more than 20% of the total combined voting power of the voting stock of EDS or 20% of the total number of outstanding shares of any class or series of non-voting stock of EDS. EDS will indemnify General Motors and its affiliates from and against tax-related losses incurred by General Motors to the extent caused by EDS' breach of any of the representations, warranties or covenants made by EDS in the Separation Agreement with respect to protecting the tax-free status of the Split-Off. Under the Separation Agreement, each of General Motors and EDS will agree to indemnify the other and its affiliates and their respective directors, officers and employees from and against losses arising out of (i) breaches of the provisions of the Separation Agreement (not including for such purpose the Tax Allocation Agreement), (ii) certain misstatements or omissions, or alleged misstatements or omissions, in certain filings under the securities laws, (iii) certain administrative actions in connection with stock records and the exchange of stock certificates by former holders of Class E Common Stock and (iv) the conduct of its respective business. GM has agreed to indemnify the members of the EDS Team, the officers and employees of EDS providing assistance to the EDS Team, and the directors of EDS who granted any approval or authorization for EDS in connection with the Split-Off, in each case, in their capacity as such, against losses arising from the Split-Off in accordance with the GM Bylaws, to the same extent as if such person were a director or officer of GM; provided that such indemnification does not apply to losses relating to (i) the EDS Certificate of Incorporation, the EDS Bylaws or the EDS Rights Agreement, (ii) EDS employee and director compensation and indemnification arrangements or (iii) EDS plans, proposals, intentions or policies applicable after the Effective Time, including EDS' dividend policy. EDS will reimburse GM for all amounts paid to or on behalf of the persons entitled to indemnification as referred to in the preceding sentence. Pursuant to the Separation Agreement, until the six-year anniversary of the Effective Time, General Motors will provide EDS and its affiliates with directors' and officers' liability, general liability and products liability 79 insurance, with respect to applicable incidents, acts or omissions occurring before the Effective Time, no less favorable to any covered person in coverage and amount than the lesser of (i) the coverage in effect at the Effective Time and (ii) the coverage then in effect for General Motors. Such insurance will be subject to the payment by EDS of certain deductibles and retention amounts, but EDS will make no annual premium payments for such coverage. EDS may terminate any of such coverage at any time, subject to applicable notice provisions. The Separation Agreement allocates responsibility for the payment of fees and expenses incurred by the parties in connection with the Split-Off. EDS will pay the fees and expenses of the financial, accounting and legal advisors retained by it or the EDS Team, including Lehman Brothers, Morgan Stanley, KPMG Peat Marwick LLP, Baker & Botts, L.L.P., Prickett, Jones, Elliott, Kristol & Schnee and Hughes & Luce, L.L.P. GM will pay the fees and expenses of the financial, accounting, legal and other advisors retained by it or the GM Team, including Merrill Lynch, Deloitte & Touche LLP, Kirkland & Ellis, Richards, Layton & Finger, Milbank, Tweed, Hadley & McCloy, Weil, Gotshal & Manges LLP, and McKinsey. Other than as provided in the preceding sentence, the fees and expenses associated with the preparation, distribution to stockholders and filing with the Commission of the materials associated with this consent solicitation or associated with other securities law filings will be shared equally by General Motors and EDS, except that GM shall pay the first $3.0 million of such fees and expenses. EDS will pay all costs of printing and engraving the certificates representing the EDS Common Stock and the costs of listing the EDS Common Stock on any stock exchange. All other costs and expenses of either party incurred in connection with the Split-Off will be paid by such party. See "Estimated Fees and Expenses." The Separation Agreement provides for General Motors to deliver to the PBGC certain documentation required by the PBGC as soon as practicable after the Effective Time and to use commercially reasonable efforts to do all things necessary pursuant to the GM-PBGC Agreement to effect the delivery to EDS of the Unconditional Releases. See "Special Factors--GM-PBGC Agreement." The Separation Agreement also provides that General Motors will not amend or modify the Transfer Agreement between General Motors and the GM Hourly Plan Trustee in any material respect, or waive the benefit of any material term of the Transfer Agreement, without the prior written consent of EDS. See "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust." The Separation Agreement provides that any employee who transferred between General Motors, EDS and certain of their affiliates during the period between September 1, 1985 and the Split-Off and continues in employment until his or her retirement will receive certain reciprocal treatment under his or her original employer's qualified retirement plan for service to the company to which such employee transferred. Such employee's compensation and service will be recognized for certain specific purposes under the qualified retirement plan of the company from which he or she transferred. The reciprocal treatment provided by the Separation Agreement will not apply to certain employees who transferred to or from Hughes or certain other General Motors subsidiaries. The Separation Agreement also includes certain agreements and arrangements with respect to the provision of continuing access to certain information, the treatment of confidential information and the establishment of lease arrangements for space within certain GM facilities used or occupied by EDS. In addition, the Separation Agreement contains representations and warranties as to certain matters, including with respect to the Class E Common Stock and EDS Common Stock to be outstanding immediately before the Effective Time, and the absence of registration rights granted by GM that would apply to EDS Common Stock after the Split-Off (other than those of the GM Hourly Plan Special Trust as described under "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust"). The Separation Agreement provides EDS a $50.0 million allowance relating to the resolution of various uncertain, contingent or other matters arising out of the separation of GM and EDS. To date, the parties have agreed to the application of $40.7 million of the allowance, principally to various tax, employee benefit and insurance matters. The remaining $9.3 million of the allowance will be available to EDS for a period generally of two years after the Effective Time for application against any amounts that are or may become payable by EDS and its affiliates to GM and its affiliates in connection with any uncertain, contingent or other matters arising 80 prior to the Effective Time and out of the separation of GM and EDS. Such allowance generally may not be utilized for items provided for in the Separation Agreement or in the Tax Allocation Agreement. Pursuant to the Separation Agreement, GM and EDS shall attempt in good faith to resolve any disputes thereunder through negotiation, and have agreed that any such disputes that cannot be resolved through negotiation shall be litigated in the Delaware state courts (except that disputes with respect to tax matters shall be submitted to arbitration). The Tax Allocation Agreement, which applies to tax periods during which EDS and its consolidated or combined subsidiaries (the "EDS Group") are part of GM's consolidated federal, state and local income tax returns, generally requires EDS to pay to GM in a timely manner the amount of federal, state and local income taxes that the EDS Group would have paid had the EDS Group been a separate group of corporations during such periods, filing its own consolidated income tax returns. Any tax attributes arising in the tax periods covered by the Tax Allocation Agreement that carry over to periods following the Split-Off will be apportioned between GM and EDS on the basis of applicable regulations or, absent specific guidance, on the basis of the amount of such attributes that would have carried over and been available to the EDS Group had it filed separate returns as described above. The Tax Allocation Agreement also grants EDS certain control and participation rights in any audit of GM by the Internal Revenue Service or state and local tax authorities, and in any litigation arising therefrom, to the extent EDS would be liable under the Tax Allocation Agreement with respect to the issues in dispute. PLANS AND PROPOSALS OF EDS EDS DIVIDEND POLICY The current dividend policy of the GM Board is to pay quarterly dividends on Class E Common Stock, when, as and if declared by the GM Board, at an annual rate equal to approximately 30% of the Available Separate Consolidated Net Income of EDS for the prior year. Under this dividend practice of the GM Board, GM paid quarterly dividends on the outstanding shares of Class E Common Stock in an amount equal to $0.13 per share during 1995. In February 1996, the GM Board raised the quarterly dividend on Class E Common Stock to $0.15 per share. There is no fixed relationship, on a per share or aggregate basis, between the cash dividends that may be paid by General Motors to holders of Class E Common Stock and cash dividends or other amounts that may be paid by EDS to General Motors. However, it has been the practice of the EDS Board to pay quarterly cash dividends on the outstanding shares of EDS Common Stock in an aggregate amount equal to the quarterly dividends per share paid by General Motors with respect to Class E Common Stock, multiplied by the Class E Dividend Base, which is the denominator of the fraction used in allocating a portion of GM's earnings attributable to EDS to the Class E Common Stock for dividend purposes as described herein. See "Class E Common Stock--Dividend Policy." EDS' dividend policy following the Split-Off will be determined by the EDS Board. Under Delaware law and the EDS Certificate of Incorporation, the EDS Board will not be required to declare dividends on any class of EDS capital stock. EDS management intends to recommend to the EDS Board at its first meeting following consummation of the Split-Off that EDS continue to pay quarterly dividends through 1996 in an amount equal to $0.15 per share. The EDS Board will not be required to follow such recommendation by EDS management. The EDS Board will be free to adopt such dividend policy as it deems appropriate and, during or after 1996, to change its dividend policies and practices from time to time and to decrease or increase the dividends paid on the EDS Common Stock on the basis of EDS' financial condition, earnings and capital requirements and other factors the EDS Board may deem relevant. EDS expects that it will adopt a dividend reinvestment plan, which will become effective following the Split-Off. 81 EDS UNAUDITED PRO FORMA CONSOLIDATED CAPITALIZATION The following table sets forth the short-term debt and consolidated capitalization of EDS as of December 31, 1995 and on a pro forma basis after giving effect to the Transactions. This table should be read in conjunction with EDS' Consolidated Financial Statements (including the notes thereto), which are included as Appendix C to this Solicitation Statement/Prospectus, and with the financial data set forth under "EDS Unaudited Pro Forma Condensed Consolidated Financial Statements." The pro forma data are not necessarily indicative of EDS' future short-term debt and consolidated capitalization or of what EDS' short-term debt and consolidated capitalization would have been had the Transactions been consummated as of December 31, 1995.
DECEMBER 31, 1995 ------------------- PRO HISTORICAL FORMA ---------- -------- (IN MILLIONS) Short-term debt: Notes payable (current).................................. $ 247.8 $ 247.8 ======== ======== Long-term debt: Notes payable............................................ $1,852.8 $2,352.8 -------- -------- Stockholders' equity: Preferred stock, $.01 par value; 200 million shares authorized; no shares issued and outstanding............ -- -- Common stock, without par value; one billion shares authorized; 483.7 million shares issued and outstanding. 517.7 -- Common stock, $.01 par value; two billion shares authorized; 483.7 million shares issued and outstanding. -- 4.8 Additional paid-in capital............................... -- 512.9 Retained earnings........................................ 4,460.8 3,912.5 -------- -------- Total stockholders' equity............................. 4,978.5 4,430.2 -------- -------- Total capitalization................................... $6,831.3 $6,783.0 ======== ========
82 GENERAL MOTORS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements are based on General Motors' Consolidated Financial Statements and give effect to the Transactions as if they had been consummated as of January 1, 1995 (in the case of income statement data) or as of December 31, 1995 (in the case of balance sheet data). The pro forma condensed consolidated financial statements are based on the assumptions set forth in the accompanying notes and should be read in conjunction with General Motors' Consolidated Financial Statements (including the notes thereto) in the GM 1995 Form 10-K, which is incorporated herein by reference, including the information with respect to EDS in Exhibit 99(a) thereto. The pro forma condensed consolidated financial statements are not necessarily indicative of General Motors' future consolidated financial position or results of operations or of what General Motors' consolidated financial position would have been had the Transactions been consummated as of December 31, 1995 or what the results of operations would have been had the Transactions been consummated as of January 1, 1995. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- ---------- NET SALES AND REVENUES Manufactured products............... $143,666.1 $ -- $143,666.1 Financial services.................. 11,664.0 -- 11,664.0 Computer systems services........... 8,531.0 (8,531.0)(a) -- Other income........................ 4,967.5 (25.1)(a) 4,942.4 ---------- --------- ---------- Total Net Sales and Revenues....... 168,828.6 (8,556.1) 160,272.5 ---------- --------- ---------- COSTS AND EXPENSES Cost of sales and other operating charges, exclusive of items listed below.............................. 126,535.3 (5,234.2)(a) (175.8)(b) 121,125.3 Selling, general, and administrative expenses........................... 13,514.7 (964.9)(a) 15.0 (c) 12,564.8 Interest expense.................... 5,302.2 (120.8)(a) 5,181.4 Depreciation of real estate, plants, and equipment...................... 8,554.4 (808.1)(a) 7,746.3 Amortization and other deductions... 5,145.7 -- 5,145.7 ---------- --------- ---------- Total Costs and Expenses........... 159,052.3 (7,288.8) 151,763.5 ---------- --------- ---------- Income from continuing operations before income taxes and cumulative effect of accounting change........ 9,776.3 (1,267.3) 8,509.0 United States, foreign, and other income taxes....................... 2,843.8 (528.1)(a) 61.1 (d) (2.3)(d) 2,374.5 ---------- --------- ---------- Income from continuing operations before cumulative effect of accounting change.................. 6,932.5 (798.0) 6,134.5 Income from discontinued operations. -- 900.0 (a) 900.0 (e) Cumulative effect of accounting change............................. (51.8) -- (51.8) ---------- --------- ---------- Net income......................... 6,880.7 102.0 6,982.7 Preference shares tender offer premium............................ 153.4 -- 153.4 Dividends on preference stocks...... 210.2 (103.5)(k) 106.7 ---------- --------- ---------- Income on Common Stocks............ $ 6,517.1 $ 205.5 $ 6,722.6 ========== ========= ========== EARNINGS ATTRIBUTABLE TO COMMON STOCKS $1 2/3 par value before cumulative effect of accounting change....... $ 5,508.8 $ 205.5 (104.5)(f) $ 5,609.8 Cumulative effect of accounting change............................ (51.8) -- (51.8) ---------- --------- ---------- Net earnings attributable to $1 2/3 par value......................... $ 5,457.0 $ 101.0 $ 5,558.0 ========== ========= ========== Net earnings attributable to Class H................................. $ 264.6 $ -- $ 264.6 ========== ========= ========== Class E from continuing operations. $ 795.5 $ (795.5)(a) $ -- Discontinued operations............ -- 795.5 (a) 104.5 (f) 900.0 Average number of shares of common stocks outstanding (in millions) $1 2/3 par value................... 749.7 -- 749.7 Class E............................ 404.6 (404.6)(a) -- Class H............................ 95.5 -- 95.5 EARNINGS PER SHARE ATTRIBUTABLE TO COMMON STOCKS $1 2/3 par value before cumulative effect of accounting change....... $ 7.28 $ .20 $ 7.48 Cumulative effect of accounting change............................ (0.07) -- (0.07) ---------- --------- ---------- Net earnings attributable to $1 2/3 per value......................... $ 7.21 $ .20 $ 7.41 ========== ========= ========== Net earnings attributable to Class H................................. $ 2.77 $ -- $ 2.77 ========== ========= ========== Class E from continuing operations. $ 1.96 $ (1.96) $ -- Discontinued operations............ -- 1.66 1.66 .22 (f) .22
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Consolidated Financial Statements. 83 GENERAL MOTORS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1995 (IN MILLIONS)
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ASSETS ---------- ----------- ---------- Cash and cash equivalents................. $ 11,044.3 $ (548.9)(a) 500.0 (g) $ 10,995.4 Other marketable securities............... 5,598.6 (76.4)(a) 5,522.2 ---------- --------- ---------- Total cash and marketable securities.... 16,642.9 (125.3) 16,517.6 Finance receivables--net.................. 58,732.0 -- 58,732.0 Accounts and note receivable.............. 9,988.4 (3,008.9)(a) 6,979.5 Inventories............................... 11,529.5 (181.2)(a) 11,348.3 Contracts in process...................... 2,469.2 -- 2,469.2 Net equipment on operating leases......... 27,702.3 -- 27,702.3 Deferred income taxes..................... 19,028.3 691.7 (a) (26.8)(l) 19,693.2 Property Real estate, plants, and equipment--at cost................................... 73,652.3 (6,237.5)(a) 67,414.8 Less accumulated depreciation........... 44,083.2 (3,065.7)(a) 41,017.5 ---------- --------- ---------- Net real estate, plants, and equipment............................ 29,569.1 (3,171.8) 26,397.3 Special tools--net...................... 8,170.7 -- 8,170.7 ---------- --------- ---------- Total property...................... 37,739.8 (3,171.8)(a) 34,568.0 Intangible assets--net.................... 11,898.9 (1,155.4)(a) 10,743.5 Other assets--net......................... 21,392.1 (2,139.2)(a) 19,252.9 ---------- --------- ---------- Total Assets.......................... $217,123.4 $(9,116.9) $208,006.5 ========== ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable (principally trade)...... $ 11,898.8 $ (288.0)(a) 24.3 (h) $ 11,635.1 Notes and loans payable................... 83,323.5 (2,101.8)(a) 81,221.7 United States, foreign, and other income taxes--deferred and payable.............. 3,231.6 (123.9)(a) (9.2)(h) 3,098.5 Postretirement benefits other than pensions................................. 41,595.1 -- 41,595.1 Pensions.................................. 6,842.3 (151.0)(a) 6,691.3 Other liabilities and deferred credits.... 46,886.6 (1,870.5)(a) 45,016.1 ---------- --------- ---------- Total Liabilities....................... 193,777.9 (4,520.1) 189,257.8 Total Stockholders' Equity................ 23,345.5 (5,054.9)(a,i) 500.0 (g) (15.1)(h) 18,748.7(j) (26.8)(l) ---------- --------- ---------- Total Liabilities and Stockholders' Equity............................... $217,123.4 $(9,116.9) $208,006.5 ========== ========= ==========
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Consolidated Financial Statements. 84 GENERAL MOTORS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED) NOTES TO GENERAL MOTORS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (a) Reflects the removal of the assets and liabilities of EDS, prior to receipt of the Special Inter-Company Payment described in note (g) below, and the reclassification of EDS' operating results to income from discontinued operations. The measurement date for accounting purposes will be the date GM stockholder approval is received. (b) Reflects reductions in unit billings as provided for under the terms of the IT Services Agreements as applied to actual usage for certain communication and information processing charges. (c) Reflects additional selling, general, and administrative costs expected to be incurred as a result of the Split-Off. (d) Income tax expense on pro forma adjustments was calculated at 38%, and includes the benefits of certain tax credits. (e) The General Motors pro forma income from discontinued operations reconciles to EDS' Separate Consolidated Net Income as follows: Pro forma income from discontinued operations................... $900.0 EDS' Separate Consolidated Net Income........................... 938.9 ------ Effect of purchase accounting adjustments reflected in General Motors Consolidated Financial Statements that are applicable to EDS....................................................... $(38.9) ======
(f) Represents the reclassification of the portion of EDS' Separate Consolidated Net Income allocated to $1 2/3 Common Stock, offset by the impact of the purchase accounting adjustments described in note (e) above. (g) Reflects receipt by GM of Special Inter-Company Payment from EDS. (h) Reflects one-time charges of approximately $24.3 million, net of income tax effect of $9.2 million, for financial advisory, legal, registration fee, printing and mailing costs related to the Split-Off. Such costs have been excluded from the Unaudited Pro Forma Condensed Consolidated Statement of Income. (i) Stockholders' equity pro forma adjustments (as described in note (a) above), excluding those items discussed in notes (g) and (h) above, for General Motors reconciles to EDS' stockholder's equity, before pro forma adjustment, as follows: GM stockholders' equity pro forma adjustments................... $5,054.9 EDS stockholder's equity........................................ 4,978.5 -------- Effect of purchase accounting adjustments reflected in General Motors Consolidated Financial Statements that are applicable to EDS............................................................ $ 76.4 ========
(j) Pro forma stockholders' equity includes the impact of the 1996 issuance of approximately 44.7 million shares of Class E Common Stock upon conversion of approximately 3.2 million shares of Series C Preference Stock. On February 22, 1996, the remaining 6,784 outstanding shares of Series C Preference Stock were redeemed. The impact of the redemption was not material to GM's consolidated balance sheet. (k) Reflects dividends on Series C Preference Stock, assuming conversion of shares as of January 1, 1995. (l) Reflects net deferred tax benefits allocated to EDS. 85 EDS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed consolidated financial statements are based on EDS' Consolidated Financial Statements and give effect to the Transactions as if they had been consummated as of January 1, 1995 (in the case of income statement data) or as of December 31, 1995 (in the case of balance sheet data). The pro forma condensed consolidated financial statements are based on the assumptions set forth in the accompanying notes and should be read in conjunction with EDS' Consolidated Financial Statements (including the notes thereto), which are included as Appendix C to this Solicitation Statement/Prospectus. The pro forma condensed consolidated financial statements are not necessarily indicative of EDS' future consolidated financial position or results of operations or of what EDS' consolidated financial position would have been had the Transactions been consummated as of December 31, 1995 or what the results of operations would have been had the Transactions been consummated as of January 1, 1995. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1995 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- Systems and other contracts revenues GM and affiliates..................... $ 3,891.1 $(175.8)(a) $ 3,715.3 Outside customers..................... 8,531.0 8,531.0 --------- ------- --------- Total revenues...................... 12,422.1 (175.8) 12,246.3 --------- ------- --------- Costs and expenses Cost of revenues...................... 9,601.6 3.0 (c) 9,604.6 Selling, general, and administrative.. 1,291.5 7.5 (c) 1,299.0 --------- ------- --------- Total costs and expenses............ 10,893.1 10.5 10,903.6 --------- ------- --------- Operating income........................ 1,529.0 (186.3) 1,342.7 Interest and other income, net.......... (62.0) (35.0)(b) (97.0) --------- ------- --------- Income before income taxes.............. 1,467.0 (221.3) 1,245.7 Provision for income taxes.............. 528.1 2.3 (a) (79.7)(d) 450.7 --------- ------- --------- Separate Consolidated Net Income/Net Income................................. $ 938.9 $(143.9) $ 795.0 (j) ========= ======= ========= Available Separate Consolidated Net Income................................. $ 795.5 $ -- ========= ========= Average number of shares of Class E Common Stock outstanding............... 404.6 -- ========= ========= Earnings per share attributable to Class E Common Stock......................... $ 1.96 $ -- ========= ========= Weighted average number of EDS common shares outstanding..................... -- 483.6 (e) ========= ========= Net income per share.................... $ -- $ 1.64 (e) ========= =========
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Consolidated Financial Statements. 86 EDS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 1995 (IN MILLIONS)
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ASSETS ---------- ----------- --------- Current assets: Cash and cash equivalents................ $ 548.9 $ $548.9 Accounts receivable...................... 3,169.0 3,169.0 Other current assets..................... 663.6 (13.4)(h) 650.2 --------- ------ --------- Total current assets................... 4,381.5 (13.4) 4,368.1 Property and equipment, net................ 3,242.4 3,242.4 Investment in leases and other............. 1,573.5 (33.2)(h) 1,540.3 Software, goodwill, and other intangibles, net....................................... 1,529.9 1,529.9 Other assets............................... 105.1 105.1 --------- ------ --------- Total assets........................... $10,832.4 $(46.6) $10,785.8 ========= ====== ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accrued liabilities...................... $ 1,704.5 $ 35.0 (j) $1,739.5 Other current liabilities................ 1,556.9 1,556.9 --------- ------ --------- Total current liabilities.............. 3,261.4 35.0 3,296.4 Deferred income taxes...................... 739.7 (33.3)(g) 706.4 Notes payable.............................. 1,852.8 500.0 (f) 2,352.8 Stockholders' equity....................... 4,978.5(i) (500.0)(f) 33.3 (g) (46.6)(h) (35.0)(j) 4,430.2 --------- ------ --------- Total liabilities and stockholders' equity................................ $10,832.4 $(46.6) $10,785.8 ========= ====== =========
The accompanying notes are an integral part of the Unaudited Pro Forma Condensed Consolidated Financial Statements. 87 EDS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED) NOTES TO EDS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following Notes to EDS Unaudited Pro Forma Condensed Consolidated Financial Statements relate to the individual adjustments required to reflect the Transactions as if they had occurred on January 1, 1995 (in the case of income statement data) or as of December 31, 1995 (in the case of balance sheet data). Adjustments to EDS' consolidated balance sheet are based on EDS' carryover basis as reported in EDS' Consolidated Financial Statements included as Appendix C herein. EDS' Consolidated Financial Statements exclude the effects of purchase accounting adjustments arising from the acquisition of EDS by GM in 1984, including GM's remaining carrying value of such purchase adjustments and the accumulated amortization of all such adjustments. The remaining carrying value of such adjustments would be immaterial to EDS' Consolidated Financial Statements. (a) Reflects the reductions in revenues from GM and its affiliates, which represent the effects of reduced unit billings as provided for under the terms of the IT Services Agreements as applied to actual usage for certain communications and compute activities for the year ended December 31, 1995, as well as certain reduced tax credits. (b) Reflects additional interest expense attributable to $500.0 million of debt incurred to make the Special Inter-Company Payment, calculated based on EDS' 1995 average long-term borrowing rate. (c) Reflects additional costs as a result of operating as a separate public company, rather than a subsidiary of General Motors. These costs include, among other items, additional insurance coverages, NYSE fees and transfer agent fees. (d) Reflects the tax impact of pretax income statement adjustments at EDS' effective tax rate of 36%. (e) Reflects the conversion of each outstanding share of Class E Common Stock into one share of EDS Common Stock. Pro forma earnings per share have been calculated based on the weighted average shares of Class E Common Stock outstanding for the year ended December 31, 1995, adjusted for the following: (i) GM's contribution of approximately 173.2 million shares of Class E Common Stock to the GM Hourly Plan on March 13, 1995; and (ii) GM's issuance of approximately 44.7 million shares of Class E Common Stock between January 1 and February 22, 1996, to satisfy conversion privileges associated with Series C Preference Stock. For purposes of computing pro forma earnings per share for 1995, each of these transactions was treated as if it occurred on January 1, 1995. (f) Reflects payment of the Special Inter-Company Payment and incurrence of additional debt for the financing thereof. (g) Reflects the net deferred tax benefits previously allocated to GM. (h) Reflects the reclassification to EDS treasury stock for GM Class E Common Stock held by EDS as an asset prior to the Split-Off. These shares, which are used to satisfy restricted stock awards as they vest, will be converted to EDS Common Stock in the Merger. (i) General Motors' equity in its indirect wholly owned subsidiary, EDS (excluding the effects of purchase accounting adjustments relating to General Motors' 1984 acquisition of EDS). (j) The pro forma balance sheet includes, and the pro forma income statement excludes, the one-time charges of approximately $35.0 million associated with the formulation and implementation of the Split-Off. These charges will be included in EDS' consolidated financial statements for the year ended December 31, 1996. These expenses could impact EDS' effective tax rate to the extent that they are non-deductible for tax purposes. 88 EDS SELECTED CONSOLIDATED FINANCIAL INFORMATION The following EDS selected consolidated historical financial data have been derived from EDS' Consolidated Financial Statements. Such data should be read in conjunction with the EDS consolidated financial statements (including the notes thereto), which are included as Appendix C to this Solicitation Statement/Prospectus, and "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations." The EDS selected consolidated historical financial data as of and for the years ended December 31, 1995, 1994, 1993, 1992 and 1991 have been derived from EDS' Consolidated Financial Statements, which have been audited by KPMG Peat Marwick LLP, independent auditors.
AS OF AND FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------- 1995 1994 1993 1992 1991 -------- --------- -------- -------- -------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) OPERATING RESULTS Systems and other contracts revenues General Motors and affiliates. $3,891.1 $ 3,547.2 $3,323.7 $3,348.5 $3,362.2 Outside customers............. 8,531.0 6,412.9 5,183.6 4,806.7 3,666.3 -------- --------- -------- -------- -------- Total revenues................ 12,422.1 9,960.1 8,507.3 8,155.2 7,028.5 -------- --------- -------- -------- -------- Costs and expenses Cost of revenues.............. 9,601.6 7,529.4 6,390.6 6,205.8 5,415.1 Selling, general, and administrative............... 1,291.5 1,187.1 1,005.4 969.3 761.9 -------- --------- -------- -------- -------- Total costs and expenses...... 10,893.1 8,716.5 7,396.0 7,175.1 6,177.0 -------- --------- -------- -------- -------- Operating income............... 1,529.0 1,243.6 1,111.3 980.1 851.5 Interest and other income, net. (62.0) 40.6 20.0 20.7 42.2 -------- --------- -------- -------- -------- Income before income taxes..... 1,467.0 1,284.2 1,131.3 1,000.8 893.7 Provision for income taxes..... 528.1 462.3 407.3 365.3 330.7 Cumulative effect of accounting change(a)..................... -- -- -- -- (15.5) -------- --------- -------- -------- -------- Separate Consolidated Net Income (b).................... $ 938.9 $ 821.9 $ 724.0 $ 635.5 $ 547.5 ======== ========= ======== ======== ======== Average number of shares of Class E Common Stock outstanding (Numerator) (b)............... 404.6 260.3 243.0 209.1 195.3 Class E Dividend Base (Denominator) (b)............. 483.7 481.7 480.6 479.3 478.1 Available Separate Consolidated Net Income (b)................ $ 795.5 $ 444.4 $ 367.2 $ 278.4 $ 223.6 Earnings per share attributable to Class E Common Stock (b)... 1.96 1.71 1.51 1.33 1.14 Dividends per share of Class E Common Stock (b).............. 0.52 0.48 0.40 0.36 0.32 BALANCE SHEET DATA Cash and marketable securities. $ 638.6 $ 757.8 $ 607.5 $ 587.9 $ 415.8 Current assets................. 4,381.5 3,354.1 2,506.8 2,157.0 1,945.6 Total assets (c)............... 10,832.4 8,786.5 6,942.1 6,123.5 5,703.2 Current liabilities............ 3,261.4 2,873.2 2,160.4 1,903.1 2,396.7 Long-term debt................. 1,852.8 1,021.0 522.8 561.1 281.9 Stockholder's equity (c)(d).... 4,978.5 4,232.5 3,617.4 3,063.4 2,610.3 OTHER DATA Depreciation and amortization.. $1,107.8 $ 771.1 $ 626.8 $ 603.2 $ 524.4 Expenditures for property and equipment..................... 1,261.5 1,186.0 816.4 639.0 673.2
- -------- (a) Effective January 1, 1991, General Motors and its subsidiaries (including EDS) adopted SFAS No. 109, "Accounting for Income Taxes." The cumulative effect of this accounting change at January 1, 1991 was a charge of $15.5 million, of which $6.1 million, or $0.03 per share, was attributable to Class E Common Stock. (b) Calculated for purposes related to the Class E Common Stock, which will be converted into EDS Common Stock on a one-for-one basis pursuant to the Split-Off. (c) Holders of Class E Common Stock have no direct rights in the equity or assets of EDS, but rather have rights in the equity and assets of General Motors (which include 100% of the stock of EDS). (d) General Motors' equity in its indirect wholly owned subsidiary, EDS (excluding the effects of purchase accounting adjustments relating to General Motors' 1984 acquisition of EDS). 89 EDS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL EDS is a provider of IT services using computer and communication technologies to meet the business needs of its clients. EDS offers its clients a continuum of services, including the management and operation of computers, networks, information systems, information processing facilities, business operations, and related personnel, as well as management consulting services. EFFECT OF THE SPLIT-OFF In connection with the Split-Off, the Master Services Agreement will be entered into between EDS and General Motors with respect to IT services to be provided after the Split-Off and the Special Inter-Company Payment will be made by EDS. If the Split-Off is not consummated, EDS will continue as an indirect wholly owned subsidiary of GM and no Special Inter-Company Payment will be made. Under such circumstances, the Existing IT Services Agreements will continue with such changes as GM and EDS may from time to time agree upon or as the GM Board upon recommendation of the Capital Stock Committee may from time to time determine to be fair to all classes of GM common stockholders. No agreement has been reached between GM and EDS regarding any changes to the Existing IT Services Agreements that may take effect if the Split-Off is not approved by GM common stockholders or is not consummated for any other reason. GM management has advised EDS management that in such an eventuality it would seek substantial changes in the Existing IT Services Agreements, including implementation of substantially all of the changes provided for by the Master Services Agreement. Neither the GM Board nor the Capital Stock Committee has determined whether to require such changes to the Existing IT Services Agreements if the Split-Off is not consummated, but they anticipate considering such changes if such circumstances arise. The IT Services Agreements contemplate that EDS will continue to serve as General Motors' principal supplier of IT services for an initial term of ten years, which may be extended by agreement of the parties, and that the IT services to be provided by EDS after the Split-Off will generally be similar to those provided to General Motors under the Existing IT Services Agreements. Under the terms of the IT Services Agreements, certain of the Existing IT Services Agreements applicable to particular units, sectors or other organizations within General Motors will be extended for additional terms of between approximately one and three years beyond their current expiration dates. In addition, EDS will provide certain plant floor automation services in North America to GM that it has not previously provided. The IT Services Agreements also provide that certain significant changes will be made to the pricing and terms under which EDS will provide IT services to General Motors after the Split-Off. Among other things, the IT Services Agreements provide that the rates charged by EDS to General Motors for certain information processing activities and communications services will be reduced and that the parties will work together to achieve increased targets for structural cost reductions. General Motors will also be given the right to competitively bid and, subject to certain restrictions, outsource a limited portion of its IT service requirements to third party providers. In addition, beginning in 1997, the payment terms relating to IT services provided by EDS will be revised over a two-year period to extend the due dates for payments from General Motors. See "Relationship between General Motors and EDS--Post Split-Off Arrangements--IT Services Agreements." Based on currently available information and assuming that the IT Services Agreements had been effective as of January 1, 1996, EDS believes that revenues generated from services performed for General Motors in 1996 would be slightly lower than those generated from such services in 1995. In addition, EDS expects that the contemplated changes in its arrangements with GM could reduce its 1996 earnings per share by as much as $0.07 to $0.14 (including $0.03 in the first quarter of 1996). The long-term impact of the terms of the IT Services Agreements cannot be precisely quantified at present, although such terms may have an adverse effect on operating margins unless EDS is able to effect reductions in the costs of providing services to General Motors. Although EDS plans to implement certain cost reduction measures, there can be no assurance as to the extent, if 90 any, to which such measures will mitigate the possible adverse impact on its operating margins. In general, there can be no assurance that the terms of the IT Services Agreements would not have a material adverse effect in the long term on the results of operations of EDS. For additional information regarding the IT Services Agreements, see "Relationship Between General Motors and EDS-- Post-Split-Off Arrangements--IT Services Agreements" and "Business of EDS-- Revenues." The Special Inter-Company Payment will be paid by EDS to GM at such time, if any, as the Split-Off occurs. The amount of the Special Inter-Company Payment will be $500.0 million. Interest costs related to the Special Inter-Company Payment are expected to be approximately $.03 per share in 1996. In addition to the Special Inter-Company Payment, EDS expects to incur approximately $35.0 million, or approximately $.05 per share in 1996, of one-time costs in connection with the formulation and implementation of the Split-Off. Certain of these costs will be incurred only if the Split-Off is consummated. In arriving at the amount of the $500.0 million Special Inter-Company Payment, the parties took into account the fact that in the Separation Agreement GM would provide EDS an allowance of $50 million relating to the resolution of various uncertain, contingent or other matters arising out of the separation of GM and EDS. Statements about the effect of the Transactions and the impact of the IT Services Agreements after the Split-Off are forward-looking statements which by their nature are subject to numerous uncertainties that could cause actual results to vary. RESTRUCTURING ACTIVITIES On April 1, 1996, EDS announced that it is taking certain actions and considering others to maintain and improve operating efficiencies and accelerate EDS' move towards "user-centered" computing. In connection therewith, EDS also announced the implementation of a voluntary early retirement offer and involuntary severance arrangements affecting between 4,000 and 5,000 employees and designed to both reduce labor costs and change the skill mix of EDS' workforce. Communication of terms of these arrangements to employees began on April 1 and will continue during the second quarter of 1996. It is expected that substantially all of these workforce reductions would be completed by December 1996. As part of its overall goal to improve operating efficiencies, EDS is also in the process of evaluating certain aspects of its business to identify any redundant facilities and related assets which may no longer fit its long-term strategic objectives. Accordingly, the actions under consideration could include the elimination by EDS of certain business functions and consolidation of certain related facilities. EDS will incur a pre-tax non-recurring charge in the second quarter of 1996 in connection with the restructuring actions discussed above. The amount of the aggregate charge (including the employee related actions, asset writedowns, and other actions being considered) will depend on the number of employees who elect to accept early retirement offers and the determination of which EDS business functions and related facilities would be eliminated or consolidated. EDS estimates that all such actions could result in an aggregate pre-tax non-recurring charge in the second quarter of 1996 in the range of $500.0 million to $750.0 million (between $.66 and $.99 per share, after tax). A portion of the contemplated charge will be of a non-cash nature, the amount of which has not yet been determined. EDS expects that any restructuring actions implemented by it will result in savings commencing in the second half of 1996. The restructuring activities discussed above are not contingent upon approval or consummation of the Split-Off. Statements about the effect of EDS' actions and the possible amount of a non-recurring charge are forward-looking statements which by their nature are subject to numerous uncertainties that could cause actual results to vary. 91 RESULTS OF OPERATIONS Three Years Ended December 31, 1995, 1994 and 1993 Revenues. EDS conducts its sales, marketing and service activities on a global basis through business units that focus both geographically and vertically along the lines of specified industries. The following table summarizes EDS' systems and other contracts revenues in each geographic operating segment for each of the years ended December 31, 1995, 1994 and 1993: SYSTEMS AND OTHER CONTRACTS REVENUES (IN MILLIONS)
1995 1994 1993 --------- -------- -------- Outside Customers: United States............................... $ 5,794.9 $4,611.2 $4,004.5 Europe...................................... 2,001.5 1,308.1 911.6 Other....................................... 734.6 493.6 267.5 --------- -------- -------- Total Outside Customers................... 8,531.0 6,412.9 5,183.6 --------- -------- -------- GM and Affiliates: United States............................... 2,926.1 2,764.4 2,574.5 Europe...................................... 659.2 523.4 511.2 Other....................................... 305.8 259.4 238.0 --------- -------- -------- Total GM and Affiliates................... 3,891.1 3,547.2 3,323.7 --------- -------- -------- Total Systems and Other Contracts Revenues.... $12,422.1 $9,960.1 $8,507.3 ========= ======== ======== Percentage of Total Revenues: Outside Customers........................... 69% 64% 61% GM and Affiliates........................... 31 36 39 --- --- --- Total..................................... 100% 100% 100% === === ===
Total revenues increased 25% in 1995 to $12,422.1 million from $9,960.1 million in 1994, which represented a 17% increase over 1993 total revenues of $8,507.3 million. Revenues from customers other than General Motors and its affiliates (outside customers) grew 33% in 1995 to $8,531.0 million, compared to a 24% increase in 1994 from $5,183.6 million in 1993. Total revenues related to GM and its affiliates were $3,891.1 million, $3,547.2 million, and $3,323.7 million in 1995, 1994 and 1993, respectively. The percentage of EDS' total revenues generated from GM and its affiliates declined to 31% in 1995 from 36% in 1994 and 39% in 1993. EDS expects this trend to continue as revenues from outside customers continue to grow. Total domestic revenues from outside customers increased 26% from $4,611.2 million in 1994 to $5,794.9 million for 1995. This compares with growth rates of 15% in 1994 and 8% in 1993. The increase in 1995 was attributable to full- year revenues on contracts which began in late 1994 and to revenues related to acquisitions, primarily the A.T. Kearney acquisition in August 1995. Domestic revenues from outside customers in 1994 increased over 1993 results due to revenues associated with new contracts signed in 1993 and 1994. During 1995, non-U.S. revenues from outside customers increased $934.4 million compared with an increase of $622.6 million in 1994 from $1,179.1 million in 1993. Growth in revenues from outside customers in Europe increased $693.4 million in 1995 from revenues associated with new contracts signed during 1994 and 1995, as well as certain acquisitions which occurred in late 1994 or 1995. In 1994, non-U.S. revenues from outside customers in Europe increased $396.5 million, or 43%, to $1,308.1 million. Other non-U.S. revenues from outside customers grew $241.0 million over 1994, to $734.6 million due to new contracts signed in Asia/Pacific and Canada, as well as full-year revenues from acquisitions in New Zealand which occurred in 1994. Other non-U.S. revenues from outside customers in 1994 was up $226.1 million over 1993 due in part to business in Japan and New Zealand. 92 The following summary table sets forth the percentage of revenues for each of the years in the three-year period ended December 31, 1995, derived from EDS' principal industry areas.
PERCENTAGE OF REVENUES FOR THE YEARS ENDED DECEMBER 31, ---------------- INDUSTRY AREA 1995 1994 1993 ------------- ---- ---- ---- Manufacturing........................................... 47% 49% 51% Financial Services...................................... 14 14 15 Government.............................................. 12 10 10 All others individually less than 10%................... 27 27 24 --- --- --- 100% 100% 100% === === ===
Other than General Motors, no one client accounted for more than 5% of EDS' total revenues in 1995, 1994, or 1993. GM business, which has historically grown at a slower rate than business from outside customers, is included in the Manufacturing industry area. The Government industry area has grown due to, among other reasons, EDS' success in selling to newly privatized sectors in Europe. Costs and Expenses. Cost of revenues as a percentage of systems and other contracts revenues was 77% in 1995, compared with 76% in 1994 and 75% in 1993. Cost as a percentage of revenues has increased due to higher labor costs for skilled workforce and pricing pressures as a result of the increasingly competitive environment in which EDS operates. The increasingly competitive environment in which EDS operates results in part from a long-term trend of convergence occurring in the computing, communications and media/entertainment sectors of the information industry. EDS is addressing this environment in part through expected efficiencies to be gained from its restructuring activities described above and its value-added business approach. See "-- Restructuring Activities" and "Business of EDS." Selling, general and administrative expenses increased 9% in 1995 to $1,291.5 million from $1,187.1 million in 1994, which increased 18% from 1993. Selling, general and administrative expenses were 10% of systems and other contracts revenues in 1995, down from 12% in 1994 and 1993 due to the fixed nature of certain of these costs. Operating Income. Operating income increased $285.4 million to $1,529.0 million in 1995. Operating income was $1,243.6 million and $1,111.3 million for 1994 and 1993, respectively. Operating margins declined from 12.5% in 1994 to 12.3% in 1995 due to the aforementioned changes in costs and expenses, as well as increased reserves for certain customer receivables. The 1993 operating margin was 13.1%. Interest and Other Income, net. Interest and other income, net, decreased $102.6 million in 1995 to $(62.0) million, compared with $40.6 million in 1994 and $20.0 million in 1993. The primary reason for the decrease in 1995 was due to increased interest expense. Interest expense increased to $120.8 million in 1995, compared with $51.7 million in 1994 and $34.5 million in 1993. The increase in 1995 resulted from interest associated with the issuance of $350.0 million of 6.85% notes due May 15, 2000 (the "Five-year Notes") and $300.0 million of 7.125% notes due May 15, 2005 (the "Ten-year Notes"), as well as from other borrowings. These borrowings were used for general corporate purposes, including the repayment of outstanding commercial paper borrowings, property and equipment expenditures, acquisitions, and other contract-related investments to support business growth. Interest and other income decreased from $92.3 million in 1994 to $58.8 million in 1995 primarily due to lower interest income on notes receivable and the recognition of other than temporary declines in the fair value of certain investment securities. Income Taxes. The effective income tax rate was 36% in 1995, 1994 and 1993. Net Income. EDS' separate consolidated net income increased 14% to $938.9 million in 1995, compared with $821.9 million for 1994 and $724.0 million in 1993. Earnings per share attributable to Class E Common Stock increased 15% to $1.96 per share in 1995 and 13% to $1.71 per share in 1994, based on EDS' Available Separate Consolidated Net Income as described in Note 1 to EDS' Consolidated Financial Statements. 93 EDS and its customers may, from time to time, modify their contractual arrangements. For customer contracts accounted for under the percentage of completion method, such changes would be reflected in results of operations as a cumulative change in accounting estimate in the period the revisions are determined. Seasonality and Inflation. EDS' revenues vary over the calendar year, with the fourth quarter generally reflecting the highest revenues for the year due to certain EDS services that are purchased more heavily in the fourth quarter as a result of the spending patterns of several customers. In addition, revenues have generally increased from quarter to quarter as a result of new business added throughout the year. EDS believes that inflation generally had little effect on its results of operations for each of the years ended December 31, 1995, 1994, and 1993. FINANCIAL POSITION Assets. In 1995, EDS' total assets increased to $10,832.4 million, a 23% increase over total assets of $8,786.5 million at December 31, 1994. This change represents increases in accounts receivable and property and equipment for contract-related investments and an increase in intangible assets related to acquisitions, primarily the acquisition of A.T. Kearney. Accounts receivable from outside customers increased $789.9 million due to more competitive contract terms, receivables acquired in the A.T. Kearney acquisition ($149.3 million), and an increase in unbilled receivables on newer contracts. At December 31, 1995, EDS held cash and cash equivalents of $548.9 million, had working capital of $1,120.1 million, and a current ratio of 1.3-to-1. This compares to $480.9 million in working capital and a 1.2-to-1 current ratio at December 31, 1994. On August 31, 1995, EDS acquired A.T. Kearney, a Chicago-based international management consulting firm. At the acquisition date, EDS paid approximately $113 million in cash and $162 million in short and long-term notes to A.T. Kearney shareholders in connection with this acquisition. Additionally, the terms included restricted stock grants of approximately 6.6 million shares of Class E Common Stock, which will vest over a ten-year period for certain A.T. Kearney personnel remaining with EDS. Prior to December 31, 1995, EDS retired $80.9 million of short-term notes related to the acquisition. After the acquisition, EDS' Management Consulting Services unit was combined with A.T. Kearney to create a new wholly owned subsidiary operating under the A.T. Kearney brand. Return on assets was 9.6% in 1995, compared with 10.5% for 1994 and 11.1% for 1993. Return on assets has declined due to the increasing capital intensity of EDS' business and increased contract-related investments in computers and telecommunications equipment, software, and other property and equipment. Additionally, EDS' results for the year ended December 31, 1995, include the results of A.T. Kearney's operations only since the acquisition date. Liabilities and Stockholder's Equity. Total liabilities increased in 1995 to support business growth and as a result of the issuance of EDS' Five-year and Ten-year Notes. Additionally, EDS revised its agreement with a syndicate of banks, which increased EDS' committed lines of credit to $2,500.0 million. Total debt was $2,100.6 million and $1,224.4 million at December 31, 1995 and 1994, respectively, which consisted of long- and short-term notes payable. The total debt-to-capital ratio (which includes current notes payable as a component of capital) was 29.7% at December 31, 1995, and 22.4% at December 31, 1994. The ratio of noncurrent debt-to-capital was 27% at December 31, 1995, and 19% at December 31, 1994. At December 31, 1995, EDS had unused uncommitted short-term lines of credit totaling $728.2 million and unused committed lines of credit of $2,500.0 million. The unused committed lines of credit of $2,500.0 million serve as a backup facility for EDS' commercial paper borrowings. At December 31, 1995, EDS had total committed lines of credit of $2,515.5 million. Stockholder's equity was $4,978.5 million at December 31, 1995, and $4,232.5 million at December 31, 1994. Return on stockholder's equity was 20.4% in 1995, compared with 20.9% in 1994 and 21.7% in 1993. New Accounting Standards. The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and for 94 Long-Lived Assets to Be Disposed Of, which will become effective for fiscal years beginning in 1996. This Statement requires that long-lived assets and certain identifiable intangibles to be held and used be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and for the measurement of loss to be based on the fair value of the asset. In addition, long-lived assets and certain identifiable intangibles to be disposed of are generally to be reported at the lower of the carrying amount or fair value less selling costs. As discussed above, EDS is in the process of evaluating certain aspects of its business to identify any redundant facilities and related assets which may no longer fit its long-term strategic objectives. Since this evaluation is not expected to be completed until the second quarter of 1996, EDS believes the effects of initially adopting SFAS No. 121 as of January 1, 1996 will be immaterial to its consolidated financial statements. The FASB has issued SFAS No. 123, Accounting for Stock-Based Compensation, which will become effective for fiscal years beginning in 1996. EDS intends to remain on Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, for the preparation of its basic consolidated financial statements and provide pro forma disclosures as if the SFAS No. 123 fair value method had been applied. Accordingly, EDS expects no impact on the basic consolidated financial statements upon adoption of this Statement. Foreign Exchange Risk Management. The translation effects of changes in exchange rates on EDS' Consolidated Financial Statements can be found in the consolidated stockholder's equity currency translation adjustment in Note 10 and in the effect of exchange rate changes on cash and cash equivalents in the EDS consolidated statements of cash flows. The disclosure of nonfunctional currency transactions gains (losses) is contained in the "Summary of Significant Accounting Policies" in Note 1. All other effects of changes in exchange rates on EDS' consolidated financial statements are immaterial due to the general nature of EDS' business and its risk management strategies described below. EDS' foreign subsidiaries conduct nearly all aspects of their respective operations using their respective functional currencies. Accordingly, such operations are not expected to yield significant currency risks. EDS hedges predominantly all its transaction risk associated with material monetary assets and liabilities denominated in currencies other than the U.S. dollar. EDS does not hedge the foreign exchange risk related to either the translation of foreign earnings into U.S. dollars or the translation of its net investment in foreign subsidiaries into U.S. dollars. EDS has no material unhedged monetary assets or liabilities denominated in currencies other than its foreign operations' functional currencies. EDS conducts business in the United States and approximately 40 other countries. EDS' most significant foreign currency transaction exposures relate to Canada, Western European countries (primarily Germany, the United Kingdom, Italy, the Netherlands and Switzerland) and New Zealand. EDS manages the foreign exchange transaction exposure resulting from its multinational operations primarily by utilizing short-term forward contracts which are used to hedge the aggregate net exposure in each currency. Derivatives involve, to varying degrees, elements of credit risk in the event a counterparty should default and market risk as the instruments are subject to rate and price fluctuations. Credit risk is managed by dealing solely with major commercial banks with high quality credit and, therefore, EDS management does not expect to incur any cost due to counterparty default. Market risk is inherently limited by the fact that EDS holds offsetting asset or liability positions. Pursuant to its prescribed policies, EDS does not hold or issue financial instruments for trading purposes. LIQUIDITY AND CAPITAL RESOURCES For the year ended December 31, 1995, net cash provided by operating activities was $1,259.0 million, down $273.5 million from the same period in 1994 due to increases in accounts receivable, including an increase in receivables from GM and its affiliates. For the year ended December 31, 1994, net cash provided by operating activities was $1,532.5 million, up $111.5 million from 1993, due in part to increases in accounts payable and accrued liabilities. Net cash provided by operating activities for 1993 consisted of depreciation and amortization as well as increases in working capital items. 95 For the year ended December 31, 1995, net cash used in investing activities increased $241.8 million, to $1,781.5 million when compared to the same period for 1994. Net cash used in investing activities increased $472.0 million, to $1,539.7 million in 1994, from $1,067.7 million in 1993. Consistent with the increasing capital intensity of EDS' business, cash used in investing activities consisted largely of payments for purchases of property and equipment of $1,261.5 million, $1,186.0 million, and $816.4 million in 1995, 1994, and 1993, respectively. Additionally, EDS used cash for investments in leases and other assets and for payments related to acquisitions. Net cash provided by financing activities was $465.1 million for the year ended December 31, 1995, up $258.6 million from the corresponding period in 1994 due in part to the issuance of long-term debt and notes payable, particularly the issuance of the Five-year Notes and the Ten-year Notes. For the year ended December 31, 1994, net cash provided by financing activities was $206.5 million, compared with cash used in financing activities of $378.2 million in 1993. EDS paid cash dividends to GM totaling $251.3 million, $231.1 million, and $192.1 million in 1995, 1994, and 1993, respectively. EDS expects that its principal uses of funds for the foreseeable future will be for capital expenditures, debt repayment, working capital and costs associated with the Split-Off, as well as the payment of the Special Inter- Company Payment to General Motors. Capital expenditures may consist of purchases of computer and telecommunications equipment, buildings and facilities, land, and software, as well as acquisitions. EDS' projected capital expenditures for 1996 are approximately $1,400.0 to $1,700.0 million. However, actual capital expenditures will depend to a significant extent on the level of acquisition and joint venture activities by EDS, as well as capital requirements for new business. EDS anticipates that cash flows from operations and unused borrowing capacity under its existing lines of credit will provide sufficient funds to meet its needs for at least the next year. The Existing IT Services Agreements provide for GM to pay EDS on the 15th day of the month in which services are provided with respect to a substantial portion of services. Under the IT Services Agreements, there will be a transition over a two-year period, beginning in 1997, to payment on the 20th day of the month following service for all agreements which do not already have payment terms at least that favorable to GM. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements--Payment Terms." These revised payment terms are expected to result in an increase in EDS' working capital requirements. EDS will obtain the funds for this working capital impact and for the Special Inter-Company Payment through borrowings under its existing commercial paper or bank credit facilities. EDS currently anticipates that it may seek to refinance such commercial paper or bank borrowings as part of its general plan to extend maturities of its indebtedness. The competitive environment and changing market forces are increasing the capital intensity of EDS' business. Increasing amounts of capital will be required by EDS in order to make investments in acquisitions, joint ventures and strategic alliances in other parts of the information industry and in new product development. In addition, information technology customer contracts frequently require investments in computers and telecommunications equipment, software, and other property, plant and equipment. For these reasons, EDS' ability to continue to access the capital markets on an efficient basis will become increasingly important to its ability to compete effectively. The Split-Off is intended, among other things, to afford EDS more flexible access to capital markets to meet its growing needs without regard to competing considerations of GM and its affiliates. Following the Split-Off, EDS may over time incur substantially more debt than it has while a subsidiary of GM. As a result, EDS' financial leverage may increase in the future. To the extent that EDS would become more highly leveraged following the Split-Off, EDS may be required to pay higher interest rates on its outstanding borrowings. In order to provide the funds necessary for EDS' future acquisition and expansion goals, EDS expects that it might incur, from time to time, additional bank financing and/or issue equity or debt securities, depending on market and other conditions. 96 BUSINESS OF EDS GENERAL EDS is a world leader in applying IT, with over 30 years of experience in using advanced computer and communications technologies to meet the business needs of its clients. Electronic Data Systems Holding Corporation was incorporated in Delaware in 1994 for the purpose of holding the capital stock of Electronic Data Systems Corporation, which was incorporated in Texas in 1962. General Motors acquired all of the capital stock of Electronic Data Systems Corporation in October 1984. Prior to that time, Electronic Data Systems Corporation had been an independent, publicly held corporation. In December 1995, Electronic Data Systems Holding Corporation formed a new wholly owned subsidiary, Electronic Data Systems Intermediate Corporation, a Delaware corporation, to which it contributed all of the capital stock of Electronic Data Systems Corporation. Thus, as of the date hereof, Electronic Data Systems Holding Corporation owns all of the capital stock of Electronic Data Systems Intermediate Corporation, which in turn owns all of the capital stock of Electronic Data Systems Corporation. Immediately prior to the Split-Off, (i) Electronic Data Systems Intermediate Corporation will be merged with and into Electronic Data Systems Holding Corporation and (ii) Electronic Data Systems Corporation will be merged with and into Electronic Data Systems Holding Corporation and, pursuant to such merger, Electronic Data Systems Holding Corporation will be renamed "Electronic Data Systems Corporation." Unless the context otherwise requires, references herein to EDS give effect to the transactions described in the preceding sentence and include Electronic Data Systems Corporation and its subsidiaries. EDS' principal executive offices are located at 5400 Legacy Drive, Plano, Texas 75024-3105 (telephone number (214) 604-6000). STRATEGY EDS' strategy is to offer a full range of IT services to enterprises, government entities and individuals worldwide. These services include management consulting, systems development, systems integration, systems management and process management. EDS' organizational structure is designed to offer the full range of services on a global basis through business units that focus along the lines of specified industries, such as manufacturing, financial services, government, communications, health, travel and transportation, and energy, as well as geographically, such as on the Americas, Europe, and Asia/Pacific and Japan. Each business unit is further organized into separate, more focused business units within the relevant industry or geography. EDS seeks to leverage its knowledge and resources for its individual customers by drawing from the many industries and skill sets available across a wide range of geographies. EDS believes its organizational structure enables it to better focus on and use the knowledge gained from the industries and geographies in which its customers operate and therefore better serve its customers and its customers' customers. EDS seeks to continue its leadership position in the IT industry through increased globalization and expanded product and service offerings. The percentage of EDS' revenues outside the United States has increased from 18% in 1990 to 30% in 1995, and the number of countries in which EDS operates has increased from 28 in 1990 to 40 in 1995. EDS believes that corporations are becoming increasingly globalized because other companies enter their markets from other geographies or they desire to expand into additional geographies. This trend is fostered by advancements in communications technology which compress time and distance. EDS intends to continue to capitalize on the general trend toward convergence of the world's markets by enhancing its capability through expanded service offerings as well as through strategic alliances with global partners and distributors. The acquisition of A.T. Kearney in 1995, which expanded EDS' capabilities along a range of industries, skill sets and regions, is an example of such strategic growth. EDS seeks to create value by imbedding more information content into the products and services it delivers. By creating "smart" systems, or systems with built-in flexibility, EDS can enhance the quantity and type of information available to a customer, increase the value of that information to the customer and better enable the customer to take full advantage of that information for its business needs. 97 EDS believes that as the trend toward the individualization of products and services accelerates, the ability to customize the delivery of information to the individual consumer will become increasingly important. This trend is evidenced by the growth of the internet and electronic commerce markets. EDS anticipates building the tools, capabilities and offerings to be a significant participant in the internet and electronic commerce markets. EDS' delivery of services to these markets, which include the home banking and home shopping markets, is generally to the consumer through EDS' customer. SERVICES EDS offers its clients a continuum of services worldwide, including the management of computers, networks, information systems, information processing facilities, business operations and related personnel, providing to its clients advantages in cost-effectiveness, speed of implementation and state- of-the-art technology. In delivering this continuum of services, EDS generally performs one or more of five basic functions: . MANAGEMENT CONSULTING SERVICES. Through its A.T. Kearney subsidiary, EDS offers management consulting services, including business and market strategy, benchmarking and best practices analysis, business process reengineering, manufacturing and operations improvement, organizational effectiveness, global sourcing and logistics and supply change management. . CREATION OF IT SYSTEMS--SYSTEMS DEVELOPMENT. EDS designs, develops and implements information systems or adds features that may increase the capabilities of existing systems. . ASSEMBLY OF IT PLATFORMS--SYSTEMS INTEGRATION. EDS selects technologies and assembles integrated systems that may include software, hardware, telecommunications and systems support and maintenance. . MANAGEMENT OF IT OPERATIONS--SYSTEMS MANAGEMENT. EDS assumes and manages the operation of part or all of a client's IT operations, which may include equipment, personnel, information processing systems and communications networks. . MANAGEMENT OF BUSINESS OPERATIONS--PROCESS MANAGEMENT. EDS manages an entire business function within the client's enterprise, which may include IT operations as well as other activities such as remittance processing, marketing, sales, customer service and training. EDS is able to leverage its extensive technical infrastructure and other numerous resources to offer IT services at clients' sites or through large scale information processing centers or specialized distributed service centers located worldwide. EDS' digital telecommunications network, EDSNET(R), is capable of worldwide transmission of clients' voice, digital and video data using the integrated fiber optic, microwave and satellite facilities of what EDS believes is one of the world's largest digital telecommunications networks, excluding government networks and common carriers. EDS constantly examines and tests computer hardware and software offered by suppliers worldwide as part of its efforts to assess and use in its operations, and offer to EDS' clients, the technological changes that continuously occur within the computer industry, including developments in distributed computing and client/server architecture. EDS has developed computer-aided software engineering ("CASE") tools to assist in generating new software to keep pace with rapidly evolving strategies involving hardware technologies and information processing theories and to facilitate the rapid deployment of its products and services to the market. BUSINESS AREAS EDS conducts its sales, marketing and service activities on a global basis through business units that focus both geographically and vertically along the lines of specified industries. By combining the skills of an industry-focused business unit with a geographic business unit, EDS is able to respond to a client's requirements with people who are knowledgeable about a specific industry and the client's business. Additionally, certain services provided by EDS to all clients are concentrated in specific service units. These service units provide electronic transfer, microcomputer technology, computer assisted design, manufacturing 98 and engineering ("CAD," "CAM" and "CAE") and other services to EDS' clients in coordination with the business units having primary responsibility for a particular client. The industry areas to which EDS provides IT services can be broadly categorized as follows: . MANUFACTURING. EDS assists numerous manufacturing companies in their worldwide operations and in their implementation of global competitive strategies, providing them with advanced capabilities in information processing, information management and telecommunications. EDS offers manufacturing clients expertise in electronic data interchange, engineering information systems, integrated document processing, inventory control, materials handling, process control, synchronous manufacturing, artificial intelligence techniques and capabilities in CAD/CAM/CAE on an integrated basis. . GOVERNMENT. EDS performs IT services for national, state and local governments in the U.S. and around the world. At the national level, EDS targets its services at both civil and defense organizations with complex, large-scale information needs. Within state and local governments, key markets of EDS include human services, transportation, public safety and administration and finance. EDS' core competency for managing complexity and its proven ability to leverage process performance improvement techniques and technologies from the private sector into the public sector has allowed EDS to expand its government presence worldwide. . FINANCIAL SERVICES. EDS offers a full range of IT services to the global financial services industry. The industry's expansion of products and services has led to an unprecedented dependence on IT and its integration with a financial institution's business processes and strategy. Through strategic alliances and acquisitions, EDS has positioned itself to support a wide range of industry segments, including commercial banks, consumer finance companies, commercial insurance companies, investment banks, regional and community banks, credit unions, brokerage and securities firms, thrifts and mortgage lenders. EDS' services are augmented by a full range of industry-specific products and services, including data processing, automated teller machines ("ATMs"), debit and credit card services, voice and teller automation, item and remittance processing, crossborder funds transfer and currency exchange, consumer asset management, customer service technology, remote/home banking and business-process improvement. . COMMUNICATIONS. EDS offers a full spectrum of IT services to the global communications market in addition to industry specific technology platforms tailored to the information needs of each industry segment. These services include clearinghouse, roaming and billing services and systems for the wireless industry, information management and billing systems for the cable television industry, and operational support systems and billing systems for the telecommunications industry. EDS also offers multimedia-based services designed to satisfy the predicted demand of emerging full service network operators within the interactive multimedia segment. . HEALTH. EDS offers IT services to companies in the health care industry, providing the management of information required in this highly regulated industry in a rapidly-changing, record-intensive environment. EDS' services go beyond traditional outsourcing and include solution sets to improve specific business areas, including sales and marketing, customer service and claims management. . TRAVEL AND TRANSPORTATION. EDS' travel and transportation group offers IT services to customers worldwide in the air transportation, freight, computer reservation system, vehicle rental, travel agency, cruise line and hospitality industries. EDS' IT services to these industries are designed to meet customer requirements for reducing operating costs, improving quality and increasing responsiveness to rapidly changing market conditions. . ENERGY. EDS provides IT services on a global basis to companies in the petroleum, natural gas, chemical, pharmaceutical, mining and utility industries. EDS' services in the energy industry are intended to improve inventory control, reduce time to market, lower product cost, improve rate case approval, improve capacity planning and increase efficiency in regulatory and environmental compliance. In certain of these markets, EDS provides services, such as ATM and travel related services, directly to individual consumers. 99 ACQUISITIONS AND STRATEGIC ALLIANCES From time to time EDS has made acquisitions and entered into strategic alliances in an effort to obtain a competitive advantage or a new or expanded presence in targeted geographic or service markets. For example, EDS acquired the domestic and international management consulting business of A.T. Kearney in August 1995. A.T. Kearney is one of the world's leading international management consulting and executive search firms serving clients throughout the world. EDS believes that a convergence of the computing and software, communication, media and entertainment and electronic commerce industries is occurring and will continue. As a result, acquisitions, joint ventures and strategic alliances are expected to be increasingly important to EDS' ability to compete effectively. See "Risk Factors Regarding EDS after the Split-Off-- No Assurance of Strategic Alliances and Other Business Opportunities," "Special Factors--Purposes of the Split-Off" and "--Competition." REVENUES EDS receives fees for all aspects of its continuum of services. The fees are generally paid pursuant to predetermined rates set forth in contracts. Contracts with respect to non-General Motors business generally have terms of one to 10 years. EDS' total revenues grew from $786 million in its 1984 fiscal year (the last full fiscal year before General Motors' acquisition of EDS) to $12.4 billion in 1995. Although revenues attributable to General Motors and its affiliates have increased from 1985 to 1995, they have decreased as a percentage of total revenues from approximately 70% in 1985 to approximately 31% in 1995 as a result of the rapid revenue growth of EDS' outside (non-General Motors) business. As a percentage of total revenues, revenues attributable to EDS' outside business have increased from approximately 30% in 1985 to approximately 69% in 1995. The following table sets forth the percentage of revenues for each of the years in the three-year period ended December 31, 1995 derived by EDS from the identified principal business areas.
PERCENTAGE OF REVENUES FOR THE YEARS ENDED DECEMBER 31, ---------------- BUSINESS AREA 1995 1994 1993 ------------- ---- ---- ---- Manufacturing............................................. 47% 49% 51% Financial Services........................................ 14 14 15 Government................................................ 12 10 10 Communications............................................ 8 7 6 Health.................................................... 7 8 8 Travel and Transportation................................. 4 4 5 Energy.................................................... 3 4 4 Other..................................................... 5 4 1 --- --- --- Total................................................. 100% 100% 100% === === ===
Other than General Motors, no one client accounted for more than 5% of EDS' total revenues in 1995, 1994 or 1993. See "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations--Revenues." SERVICES FOR GENERAL MOTORS Approximately 31% of EDS' total revenues in 1995 was attributable to General Motors and its affiliates. EDS provides substantially all of the worldwide data processing and telecommunications activities for General Motors and its affiliates (other than Hughes, with the exception of its subsidiary, Delco), including integrated information systems for payroll, health and benefits, office automation, communications and plant automation functions. The loss of General Motors as an ongoing major customer of EDS would have a material adverse 100 effect on EDS. See "Risk Factors Regarding EDS after the Split-Off--Dependence on Major Customer; Changes in Pricing and Terms." The IT services to be provided by EDS under the IT Services Agreements will generally be similar to those provided to General Motors under the Existing IT Services Agreements. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements." BACKLOG EDS' backlog represents an estimate of the remaining future revenue from existing signed contracts. Using the best available information, EDS determines this estimate on an annual basis as of December 31 of each year. The estimate includes contracts with non-GM customers which have a term of 12 months or longer and is calculated for each of the next ten years plus a summary amount for contracts with terms extending beyond such ten-year period. EDS historically has not included estimates for future revenues from General Motors and its subsidiaries because of the intercompany relationships with these entities as well as the ongoing nature of the Existing IT Services Agreements. The EDS backlog estimate includes revenues expected under current terms of executed contracts, revenues from government contracts in which quantities are not definite but estimable, and a risk-adjusted estimate of renewals and extensions for those contracts which contain renewal or extension provisions. Changes in the backlog calculation from year to year result from (i) additional revenue from the signing of new contracts, (ii) reduction in revenue from fulfilling contracts during the most recent year, (iii) reduction in revenue from early termination of contracts, and (iv) adjustments to estimates of previously included contracts. On an annual basis, EDS reviews each contract included in the calculation and adjusts estimates for those contracts based on the latest available information. At December 31, 1995 and 1994, EDS' firm backlog for services was approximately $39.8 billion and $34.5 billion, respectively. COMPETITION EDS experiences competition in the IT industry and in the broader information industry, which includes the computing, communications and media/entertainment industries. Today, EDS' principal competitors in the IT services industry include International Business Machines Corporation, Andersen Consulting LLP, Computer Sciences Corporation, AT&T Corp. ("AT&T"), MCI Communications Corporation/SHL Systemhouse Inc. ("MCI") and Cap Gemini Sogeti S.A. EDS has historically faced competition principally from other companies providing information technology systems and services. As the markets for IT services have grown and as the services demanded by customers have expanded and increased in complexity, EDS' competitors have expanded from niche- oriented, geographically-focused companies to include broader-based, global competitors. EDS believes that a long-term trend of convergence is occurring in the computing, communications and media/entertainment sectors of the information industry. As this trend continues, companies historically involved in the communications and media/entertainment sectors of the information industry, as well as companies principally involved in other portions of the IT industry, will increasingly seek to compete in the businesses in which EDS has traditionally operated. For example, AT&T and MCI now offer services that combine computing with communications. Similarly, EDS' strategy includes continuing to leverage its expertise into other parts of the information industry. The ability of EDS to remain competitive will depend in part upon its continued ability to finance and acquire the resources necessary to offer broad-based services and products on an efficient basis. See "Special Factors--Purposes of the Split-Off." In addition, technology in the IT industry is in a rapid and continuing state of change as new technologies continue to be developed, introduced and implemented. EDS management believes that its ability to continue to 101 compete effectively also will depend upon its ability to develop and market services and products that meet changing user needs and respond to technological changes on a timely and cost-effective basis. EMPLOYEES As of December 31, 1995, EDS employed approximately 96,000 persons located in the United States and approximately 40 other countries. None of EDS' United States or Canadian employees is currently employed under an agreement with a collective bargaining unit, and EDS believes that its relations with employees are good. To maintain its technical expertise and its responsiveness to evolving client needs, EDS provides its employees with extensive continuing education and training, as well as leadership and professional development programs. PATENTS, PROPRIETARY RIGHTS AND LICENSES EDS holds a number of patents and pending patent applications in the United States and in foreign countries. EDS' policy generally is to pursue patent protection that it considers necessary or advisable for the patentable inventions and technological improvements of its business. EDS also relies significantly on trade secrets, copyrights, technical expertise and know-how, continuing technological innovations and other means, such as confidentiality agreements with employees, consultants and customers, to protect and enhance its competitive position. Some of the business areas in which EDS is engaged are highly patent- intensive. Many of EDS' competitors have obtained, and may be expected to obtain in the future, patents that cover or affect services or products directly or indirectly related to those offered by EDS. EDS routinely receives communications from third parties asserting patent or other rights covering EDS' services or products. There can be no assurance that EDS is aware of all patents containing claims that may post a risk of infringement by its services or products. In addition, patent applications in the United States are confidential until a patent is issued and, accordingly, EDS cannot evaluate the extent to which its services or products may infringe claims contained in pending patent applications. In general, if it were determined that one or more of the services or products offered by EDS infringe patents held by others, EDS would be required to cease developing or marketing such services or products, to obtain licenses to develop or market such services from the holders of the patents or to redesign such services or products in such a way as to avoid infringing the patent claims. The extent to which EDS may be required in the future to obtain licenses with respect to patents held by others and the availability and cost of any such licenses are currently unknown. There can be no assurance that EDS would be able to obtain such licenses on commercially reasonable terms or, if it were unable to obtain such licenses, that it would be able to redesign its services or products to avoid infringement or that litigation would not ensue. EDS management is not aware of any pending patent or proprietary right disputes against EDS that would have a material adverse effect on EDS' consolidated financial position or results of operations. REGULATION Various aspects of EDS' business are subject to federal and state regulation noncompliance with which, depending upon the nature of the noncompliance, may result in the suspension or revocation of any license or registration at issue, the termination or loss of any contract at issue or the imposition of contractual damages, civil fines or criminal penalties. EDS has experienced no material difficulties in complying with the various laws and regulations affecting its business. REAL PROPERTY As of December 31, 1995, EDS had approximately 442 locations operating in 41 states and 221 cities in the United States and approximately 257 additional locations in 130 cities in approximately 40 countries outside the United States. At such date, approximately 6.1 million square feet of space was owned by EDS and an additional 102 13.8 million square feet of space was leased. EDS' worldwide headquarters, which is owned by EDS and located on a 363 acre campus in Plano, Texas, contains approximately 3.5 million square feet of office and data center space. EDS' two information management centers, which monitor the EDSNET(R) global telecommunications network, are located in Plano, Texas and Stockley Park, United Kingdom. EDS' large scale information processing centers ("IPCs") are located throughout the United States and in each of Canada, Brazil, France, Germany, the Netherlands, Spain and the United Kingdom. In addition, EDS operates distributed service centers ("DSCs") at customer owned sites or EDS owned or leased facilities throughout the world. DSCs generally support a single or small number of customers with more specialized requirements than those supported at the large scale, multiple customer IPCs. Leased properties consist primarily of office, warehouse, DSC and non-U.S. IPC facilities. Lease terms are generally five years or, with respect to leases related to a specific customer contract, have a term concurrent with that contract. Upon expiration of its leases, EDS does not anticipate any difficulty in obtaining renewals or alternative space. In addition to the leased property referred to above, EDS occupies office space at customer locations throughout the world. Such space is generally occupied pursuant to the terms of the respective customer contracts. EDS management believes that its facilities are suitable and adequate for its business; however, EDS periodically reviews its space requirements to consolidate and dispose of or sublet facilities which are no longer required in connection with its business and to acquire new space to meet the needs of its business. LEGAL PROCEEDINGS From time to time EDS is involved in various litigation matters arising in the ordinary course of its business. EDS management does not believe that disposition of any current matter will have a material adverse effect on EDS' consolidated financial position or results of operations. 103 EDS MANAGEMENT AND EXECUTIVE COMPENSATION DIRECTORS AND EXECUTIVE OFFICERS The EDS Board currently has five members, all of whom are executive officers of EDS. Effective as of the date of consummation of the Split-Off, three of the current members of the EDS Board will resign as directors. In addition, effective as of the same date, the total number of directors will be increased to 10 and eight additional persons will commence to serve as directors. When such persons commence to serve as directors, a majority of the members of the EDS Board will consist of independent directors. Set forth below are the names, ages and positions with EDS upon consummation of the Split-Off of the persons expected to be directors and executive officers of EDS immediately after such consummation.
NAME AGE POSITIONS ---- --- --------- Lester M. Alberthal, Jr. ........................ 52 Chairman of the Board and Chief Executive Officer Gary J. Fernandes........ 52 Vice Chairman and Director Jeffrey M. Heller........ 56 President, Chief Operating Officer and Director* John R. Castle, Jr. ..... 53 Senior Vice President Paul J. Chiapparone...... 56 Senior Vice President Joseph M. Grant.......... 57 Senior Vice President and Chief Financial Officer Dean Linderman........... 52 Senior Vice President G. Stuart Reeves......... 56 Senior Vice President James A. Baker, III...... 65 Director* Richard B. Cheney........ 55 Director* Ray J. Groves............ 60 Director* Ray L. Hunt.............. 53 Director* C. Robert Kidder......... 51 Director* Judith Rodin............. 51 Director* Enrique J. Sosa.......... 56 Director*
- -------- *Election as director to be effective immediately after consummation of the Split-Off. The EDS Board will be divided into three classes serving staggered terms. Directors in each class will be elected to serve for three-year terms and until their successors are elected and qualified. Each year, the directors of one class will stand for election as their terms of office expire. Messrs. Groves, Heller and Hunt will be designated as Class I directors, with their terms of office expiring in 1997; Messrs. Cheney, Fernandes, Kidder and Sosa will be designated as Class II directors, with their terms of office expiring in 1998; and Messrs. Alberthal and Baker and Dr. Rodin will be designated as Class III directors, with their terms of office expiring in 1999. The EDS Board has established three standing committees, an Audit Committee, a Compensation and Benefits Committee and a Governance Committee. The Audit Committee will initially consist of Messrs. Groves, Hunt and Sosa. The Compensation and Benefits Committee will initially consist of Messrs. Groves and Kidder, who are "disinterested persons" within the meaning of Rule 16b-3 under the Exchange Act. The Governance Committee will initially consist of Messrs. Baker and Cheney and Dr. Rodin, with the Chairman of the Board being an ex-officio, non-voting member. The Audit Committee will recommend to the EDS Board the independent public accountants to be selected to audit EDS' annual financial statements. The Audit Committee will also review the planned scope of the annual external and internal audits, the independent accountants' and internal auditors' reports to management and management's responses thereto, possible violations of EDS' business ethics and conflicts of interest policies and the effectiveness of EDS' internal audit staff. 104 The Compensation and Benefits Committee will establish remuneration levels for senior executives of EDS, review the performance of the Chief Executive Officer, review significant employee benefit programs and establish and administer executive compensation programs, including bonus plans, stock option and other equity-based programs, deferred compensation plans and any other cash or stock incentive programs. The Governance Committee will recommend to the EDS Board the slate of nominees to be elected to the EDS Board and to be selected for membership on the various EDS Board committees and will recommend a successor to the Chief Executive Officer when a vacancy occurs through retirement or otherwise. The EDS Board may, from time to time, establish other committees to facilitate the management of EDS or for other purposes it may deem appropriate. Executive officers serve at the discretion of the EDS Board. Set forth below is a description of the backgrounds of the persons expected to be directors and executive officers of EDS upon the consummation of the Split-Off. Mr. Alberthal has been President of EDS since April 1986, Chief Executive Officer since December 1986 and Chairman of the Board since June 1989. Mr. Alberthal joined EDS in 1968. He became responsible for EDS' health care division in 1974 and was named Senior Vice President with responsibility for EDS' insurance group in 1979. Following the acquisition of EDS by General Motors in 1984, Mr. Alberthal led all non-General Motors North American operating groups. Mr. Alberthal is on the Board of Directors of Baker Hughes Incorporated. Mr. Fernandes has been a Senior Vice President of EDS since October 1984 and a director of EDS since October 1981. Mr. Fernandes has been elected as the Vice Chairman of EDS effective upon consummation of the Split-Off. Mr. Fernandes has oversight responsibility for EDS' worldwide business development and corporate development (including marketing and strategic planning) and is Chairman of its A.T. Kearney management consulting services subsidiary. Mr. Fernandes joined EDS in 1969 and has served in numerous management capacities in the United States, Europe and Japan. Mr. Fernandes is a director of The Southland Corporation, Westcott Communications, Inc., Amtech Corporation and John Wiley & Sons, Inc. Mr. Heller has been a Senior Vice President of EDS since October 1984 and a director of Electronic Data Systems Corporation since April 1983. Mr. Heller has been elected as the President and Chief Operating Officer and a director of EDS effective upon consummation of the Split-Off. Mr. Heller has oversight responsibility for EDS' Asia/Pacific operations, global communications business units and technical services groups. Mr. Heller joined EDS in 1968 and has served in numerous technical management positions. Mr. Heller is a director of Westcott Communications, Inc. Mr. Castle has been a Senior Vice President of EDS since October 1988. He has oversight responsibility for EDS' government affairs, communications and public relations groups and EDS' legal department. Prior to joining EDS in 1988, Mr. Castle was a partner in the Dallas law firm of Hughes & Luce. Mr. Chiapparone has been a Senior Vice President of EDS since April 1986. He has oversight responsibility for EDS' business units serving General Motors and other customers in the manufacturing industry. Mr. Chiapparone joined EDS in 1966 and has served in numerous management capacities. Mr. Chiapparone is a director of St. Jude Medical, Inc. Mr. Grant has been Chief Financial Officer of EDS since December 1990 and a Senior Vice President since February 1992. Mr. Grant has oversight responsibility for EDS' administration and corporate finance groups. Prior to joining EDS in December 1990, Mr. Grant served as executive vice president and chief systems officer for American General Corporation from 1989 to 1990 and as chairman of the board and chief executive officer of Texas American Bancshares Inc. from 1986 to 1989. Mr. Grant is a director of Heritage Media Corporation, American Eagle Group, Inc. and NorAm Energy Corp. 105 Mr. Linderman has been a Senior Vice President of EDS since April 1986. He has oversight for EDS' business units serving customers in the financial, energy, travel and transportation, health care and insurance industries, as well as EDS' operations in Canada, Mexico and Central and South America and its employee development units. Mr. Linderman joined EDS in 1970 and has served in numerous management positions. Mr. Reeves has been a Senior Vice President since February 1987. Mr. Reeves has oversight responsibilities for EDS' European operations. Mr. Reeves joined EDS in 1967, and has held numerous technical and management positions. Mr. Baker has been elected as a director of EDS effective upon consummation of the Split-Off. Mr. Baker has been a Senior Partner of Baker & Botts, L.L.P. since March 1993 and a Senior Counselor of The Carlyle Group, a merchant banking firm, since 1993. Mr. Baker served as Senior Counselor to the President of the United States and White House Chief of Staff from August 1992 to January 1993, as United States Secretary of State from January 1989 to August 1992, as United States Secretary of the Treasury from 1985 to 1988, and as White House Chief of Staff from 1981 to 1985. Mr. Cheney has been elected as a director of EDS effective upon consummation of the Split-Off. Mr. Cheney has been the President and Chief Executive Officer of Halliburton Company since October 1995 and its Chairman of the Board since January 1996. Mr. Cheney was a Senior Fellow at the American Enterprise Institute, a policy think tank, from January 1993 to October 1995. Mr. Cheney served as United States Secretary of Defense from January 1989 to January 1993. Mr. Cheney is a director of Halliburton Company, Union Pacific Corporation and The Procter & Gamble Company. Mr. Groves has been elected as a director of EDS effective upon consummation of the Split-Off. Mr. Groves retired as Chairman and Chief Executive Officer of Ernst & Young L.L.P. in September 1994, which position he had held since October 1977, and has served as part-time Chairman of Legg Mason Merchant Banking, Inc. since March 1995. Mr. Groves is a director of Consolidated Natural Gas Company, Marsh & McLennan Companies, Inc., RJR Nabisco Holdings Corp. and RJR Nabisco, Inc. Mr. Hunt has been elected as a director of EDS effective upon consummation of the Split-Off. Mr. Hunt has been the Chairman of the Board, President and Chief Executive Officer of Hunt Consolidated Inc. and the Chairman of the Board and Chief Executive Officer of Hunt Oil Company for more than five years. Mr. Hunt is a director of Dresser Industries, Inc., Pepsico, Inc., and Ergo Science Corporation. Mr. Kidder has been elected as a director of EDS effective upon consummation of the Split-Off. Mr. Kidder has been Chairman and Chief Executive Officer of Borden, Inc. since January 1995. Mr. Kidder was Chairman and Chief Executive Officer of Duracell International, Inc. from August 1991 through October 1994 and its President and Chief Executive Officer from June 1988 to August 1991. Mr Kidder is a director of Borden, Inc., Duracell International, Inc., and Dean Witter, Discover & Co. Dr. Rodin has been elected as a director of EDS effective upon consummation of the Split-Off. Dr. Rodin has been President of the University of Pennsylvania, as well as a professor of psychology and of medicine and psychiatry at the university, since 1994. Dr. Rodin was Provost of Yale University from 1992 to 1994 and held various professorial and other positions at Yale from 1972 to 1994, including Dean of the Graduate School of Arts and Sciences and Chair of the Department of Psychology. Dr. Rodin is a director of AETNA Life and Casualty Company and Air Products and Chemicals, Inc. Mr. Sosa has been elected as a director of EDS effective upon consummation of the Split-Off. Since October 1995, Mr. Sosa has been an Executive Vice President of Amoco Corporation, heading its chemicals sector. For greater than five years prior to that time, Mr. Sosa was with The Dow Chemical Company, most recently serving as a Senior Vice President and a director, as well as President of Dow North America. 106 DIRECTOR COMPENSATION Each non-employee director of EDS will receive annual cash compensation in the amount of $35,000, and will also receive annual cash compensation in the amount of $5,000 for serving as a committee chairman and $2,500 for attendance at each meeting of the EDS Board and each committee thereof. Any director who is also an employee of EDS or its affiliates will not be entitled to any compensation for serving as a director of EDS. Amended EDS Incentive Plan In addition, each nonemployee director will receive, on an annual basis pursuant to the Amended EDS Incentive Plan, (i) options to purchase 1,500 shares of EDS Common Stock at an exercise price equal to the fair market value of such shares at the date of grant and (ii) 500 restricted shares of EDS Common Stock, which options and restricted stock will vest ratably over a three-year period. A nonemployee director may make an annual election to receive, in lieu of all or any portion of the director's fees he or she would otherwise receive in the next year, (i) non-qualified stock options to purchase EDS Common Stock and/or (ii) a restricted stock award covering shares of EDS Common Stock, in each case in accordance with the terms of the Amended EDS Incentive Plan. EDS Nonemployee Director Deferred Compensation Plan The EDS Deferred Compensation Plan for Nonemployee Directors (the "EDS Nonemployee Director Deferred Compensation Plan"), which has been adopted by the EDS Board and approved and ratified by General Motors, permits nonemployee directors to elect annually to defer all or a portion of their director's fees and to have such deferred fees treated as if they had been, at the election of the director, invested either in an interest bearing account or in units denominated in EDS Common Stock. The EDS Nonemployee Director Deferred Compensation Plan will be administered by a committee consisting of at least two members of the EDS Board. Such committee shall initially be the Compensation and Benefits Committee. Fees deferred and treated as invested in an interest bearing account earn interest from the effective date of the deferral until paid at a rate, adjusted as of January 1 of each year, equal to 120% of the applicable federal long-term rate published by the Internal Revenue Service pursuant to Section 1274(d) of the Code, compounded annually. Fees deferred and treated as invested in EDS Common Stock shall be deemed to have purchased whole and fractional shares of such stock on the effective date of the deferral at the then fair market value of EDS Common Stock. At such time as dividends are paid on EDS Common Stock, the interest bearing account established for a nonemployee director who has elected to invest his or her fees in units denominated in EDS Common Stock will be credited with an amount equal to the deemed dividends thereon. Interest accrued on amounts accumulated in a nonemployee director's interest bearing account will be credited to such account on an annual basis. All amounts accumulated in the account of a nonemployee director pursuant to the EDS Nonemployee Director Deferred Compensation Plan, including any interest or deemed dividends, will be paid to such nonemployee director commencing upon (i) the date of termination of his or her status as a director of EDS or (ii) the expiration of five years after such date. Any payments made pursuant to the plan shall be in the form of cash, and a nonemployee director may elect to receive the cash payments to which he or she is entitled (a) in a lump sum, (b) in three equal consecutive annual installments or (c) in five equal consecutive annual installments. 107 EXECUTIVE COMPENSATION The following Summary Compensation Table sets forth information on compensation earned in 1995 by Mr. Alberthal and the four other most highly compensated executive officers of EDS.
LONG TERM COMPENSATION ANNUAL COMPENSATION AWARDS -------------------------------- ------------ NAME AND RESTRICTED ALL PRINCIPAL POSITION OTHER ANNUAL STOCK OTHER DURING 1995 YEAR SALARY BONUS(A) COMPENSATION AWARDS(B) COMPENSATION(C) ------------------ ---- -------- ---------- ------------ ------------ --------------- Lester M. Alberthal, Jr., Chairman of the Board, President and Chief Executive Officer...... 1995 $675,000 $1,000,000 $10,902 -- $33,126 Jeffrey M. Heller, Senior Vice President.. 1995 385,000 550,000 11,498 -- 48,588 Gary J. Fernandes, Senior Vice President.. 1995 330,000 575,000 2,113 -- 9,026 John R. Castle, Jr., Senior Vice President.. 1995 370,000 450,000 1,592 -- 8,048 Dean Linderman, Senior Vice President.. 1995 335,000 450,000 2,766 -- 10,591
- -------- (a) Represents bonuses earned by the named executives with respect to the year ended December 31, 1995. 50%, 25% and 25% of the amount reported with respect to each named executive will be paid during 1996, 1997 and 1998, respectively, subject to certain conditions regarding the continuation of the named executive's employment. (b) As of December 31, 1995, the number and fair market value of the aggregate units representing shares of unvested restricted Class E Common Stock held by the named executive officers is: Mr. Alberthal, 480,000 shares, $24,960,000; Mr. Heller, 340,000 shares, $17,680,000; Mr. Fernandes, 260,000 shares, $13,520,000; Mr. Castle, 155,000 shares, $8,060,000; and Mr. Linderman, 290,000 shares, $15,080,000. All such restricted stock units have been granted pursuant to the Existing EDS Incentive Plan and are scheduled to vest (subject to earlier vesting based on the achievement of performance goals by EDS) during the period from 1996 through the earlier of normal retirement age or 2009. Certificates for the shares underlying such units are issuable upon vesting. Dividend equivalents are paid to the named executive officers with respect to such restricted stock units in the amounts and at the time of the payment of dividends on the Class E Common Stock. (c) Consists of (i) payments by EDS of premiums under certain life insurance policies the proceeds of which would be applied by EDS for the benefit of the named executives' estates and (ii) the imputed value of outstanding non-interest bearing loans to the named executives during 1995 for the payment of withholding taxes required as a result of the vesting of units representing restricted Class E Common Stock under the Existing EDS Incentive Plan. See "--Existing EDS Incentive Plan--Advancement of Withholding Tax Payments." AMENDED EDS INCENTIVE PLAN The description set forth below represents a summary of the principal terms and conditions of the Amended EDS Incentive Plan in the form approved by the GM Board and its Executive Compensation Committee and does not purport to be complete. Such description is qualified in its entirety by reference to the Amended EDS Incentive Plan, a copy of which is attached as Appendix D to this Solicitation Statement/Prospectus. 108 General The Amended EDS Incentive Plan is intended to amend and restate the Existing EDS Incentive Plan. On March 31, 1996, the GM Board and its Executive Compensation Committee approved the Amended EDS Incentive Plan. The Amended EDS Incentive Plan has also been ratified and approved by the EDS Board. If the Amended EDS Incentive Plan is approved by the requisite votes of the common stockholders of General Motors, it will become effective in its entirety upon consummation of the Split-Off. If the Plan is not approved by the requisite stockholder votes, it will nonetheless become effective upon consummation of the Split-Off insofar as it relates to Nonemployee Directors (as defined below) but will not become effective insofar as it relates to Employees (as defined below). Furthermore, if the Amended EDS Incentive Plan is not approved by the common stockholders of General Motors, the Existing EDS Incentive Plan will remain in effect (with certain modifications intended, among other things, to reflect the assumption of such plan by EDS upon the consummation of the Split-Off) and an aggregate of 60,000,000 shares of EDS Common Stock will be available for future awards to Employees thereunder. A description of the terms and provisions of the Existing EDS Incentive Plan is provided below under "--Existing EDS Incentive Plan." The objectives of the Amended EDS Incentive Plan are to attract and retain key employees of EDS and its subsidiaries, to attract and retain qualified directors of EDS, to encourage the sense of proprietorship of such employees and directors and to stimulate the active interest of such persons in the development and financial success of EDS and its subsidiaries. These objectives are to be accomplished by making awards ("Awards") under the Amended EDS Incentive Plan and thereby providing participants with a proprietary interest in the growth and performance of EDS and its subsidiaries. Key employees eligible for Awards under the Amended EDS Incentive Plan (the "Employees") are those that hold positions of responsibility and whose performance can have a significant effect on the success of EDS and its subsidiaries. Directors eligible for automatic or elective Awards under the Amended EDS Incentive Plan are those who are not employees of EDS or any of its subsidiaries (the "Nonemployee Directors"). Awards to Employees under the Amended EDS Incentive Plan ("Employee Awards") may be made in the form of grants of stock options ("Options"), stock appreciation rights ("SARs"), restricted or non-restricted stock or units denominated in stock ("Stock Awards"), cash awards ("Cash Awards"), performance awards ("Performance Awards") or any combination of the foregoing. Awards to Nonemployee Directors under the Amended EDS Incentive Plan ("Director Awards") will be in the form of grants of Options and restricted Stock Awards. The Amended EDS Incentive Plan provides for Awards to be made in respect of a maximum of 60,000,000 shares of EDS Common Stock (in addition to the shares that are the subject of awards outstanding as of the date upon which the Amended EDS Incentive Plan becomes effective), of which 400,000 shares will be available for Director Awards and the remainder will be available for Employee Awards. Shares of EDS Common Stock which are the subject of Awards that are forfeited or terminated, expire unexercised, are settled in cash in lieu of EDS Common Stock or in a manner such that all or some of the shares covered thereby are not issued or are exchanged for Awards that do not involve EDS Common Stock will again immediately become available for Awards under the Amended EDS Incentive Plan. The Amended EDS Incentive Plan, as it applies to Employee Awards but not with respect to Nonemployee Directors, will be administered by the Compensation and Benefits Committee of the EDS Board, or such other committee as may in the future be appointed by the EDS Board (the "Committee"). To the extent required pursuant to Rule 16b-3 under the Exchange Act in order for the grant of Employee Awards to be exempt under Section 16, the Committee will at all times consist of at least two members of the EDS Board of Directors who meet the requirements of the definition of "disinterested person" set forth in Rule 16b-3(c)(2)(i). Insofar as the Amended EDS Incentive Plan relates to Employee Awards, the Committee will have the exclusive power to administer the Amended EDS Incentive Plan and to take all actions which are specifically 109 contemplated thereby or are necessary or appropriate in connection with the administration thereof. Insofar as the Amended EDS Incentive Plan relates to Employee Awards, the Committee will also have the exclusive power to interpret the Amended EDS Incentive Plan and to adopt such rules, regulations and guidelines for carrying out the purposes of the Amended EDS Incentive Plan as it may deem necessary or proper in keeping with the objectives thereof. The Committee may, in its discretion, provide for the extension of the exercisability of an Employee Award, accelerate the vesting or exercisability of an Employee Award, eliminate or make less restrictive any restrictions contained in an Employee Award, waive any restriction or other provision of the Amended EDS Incentive Plan or in any Employee Award or otherwise amend or modify an Employee Award in any manner that is either (i) not adverse to the Employee holding the Employee Award or (ii) consented to by such Employee. The Committee may delegate to the Chief Executive Officer and to other senior officers of EDS its duties under the Amended EDS Incentive Plan, except that no such delegation may be made in the case of actions with respect to participants who are subject to Section 16 of the Exchange Act. Employee Awards The Committee will determine the type or types of Employee Awards made under the Amended EDS Incentive Plan and will designate the Employees who are to be recipients of such Awards. Each Employee Award may be embodied in an agreement, which will contain such terms, conditions and limitations as are determined by the Committee. Employee Awards may be granted singly, in combination or in tandem. Employee Awards may also be made in combination or in tandem with, in replacement of, or as alternatives to, grants or rights under the Amended EDS Incentive Plan or any other employee plan of EDS or any of its subsidiaries, including any acquired entity; provided, however, that no Option may be issued in exchange for the cancellation of an Option with a lower exercise price. All or part of an Employee Award may be subject to conditions established by the Committee, which may include continuous service with EDS and its subsidiaries, achievement of specific business objectives, increases in specified indices, attainment of specified growth rates and other comparable measurements of performance. The types of Employee Awards that may be made under the Amended EDS Incentive Plan are as follows: Options. Options are rights to purchase a specified number of shares of EDS Common Stock at a specified price. An option granted pursuant to the Amended EDS Incentive Plan may consist of either an incentive stock option ("ISO") that complies with the requirements of Section 422 of the Code or a non- qualified stock option ("NQSO") that does not comply with such requirements. ISOs must have an exercise price per share that is not less than the fair market value of the EDS Common Stock on the date of grant. NQSOs must have an exercise price per share that is not less than, but may exceed, the fair market value of the EDS Common Stock on the date of grant. In either case, the exercise price must be paid in full at the time an Option is exercised in cash or, if the Employee so elects, by means of tendering EDS Common Stock or surrendering another Award. The Committee will determine acceptable methods for tendering EDS Common Stock or other Awards by an Employee to exercise an Option; provided, however, that any EDS Common Stock or other Employee Award may be so tendered only if it has been held by the Employee for at least six months. Subject to the foregoing, the terms, conditions and limitations applicable to any Options, including the term of any Options and the date or dates upon which they become exercisable, will be determined by the Committee. SARs. SARs are rights to receive a payment, in cash or EDS Common Stock, equal to the excess of the fair market value or other specified valuation of a specified number of shares of EDS Common Stock on the date the rights are exercised over a specified strike price. An SAR may be granted under the Amended EDS Incentive Plan to the holder of an Option with respect to all or a portion of the shares of EDS Common Stock subject to such Option or may be granted separately. The terms, conditions and limitations applicable to any SARs, including the term of any SARs and the date or dates upon which they become exercisable, will be determined by the Committee. 110 Stock Awards. Stock Awards consist of restricted and non-restricted grants of EDS Common Stock or units denominated in EDS Common Stock. The terms, conditions and limitations applicable to any Stock Awards will be determined by the Committee. Without limiting the foregoing, rights to dividends or dividend equivalents may be extended to and made part of any Stock Award in the discretion of the Committee. Cash Awards. Cash Awards consist of grants denominated in cash. The terms, conditions and limitations applicable to any Cash Awards will be determined by the Committee. Performance Awards. Performance Awards consist of grants made to an Employee subject to the attainment of one or more performance goals. A Performance Award will be paid, vested or otherwise deliverable solely upon the attainment of one or more pre-established, objective performance goals established by the Committee prior to the earlier of (i) 90 days after the commencement of the period of service to which the performance goals relate and (ii) the elapse of 25% of the period of service, and in any event while the outcome is substantially uncertain. A performance goal may be based upon one or more business criteria that apply to the Employee, one or more business units of EDS or EDS as a whole, and may include any of the following: increased revenue, net income, stock price, market share, earnings per share, return on equity, return on assets or decrease in costs. Subject to the foregoing, the terms, conditions and limitations applicable to any Performance Awards will be determined by the Committee. EDS management intends to recommend to the Committee that Employee Awards granted under the Amended EDS Incentive Plan be distributed among a significant number of Employees and that the Committee balance the use of Options and Stock Awards and include the use of a significant number of Options. The Amended EDS Incentive Plan contains certain limitations with respect to Awards that may be made thereunder. In particular, the Amended EDS Incentive Plan provides that the following limitations shall apply to any Employee Awards made thereunder: (i) no Participant may be granted, during any one-year period, Employee Awards consisting of Options or SARs that are exercisable for more than 1,500,000 shares of Common Stock; (ii) no Participant may be granted, during any one-year period, Employee Awards consisting of shares of Common Stock or units denominated in such shares (other than any Employee Awards consisting of Options or SARs) covering or relating to more than 300,000 shares of Common Stock (the limitation set forth in this clause (ii), together with the limitation set forth in clause (i) above, being hereinafter collectively referred to as the "Stock Based Awards Limitations"); and (iii) no Participant may be granted Employee Awards consisting of cash or in any other form permitted under the Amended EDS Incentive Plan (other than Employee Awards consisting of Options or SARs or otherwise consisting of shares of Common Stock or units denominated in such shares) in respect of any one-year period having a value determined on the date of grant in excess of $5,000,000. Under the Existing EDS Incentive Plan, there are currently outstanding restricted Stock Awards covering an aggregate of approximately 17,100,000 shares of Class E Common Stock. Upon the effectiveness of the Amended EDS Incentive Plan in so far as it relates to Employees, such outstanding restricted Stock Awards will be adjusted to reflect the Split-Off and prevent any dilution or enlargement of the rights of the holders thereof. By virtue of this adjustment and without necessity of any action on the part of the participants, each outstanding restricted Stock Award will be modified so that, effective as of the date of consummation of the Split-Off, the securities to which each such Stock Award relates will be a number of shares of EDS Common Stock equal to the number of shares of Class E Common Stock subject to such Stock Award immediately prior to the consummation thereof. Such adjustment will not have any effect on the vesting of, or restrictions on resale applicable to, any outstanding restricted Stock Award. Furthermore, the holder of each restricted Stock Award shall continue to be subject to any non- competition restrictions provided for in the Existing EDS Incentive Plan which were applicable thereto prior to the effectiveness of the Amended EDS Incentive Plan. 111 Director Awards Under the Amended EDS Incentive Plan, each Nonemployee Director will receive the Awards described below, which will be granted either automatically or at the option of the Nonemployee Director in lieu of director's fees. Nonemployee Director Options. On the date of the consummation of the Split- Off, each Nonemployee Director will automatically receive a grant of NQSOs that provide for the purchase of 1,500 shares of EDS Common Stock. In addition, on the first business day of the month following the date on which each annual meeting of the stockholders of EDS is held (each, an "Annual Director Award Date"), each Nonemployee Director will automatically receive a grant of NQSOs that provide for the purchase of 1,500 shares of EDS Common Stock. A Nonemployee Director who is elected after the date of the consummation of the Split-Off otherwise than by election at an annual meeting of stockholders of the Company will automatically receive, on the date of his or her election, a grant of NQSOs that provides for the purchase of a number of shares of EDS Common Stock equal to the product of (i) 1,500 and (ii) a fraction the numerator of which is the number of days between the election of such Nonemployee Director and the next scheduled Annual Director Award Date and the denominator of which is 365. The term of the NQSOs granted to Nonemployee Directors will be for a period of ten years from the date of grant. The exercise price of such NQSOs will be equal to the fair market value of the EDS Common Stock on the date of grant. Such exercise price must be paid in full in cash at the time a NQSO is exercised. All NQSOs granted to Nonemployee Directors under the Amended EDS Incentive Plan will become exercisable in increments of one-third of the total number of shares of EDS Common Stock that are subject thereto on the first, second and third anniversaries of the date of grant. All unvested NQSOs granted to a Nonemployee Director will be forfeited if the Nonemployee Director resigns from the EDS Board without the consent of a majority of the other directors. In addition a Nonemployee Director may make an annual election to receive, in lieu of all or any portion of the director's fees he or she would otherwise receive in the next year (including both annual retainer and meeting fees), a number of NQSOs equal to the product of (x) three times (y) a fraction the numerator of which is equal to the dollar amount of fees the Nonemployee Director elects to forego in the next year in exchange for NQSOs and the denominator of which is equal to the fair market value of EDS Common Stock on the date of the election. The terms of the NQSOs received by a Nonemployee Director pursuant to such election will be the same as those of the NQSOs automatically granted as described above. Nonemployee Director Restricted Stock Grants. On the date of the consummation of the Split-Off, each Nonemployee Director will automatically receive a restricted Stock Award covering 500 shares of EDS Common Stock. In addition, on each Annual Director Award Date, each Nonemployee Director will automatically receive a restricted Stock Award covering 500 shares of EDS Common Stock. A Nonemployee Director who is elected after the date of the consummation of the Split-Off otherwise than by election at an annual meeting of stockholders of the Company will automatically receive, on the date of his or her election, a restricted Stock Award covering a number of shares of EDS Common Stock equal to the product of (i) 500 and (ii) a fraction the numerator of which is the number of days between the election of such Nonemployee Director and the next scheduled Annual Director Award Date and the denominator of which is 365. The shares of EDS Common Stock that are the subject of any such restricted Stock Award (i) will vest ratably in increments equal to one- third of the total number of shares of EDS Common Stock subject thereto on the first, second and third anniversaries of the date of grant and (ii) will vest fully upon the failure of the Nonemployee Director to be reelected as a director of EDS, the death of the Nonemployee Director or the resignation of the Nonemployee Director by reason of disability or at the request of a majority of the other directors of EDS. All unvested shares of EDS Common Stock that are the subject of such restricted Stock Award will be forfeited if the Nonemployee Director resigns from the EDS Board without the consent of a majority of the other directors. In addition, a Nonemployee Director may make an annual election to receive, in lieu of all or any portion of the director's fees he or she would otherwise receive in the next year (including both annual retainer and meeting fees), a restricted Stock Award covering a number of shares of EDS Common Stock having a fair market 112 value equal to 110% of a fraction the numerator of which is equal to the dollar amount of fees the Nonemployee Director elects to forego in the next year in exchange for restricted Stock Awards and the denominator of which is equal to the fair market value of EDS Common Stock on the date of the election. The terms of the restricted Stock Awards received by a Nonemployee Director pursuant to such election will be the same as those of the restricted Stock Awards automatically granted as described above. Other Provisions With the approval of the Committee, payments in respect of Employee Awards may be deferred, either in the form of installments or a future lump sum payment, by any Employee. At the discretion of the Committee, an Employee may be offered an election to substitute an Award for another Award or Awards of the same or different type. EDS will have the right to deduct applicable taxes from any Employee Award payment and withhold, at the time of delivery or vesting of cash or shares of EDS Common Stock under the Amended EDS Incentive Plan, an appropriate amount of cash or number of shares of EDS Common Stock, or combination thereof, for the payment of taxes. The Committee may also permit withholding to be satisfied by the transfer to EDS of shares of EDS Common Stock previously owned by the holder of the Employee Award for which withholding is required. The Committee may provide for loans, on either a short term or demand basis, from EDS to an Employee or Nonemployee Director to permit the payment of taxes required by law. The EDS Board may amend, modify, suspend or terminate the Amended EDS Incentive Plan for the purpose of addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment that would impair the rights of any Employee or Nonemployee Director with respect to any Award may be made without the consent of such Employee or Nonemployee Director and (ii) no amendment requiring stockholder approval in accordance with Rule 16b-3 under the Exchange Act will be effective until such approval has been obtained. No Award or any other benefit under the Amended EDS Incentive Plan constituting a "derivative security" within the meaning of Rule 16a-1(c) under the Exchange Act will be assignable or otherwise transferable except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. In the event of any subdivision or consolidation of outstanding shares of EDS Common Stock, declaration of a stock dividend payable in shares of EDS Common Stock or other stock split, the Amended EDS Incentive Plan provides for the Committee to make appropriate adjustments to (i) the number of shares of EDS Common Stock reserved under the Amended EDS Incentive Plan, (ii) the number of shares of EDS Common Stock covered by outstanding Awards in the form of EDS Common Stock or units denominated in EDS Common Stock, (iii) the exercise or other price in respect of such Awards, (iv) the appropriate fair market value and other price determinations for Awards in order to reflect such transactions, (v) the number of shares of Common Stock covered by Options automatically granted to Nonemployee Directors, (vi) the number of shares covered by restricted Stock Awards automatically granted to Nonemployee Directors and (vii) the Stock Based Awards Limitations. Furthermore, in the event of any other recapitalization or capital reorganization of EDS, any consolidation or merger of EDS with another corporation or entity, the adoption by EDS of any plan of exchange affecting the EDS Common Stock or any distribution to holders of EDS Common Stock of securities or property (other than normal cash dividends or stock dividends), the EDS Board will make appropriate adjustments to the amounts or other items referred to in clauses (ii), (iii), (iv), (v), (vi) and (vii) above to give effect to such transactions, but only to the extent necessary to maintain the proportionate interest of the holders of the Awards and to preserve, without exceeding, the value thereof. Tax Implications of Awards Set forth below is a summary of the federal income tax consequences to Employees, Nonemployee Directors and EDS as a result of the grant and exercise of Awards under the Amended EDS Incentive Plan. This summary 113 is based on statutory provisions, Treasury regulations thereunder, judicial decisions, and IRS rulings in effect on the date hereof. Nonqualified Stock Options; Stock Appreciation Rights; Incentive Stock Options. Employees and Nonemployee Directors will not realize taxable income upon the grant of a NQSO or an SAR. Upon the exercise of an SAR or NQSO, the Employee or Nonemployee Director will recognize ordinary income (subject, in the case of Employees, to withholding by EDS) in an amount equal to the excess of (i) the amount of cash and the fair market value of the EDS Common Stock received, over (ii) the exercise price (if any) paid therefor. The Employee or Nonemployee Director will generally have a tax basis in any shares of EDS Common Stock received pursuant to the exercise of an SAR, or pursuant to the cash exercise of an NQSO, that equals the fair market value of such shares on the date of exercise. Subject to the discussion under "--Certain Tax Code Limitations on Deductibility" below, EDS (or a subsidiary) will generally be entitled to a deduction for U.S. federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by the Employee or Nonemployee Director under the foregoing rules. Employees will not have taxable income upon the grant of an ISO. Upon the exercise of an ISO, the Employee will not have taxable income, although the excess of the fair market value of the shares of EDS Common Stock received upon exercise of the ISO ("ISO Stock") over the exercise price will increase the alternative minimum taxable income of the Employee, which may cause such Employee to incur alternative minimum tax. The payment of any alternative minimum tax attributable to the exercise of an ISO would be allowed as a credit against the Employee's regular tax liability in a later year to the extent the Employee's regular tax liability is in excess of the alternative minimum tax for that year. Upon the disposition of ISO Stock that has been held for the requisite holding period (generally, at least two years from the date of grant and one year from the date of exercise of the ISO), the Employee will generally recognize capital gain (or loss) equal to the difference between the amount received in the disposition and the exercise price paid by the Employee for the ISO Stock. However, if an Employee disposes of ISO Stock that has not been held for the requisite holding period (a "disqualifying disposition"), the Employee will recognize ordinary income in the year of the disqualifying disposition to the extent that the fair market value of the ISO Stock at the time of exercise of the ISO (or, if less, the amount realized in the case of an arm's-length disqualifying disposition to an unrelated party) exceeds the exercise price paid by the Employee for such ISO Stock. The Employee would also recognize capital gain to the extent the amount realized in the disqualifying disposition exceeds the fair market value of the ISO stock on the exercise date. If the exercise price paid for the ISO Stock exceeds the amount realized in the disqualifying disposition (in the case of an arm's- length disposition to an unrelated party), such excess would generally constitute a capital loss. EDS and its subsidiaries will generally not be entitled to any federal income tax deduction upon the grant or exercise of an ISO, unless the Employee makes a disqualifying disposition of the ISO Stock. If an Employee makes such a disqualifying disposition, EDS (or a subsidiary) will then, subject to the discussion below under "--Certain Tax Code Limitations on Deductibility," be entitled to a tax deduction that corresponds as to timing and amount with the compensation income recognized by the Employee under the rules described in the preceding paragraph. Under current rulings, if an Employee or Nonemployee Director transfers previously held shares of EDS Common Stock (other than ISO Stock that has not been held for the requisite holding period) in satisfaction of part or all of the exercise price of an NQSO or ISO, the Employee or Nonemployee Director will recognize income with respect to the EDS Common Stock received in the manner described above, but no additional gain will be recognized as a result of the transfer of such previously held shares in satisfaction of the NQSO or ISO exercise price. Moreover, that number of shares of EDS Common Stock received upon exercise which equals the number of shares of previously held EDS Common Stock surrendered therefor in satisfaction of the NQSO or ISO exercise price will have a tax basis that equals, and a holding period that includes, the tax basis and holding period of the previously held shares of EDS Common Stock surrendered in satisfaction of the NQSO or 114 ISO exercise price. Any additional shares of EDS Common Stock received upon exercise will have a tax basis that equals the amount of cash (if any) paid by the Employee or Nonemployee Director. Cash Awards; Stock Unit Awards; Stock Awards. An Employee will recognize ordinary compensation income upon receipt of cash pursuant to a Cash Award or Performance Award or, if earlier, at the time such cash is otherwise made available for the Employee to draw upon it. An Employee will not have taxable income upon the grant of a Stock Award in the form of units denominated in EDS Common Stock ("Stock Unit Award"), but rather will generally recognize ordinary compensation income at the time the Employee receives EDS Common Stock or cash in satisfaction of such Stock Unit Award in an amount equal to the fair market value of the EDS Common Stock or cash received. In general, an Employee or Nonemployee Director will recognize ordinary compensation income as a result of the receipt of EDS Common Stock pursuant to a Stock Award or Performance Award in an amount equal to the fair market value of the EDS Common Stock when such stock is received; provided, however, that if the stock is not transferable and is subject to a substantial risk of forfeiture when received, the Employee or Nonemployee Director will recognize ordinary compensation income in an amount equal to the fair market value of the EDS Common Stock when it first becomes transferable or is no longer subject to a substantial risk of forfeiture, unless the Employee or Nonemployee Director makes an election to be taxed on the fair market value of the EDS Common Stock when such stock is received. An Employee will be subject to withholding for federal, and generally for state and local, income taxes at the time the Employee recognizes income under the rules described above with respect to EDS Common Stock or cash received pursuant to a Cash Award, Performance Award, Stock Award or Stock Unit Award. Dividends that are received by an Employee or Nonemployee Director prior to the time that the EDS Common Stock is taxed to the Employee or Nonemployee Director under the rules described in the preceding paragraph are taxed as additional compensation, not as dividend income. The tax basis of an Employee or Nonemployee Director in the EDS Common Stock received will equal the amount recognized by the Employee as compensation income under the rules described in the preceding paragraph, and the Employee's holding period in such shares will commence on the date income is so recognized. Certain Tax Code Limitations on Deductibility. In order for the amounts described above to be deductible by EDS (or a subsidiary), such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses. The ability of EDS (or a subsidiary) to obtain a deduction for future payments under the Amended EDS Incentive Plan could also be limited by Section 280G of the Code, which prevents the deductibility of certain excess parachute payments made in connection with a change in control of an employer. The ability of EDS (or a subsidiary) to obtain a deduction for amounts paid under the Amended EDS Incentive Plan could also be affected by Section 162(m) of the Code, which limits the deductibility, for U.S. federal income tax purposes, of compensation paid to certain employees of EDS to $1 million with respect to any such employee during any taxable year of EDS. However, certain exceptions apply to this limitation in the case of performance-based compensation. It is intended that the approval of the Amended EDS Incentive Plan by the common stockholders of General Motors and the description of the Amended EDS Incentive Plan contained herein will satisfy certain of the requirements for the performance-based exception, and after the consummation of the Split-Off, EDS will be able to comply with the requirements of the Code and the Treasury Regulation Section 1.162-27 with respect to the grant and payment of certain performance-based awards (including certain options and SARs) under the Amended EDS Incentive Plan so as to be eligible for the performance-based exception. However, it may not be possible in all cases to satisfy all of the requirements for the exception and EDS may, in its sole discretion, determine that in one or more cases it is in its best interests to not satisfy all of the requirements for the performance-based exception. EXISTING EDS INCENTIVE PLAN The description set forth below represents a summary of the principal terms and conditions of the Existing EDS Incentive Plan. The following description, which gives effect to the EDS Assumption Amendments (as hereinafter defined), does not purport to be complete and is qualified in its entirety by reference to the Existing 115 EDS Incentive Plan, a copy of which is filed as an exhibit to the Registration Statement of which this Solicitation Statement/Prospectus is a part. General If the Amended EDS Incentive Plan is not approved by the stockholders of General Motors, the Existing EDS Incentive Plan will continue in effect after the Split-Off and will not be amended and restated as described above under "--Amended EDS Incentive Plan." However, the committee charged with administering the Existing EDS Incentive Plan will adopt certain amendments to the Existing EDS Incentive Plan (the "EDS Assumption Amendments") which are intended to reflect the assumption of the Existing EDS Incentive Plan by EDS upon consummation of the Split-Off. Among other things, the EDS Assumption Amendments provide that, effective upon the consummation of the Split-Off, (i) the Existing EDS Incentive Plan will be administered by the Compensation and Benefits Committee of EDS, or such other committee as may in the future be appointed by the EDS Board, (ii) each outstanding award under the Existing EDS Incentive Plan will be adjusted so that, effective as of the date of consummation of the Split-Off, the securities to which each such award relates will be a number of shares of EDS Common Stock equal to the number of shares of Class E Common Stock subject to such award immediately prior to the consummation thereof, (iii) future awards made under the Existing EDS Incentive Plan will be in the form of EDS Common Stock rather than Class E Common Stock, (iv) future awards may be made under the Existing EDS Incentive Plan in respect of a maximum of 60,000,000 shares of EDS Common Stock and (v) all references to General Motors contained in the Existing EDS Incentive Plan will be deleted. The purpose of the Existing EDS Incentive Plan is to provide corporate officers and key employees of EDS and its subsidiaries with a strong incentive for individual creativity and contribution to ensure the future growth of EDS. The Existing EDS Incentive Plan is designed to reward employees making important contributions to the success of EDS by enabling such persons to acquire shares of EDS Common Stock. Key employees, including officers and directors, of EDS are eligible to participate in the Existing EDS Incentive Plan. However, (i) no member of the EDS Board is entitled to participate in the Existing EDS Incentive Plan unless he or she is also a full time employee of EDS; (ii) no member of the Compensation and Benefits Committee of EDS is eligible to participate in the Existing EDS Incentive Plan; (iii) no person is eligible to participate in the Existing EDS Incentive Plan if he or she owns, directly or indirectly, more than 5% of the total combined voting power of all classes of stock of EDS and (iv) not more than 32,000,000 shares of EDS Common Stock may be sold, awarded or covered by rights or options granted under the Existing EDS Incentive Plan to any one participant. The Existing EDS Incentive Plan covers (i) the sale of shares subject to restrictions ("Restricted Stock"), (ii) the grant of rights, subject to restrictions ("Restricted Stock Units"), to acquire shares which may or may not be subject to restrictions ("Unit Stock"), (iii) the award of bonus shares that may or may not be subject to restrictions ("Bonus Stock") and (iv) the grant of options (including ISOs) to acquire shares which may or may not be subject to restrictions ("Option Stock"). An aggregate of 60,000,000 shares of EDS Common Stock (in addition to the shares that are the subject of awards outstanding as of the date upon which the EDS Assumption Amendments become effective) will be available for awards under the Existing EDS Incentive Plan after giving effect to the EDS Assumption Amendments. If shares of Restricted Stock, Unit Stock, Bonus Stock or Option Stock issued pursuant to the Existing EDS Incentive Plan are repurchased by or redelivered to EDS in connection with the restrictions imposed on such shares pursuant to the Existing EDS Incentive Plan, such repurchased and redelivered shares shall again become available for sale, award or grant under the Existing EDS Incentive Plan. To the extent that any Restricted Stock Units terminate in connection with the restrictions imposed on such units (other than pursuant to the delivery of shares in respect thereof) or any options granted under the Existing EDS Incentive Plan terminate or expire unexercised in whole or in part, the shares of EDS Common Stock then so covered will again become available for sale, award or grant under the Existing EDS Incentive Plan. 116 Upon the effectiveness of the EDS Assumption Amendments, the Existing EDS Incentive Plan will be administered and interpreted by the Benefits and Compensation Committee of the EDS Board. No member of such committee shall be eligible, or shall have been eligible at any time within one year prior to his appointment to the Committee, for selection as a person to whom EDS Common Stock may be sold or awarded or to whom either rights to acquire shares or options may be granted pursuant to the Existing EDS Incentive Plan. The committee charged with administering the Existing EDS Incentive Plan has full authority, in its discretion, to determine those corporate officers and key employees who shall participate in the Existing EDS Incentive Plan and the number of shares of EDS Common Stock to be sold or awarded to each participant and the number of shares of EDS Common Stock to be covered by either rights to acquire shares or options granted to each participant. Recommendations for individual awards are made to such committee by the President of EDS. Such committee may adopt rules and regulations for the administration of the Existing EDS Incentive Plan to the extent it deems advisable and has full discretionary authority to amend such rules and regulations. All determinations made by such committee are conclusive except that, to the extent required by law or by the EDS Certificate of Incorporation or Bylaws, the terms of any sale or award of shares or any grant of either rights to acquire shares or options under the Existing EDS Incentive Plan and the sufficiency of the consideration therefor are subject to ratification by the EDS Board prior to such sale, award or grant. Awards The types of awards that may be made under the Existing EDS Incentive Plan are as follows: Restricted Stock. Shares of Restricted Stock may be sold pursuant to the Existing EDS Incentive Plan at a nominal price which does not exceed 10% of the fair market value of the shares at the time of grant. All shares of Restricted Stock sold pursuant to the Existing EDS Incentive Plan are subject to specified restrictions, certain of which may be modified in the applicable award agreement. Restricted Stock Units. Restricted Stock Units may be granted pursuant to the Existing EDS Incentive Plan without cash consideration. Each Restricted Stock Unit entitles the holder thereof to receive the shares covered by such unit at such time, in such amounts and subject to such conditions as specified in the applicable award agreement. Bonus Stock. Shares of Bonus Stock may be awarded pursuant to the Existing EDS Incentive Plan without cash consideration. The committee administering the Existing EDS Incentive Plan is authorized to determine, and set forth in the applicable award agreement, whether such shares of Bonus Stock are awarded free of, or subject to, any restrictions. Stock Options. Stock options may be granted pursuant to the Existing EDS Incentive Plan and shall have such terms and conditions as the committee administering such plan in its sole discretion shall determine, including the period during which they may be exercised and the conditions under which they may be terminated. The exercise price of a stock option shall not be less than 100% of the fair market value of the underlying shares of EDS Common Stock on the date the option is granted. Each Award made pursuant to the Existing EDS Incentive Plan is subject to certain non-competition restrictions that apply for such period of time and in such geographic area as is specified in the applicable award agreement. Such non-competition restrictions generally provide that if within the specified period of time and geographic areas a participant engages in certain competitive activities (such as (i) participating in any activity as or for a competitor of EDS, which is the same or similar to the activities in which the participant was involved as an employee of EDS, (ii) hiring or attempting to hire any employee of EDS, (iii) soliciting the business of any customer of EDS or (iv) participating in any activity for a customer of EDS, which is the same or similar to the activities in which the participant was involved as an employee of EDS), the participant may be obligated to (a) immediately resell and deliver to EDS, upon demand, all shares of Restricted Stock, Unit Stock, Bonus Stock or Option Stock sold or awarded to the participant as to which the participant is still the direct or indirect 117 beneficial owner at the cash price per share, if any, paid by the participant; and (b) pay to EDS an amount in cash with respect to each share of Restricted Stock, Unit Stock, Bonus Stock and Option Stock not still so held equal to the fair market value of each such share on the first date on which such share is no longer held less the price paid by him for such share. Additionally, if a participant engages in such activities, any option outstanding under the Existing EDS Incentive Plan that is held by such participant shall automatically terminate and shall no longer be exercisable, and all Restricted Stock Units then held shall automatically terminate. Other Provisions The EDS Board or the committee administering the Existing EDS Incentive Plan may amend such plan at any time, provided that, without the approval of the stockholders of EDS entitled to vote thereon, no such amendment shall become effective if it would (i) increase the number of shares of EDS Common Stock which may be sold or awarded under the Existing EDS Incentive Plan; or (ii) modify the requirements as to eligibility for participation in such plan. Unless earlier terminated by the EDS Board or the committee administering the Existing EDS Incentive Plan, such plan shall terminate on October 17, 2004. Although no shares of EDS Common Stock may be sold or issued (except to the extent issued in connection with rights or options previously granted under such plan) or rights or options granted after such date, such termination shall not affect any restrictions previously imposed on shares issued, or alter the rights of participants with respect to rights or options granted or shares issued, pursuant to the Existing EDS Incentive Plan. In the event of any change in the number, class or rights of shares subject to the Existing EDS Incentive Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, split-up, combination of shares, exchange of shares, issuance of rights to subscribe or other change in capital structure), the Existing EDS Incentive Plan provides for the committee administering such plan to make appropriate adjustments to the maximum number of shares subject to the Existing EDS Incentive Plan and the number of shares and price per share subject to any outstanding award or grant as the committee shall find to be equitable to prevent dilution or enlargement of such rights. Advancement of Withholding Tax Payments Under current EDS policy, holders of Restricted Stock Units granted under the Existing Incentive Plan are required to reimburse EDS for the applicable withholding taxes paid by EDS in respect of the vesting of such units within 60 days of such payment by EDS. In the event that such holder is restricted from selling shares of Class E Common Stock (or, following the Split-Off, EDS Common Stock) by virtue of such holder's being in possession of material non- public information regarding EDS, EDS has historically extended the date for the reimbursement of such payment until such restriction is terminated. As of March 15, 1996, the indebtedness of Messrs. Alberthal, Castle, Chiapparone, Fernandes, Grant, Heller, Linderman and Reeves in respect of such advancement of payments for withholding taxes was $964,009, $365,659, $698,075, $531,867, $299,175, $698,075, $971,929, and $598,350, respectively, and the largest amount of such indebtedness outstanding at any time since January 1, 1995 for such executive officers was $964,009, $365,659, $698,075, $531,867, $299,175, $938,601, $971,929, and $598,350, respectively. Tax Implications to EDS EDS would generally be entitled to a deduction with respect to awards granted under the Existing EDS Incentive Plan in the manner, and subject to the limitations, described above under "Amended EDS Incentive Plan--Tax Implications of Awards." However, notwithstanding the fact that approval of the Amended EDS Incentive Plan by the common stockholders of General Motors is not obtained, the deduction limitations set forth in Section 162(m) of the Code would not apply to shares of Restricted Stock, shares of Bonus Stock, Restricted Stock Units or options which are granted on or prior to the date of the first regularly scheduled stockholder meeting of EDS that occurs after December 2, 1995. 118 EDS RETIREMENT PLAN The following table indicates the estimated annual benefits payable upon retirement to Messrs. Alberthal, Castle, Fernandes, Heller and Linderman, for the specified compensation and years of service classifications, under the combined formulas of the Amended and Restated EDS Retirement Plan (the "EDS Retirement Plan") and the EDS Supplemental Executive Retirement Plan (the "EDS Supplemental Plan"). The EDS Supplemental Plan is a non-qualified, unfunded retirement plan intended to pay benefits to certain executive level employees whose benefits under the EDS Retirement Plan are limited under the Code. Benefits under the EDS Supplemental Plan can be reduced, suspended or eliminated at any time by the EDS Compensation and Benefits Committee. PROJECTED TOTAL ANNUAL RETIREMENT BENEFITS UNDER THE EDS RETIREMENT PLAN AND THE EDS SUPPLEMENTAL PLAN
YEARS OF SERVICE - ------------------------------------------------------------------------------- FINAL AVERAGE EARNINGS 5 10 15 20 25 30 - ------------------------------------------------------------------------------- $ 400,000 $ 32,428 $ 64,856 $ 97,284 $129,712 $162,140 $194,568 $ 600,000 $ 49,128 $ 98,256 $147,384 $196,512 $245,640 $294,768 $ 800,000 $ 65,828 $131,656 $197,484 $263,312 $329,140 $394,968 $1,000,000 $ 82,528 $165,056 $247,584 $330,112 $412,640 $495,168 $1,200,000 $ 99,228 $198,456 $297,684 $396,912 $496,140 $595,368 $1,400,000 $115,928 $231,856 $347,784 $463,712 $579,640 $695,568
As of December 31, 1995, the average annual base salary for the highest five years over the last 10-year period and the eligible years of credited service for each of the named executive officers was as follows: Mr. Alberthal, $1,277,167--28 years; Mr. Castle, $682,667--seven years; Mr. Fernandes, $635,250--27 years; Mr. Heller, $729,334--28 years; and Mr. Linderman, $643,167--25 years. The annual base salary for the most recent year considered in the calculation of such average annual base salary is set forth in the Summary Compensation Table set forth above under the column labeled "Salary." "Earnings" under the EDS Retirement Plan generally refer to total annual cash compensation (up to $150,000 for 1995 as limited by the Code) for services rendered to EDS and its participating subsidiaries, together with any salary reduction contributions to the EDS Deferred Compensation Plan, and shall exclude extraordinary compensation (such as overseas living allowances, relocation allowances and benefits under any employee benefit plan, such as the Stock Incentive Plan). Benefits under the EDS Retirement Plan generally equal (i) 55% of the participant's final average earnings (based on the highest five consecutive years of includible earnings within the last ten years of employment), less the maximum offset allowance that can be deducted from final average earnings as determined under the Code, multiplied by (ii) the participant's years of credited benefit service (not to exceed 30), divided by 30. Benefits are payable in the form of a single or joint survivor life annuity, unless otherwise elected. To be eligible to participate in the EDS Supplemental Plan, an executive level employee must, among other requirements, be a participant in EDS' executive bonus plan and a participant in the EDS Retirement Plan and have met the eligibility requirements for the receipt of benefits thereunder. The benefit payable under the EDS Supplemental Plan for normal retirement, together with the benefit payable under the EDS Retirement Plan, will generally equal (i) 50% of the average of the participant's total compensation (based on the highest five consecutive years within the last ten years of employment) less (ii) the maximum offset allowance that can be deducted from final average earnings as determined under the Code. Such benefits are payable in the form of a single or joint survivor life annuity. 119 STOCK PURCHASE PLAN The EDS Board has adopted, and General Motors as the sole stockholder of EDS has approved, the 1996 Electronic Data Systems Corporation Stock Purchase Plan (the "EDS Stock Purchase Plan"), subject to consummation of the Split-Off. The EDS Stock Purchase Plan is intended to qualify as an "employee stock purchase plan" under Section 423 of the Code. All full-time employees of EDS and certain subsidiaries are eligible to participate in the EDS Stock Purchase Plan. An aggregate of approximately 57,500 shares of EDS Common Stock would be reserved for issuance under the EDS Stock Purchase Plan following consummation of the Split-Off, subject to adjustment in accordance with the terms of the EDS Stock Purchase Plan. Under the EDS Stock Purchase Plan, the EDS Board and/or the Compensation and Benefits Committee may determine the effective date of an offering and the purchase period thereunder and establish the purchase price and the maximum number of shares that each eligible employee may purchase, which number will be based on a percentage of the employee's compensation with a maximum individual investment as specified in the Code. All eligible employees who enroll in an offering receive options to purchase shares of EDS Common Stock at a price that is not less than the lesser of (i) 85% of the fair market value of the stock on the offering date or (ii) an amount which under the terms of the offering is not less than 85% of such fair market value at the time the right to purchase is exercised. Shares of EDS Common Stock purchased under the Plan may not be sold or transferred within two years of the date of purchase unless they are first offered to EDS at the lesser of (i) the price originally paid for the shares or (ii) the fair market value per share of EDS Common Stock on the date the shares are offered to EDS. EDS will make no cash contributions to the EDS Stock Purchase Plan, but will bear the expenses of administration. The EDS Stock Purchase Plan will be administered by the Compensation and Benefits Committee, which will have authority to resolve all questions relating to the administration of the Plan. A participating employee will not recognize income at the time rights to purchase shares are granted to him or her or when the employee exercises such rights and purchases shares of EDS Common Stock at the end of an offering. If an employee sells or otherwise disposes of the shares acquired under the Plan (i) more than two years after the date of purchase and (ii) more than two years after the date of the grant and more than one year after the date of exercise, or if the employee dies before disposing of the shares, ordinary income (compensation) should be included in the employee's gross income, limited to the lesser of (a) the excess of the fair market value at the time of sale or other disposition or at death over the amount paid for the shares under the option or (b) the excess of the fair market value of the shares at the time the option was granted over the purchase price (determined as if the option were exercised on the date of grant). Any gain upon sale or other disposition in excess of the lesser of the amounts in (a) or (b) above would be treated as a long-term capital gain. If the employee meets requirement (ii) above but not (i), he or she should recognize ordinary income (compensation) as described in the first sentence of this paragraph, if any, and, in addition, long-term capital loss equal to the difference between the amount paid by EDS to repurchase the stock and the sum of the price paid by the employee for the stock plus the amount of ordinary income, if any, recognized by the employee on the disposition. EDS will recognize no income, gain, deduction or loss with respect to the grant or exercise of rights to purchase shares under the EDS Stock Purchase Plan. In the event of a disqualifying disposition (the sale or disposition of a share prior to the expiration of the two-year period after the date of grant or the one year period after the date of exercise), the employee should recognize ordinary income (compensation) in the year of the disqualifying disposition to the extent of the excess, if any, of the fair market value of the stock at the date the option was exercised over the price paid for the stock under the option with the difference between the amount paid by EDS for repurchase of the stock and the sum of the price paid by the employee for the stock plus the amount of ordinary income, if any, recognized by the employee on the disposition treated as a long-term or short-term capital loss depending on the length of the 120 holding period. In the event of such a disqualifying disposition, EDS would be accorded a deduction, assuming certain compliance requirements are met, equal to the amount of the compensation includible by the employee. CHANGE OF CONTROL EMPLOYMENT AGREEMENTS EDS management intends to recommend to the EDS Board at its first meeting following consummation of the Split-Off that EDS enter into certain change of control employment agreements ("Employment Agreements") with each of its executive officers and certain of its other officers (each, an "Executive"). EDS management expects that the Employment Agreements to be recommended to the EDS Board will generally provide that, upon the occurrence of certain triggering events involving an actual or potential change of control of EDS, the employment of each Executive with EDS will be continued for specified period of time ranging from three to five years (the "Employment Period") and will contain the other terms and provisions described below. The employment rights of the Executives under the Employment Agreements would be triggered by either a "Change of Control" or a "Potential Change of Control" (as such terms are defined in the Employment Agreements). Following a Potential Change of Control, the employment period may terminate (but the Employment Agreement will remain in force and a new employment period will apply to any future Change of Control or Potential Change of Control), if either (a) the EDS Board determines that a Change of Control is not likely or (b) the Executive, upon proper notice to EDS, elects to terminate his Employment Period as of any anniversary of the Potential Change of Control. A "Change of Control" generally includes the occurrence on or after the date of the Split-Off of any of the following: (i) any person, other than an exempt person (including EDS and its subsidiaries and employee benefit plans), becoming a beneficial owner of 15% or more of the shares of EDS Common Stock or voting stock of EDS then outstanding (including as a result of the Split- Off); (ii) a change in the identity of a majority of the persons serving as members of the EDS Board, unless such change was approved by a majority of the incumbent members of the EDS Board; (iii) the approval by the EDS stockholders of a reorganization, merger or consolidation in which (x) existing EDS stockholders would not own more than 85% of the common stock and voting stock of the resulting company, (y) a person (other than certain exempt persons) would own 15% or more of the common stock or voting stock of the resulting company or (z) less than a majority of the board of the resulting company would consist of the then incumbent members of the EDS Board; or (iv) the approval by the EDS stockholders of a liquidation or dissolution of EDS, unless such liquidation or dissolution is part of a plan of liquidation or dissolution involving a sale to a company of which following such transaction (x) more than 85% of the common stock and voting stock would be owned by existing EDS stockholders, (y) no person (other than certain exempt persons) would own 15% or more of the common stock or voting stock of such company and (z) at least a majority of the board of directors of such company would consist of the then incumbent members of the EDS Board. The acquisition of EDS Common Stock in the Split-Off by the GM Hourly Plan is an exempt transaction that will not constitute a Change of Control. A "Potential Change in Control" generally includes any of the following: (i) the commencement of a tender or exchange offer for EDS stock that, if consummated, would result in a Change of Control; (ii) EDS entering into an agreement which, if consummated, would constitute a Change of Control; (iii) the commencement of a contested election contest subject to certain proxy rules; or (iv) the occurrence of any other event that the EDS Board determines could result in a Change of Control. Under the Employment Agreements, EDS would agree that throughout the Employment Period, each Executive's position, authority, duties and responsibilities will not be diminished from the most significant held or exercised by, or assigned to, such Executive at any time during the 90-day period immediately prior to the commencement of the Employment Period. Additionally, all forms of the Executive's compensation, including salary, bonus, regular salaried employee plans, stock options, restricted stock and other awards, will continue on a basis no less favorable than as the same exist during the same period. The Employment Agreements would provide that an Executive's Employment Period terminates (i) automatically upon the Executive's death or after 180 days of the Executive's continuing Disability (as defined in the Employment Agreements), (ii) at EDS' option if the Executive is terminated for "Cause" (as defined in 121 the Employment Agreements) and (iii) at the Executive's option at any time for "Good Reason" or for any reason during the 180-day period beginning 60 days (or 180 days in the case of agreements with less than a five-year term) after a Change of Control (a "Window Period"). For purposes of EDS' option to terminate the Employment Period, "Cause" is defined in the Employment Agreement to mean (i) dishonesty by the Executive which results in substantial personal enrichment at the expense of EDS or (ii) demonstratively willful repeated violations of the Executive's obligations under the Employment Agreement, which violations are intended to result and do result in material injury to EDS. For purposes of an Executive's option to terminate the Employment Period, "Good Reason" generally means (i) a diminution of the executive officer's job duties; (ii) EDS' failure to comply with the requirements of the Employment Agreement; (iii) the transfer of an Executive's work location; (iv) a purported termination of the Executive's employment by EDS which is not in compliance with the Employment Agreement; (v) the failure of a successor to honor the Employment Agreement or (vi) a failure to reelect the Executive to the EDS Board if such Executive was a member of the EDS Board immediately prior to the commencement of the Employment Period. If an Executive's employment is terminated for any reason during a Window Period, by reason of death or Disability during a Window Period, or for Good Reason at any time, the Executive (or the Executive's legal representatives) will be entitled to receive the following: (i) the employee benefits the Executive has earned as of the date of termination; (ii) the Executive's then current salary and bonus throughout the remainder of the Employment Period; (iii) the cash value of the Executive's retirement and 401(k) benefits to the end of the Employment Period; (iv) under certain circumstances, a pro rata portion of the grants of options, restricted stock and other compensatory awards the Executive would have received had his employment continued; and (v) continued coverage under employee welfare benefit plans until the end of the Employment Period. In addition, all options, restricted stock and other compensatory awards held by the Executive will immediately vest and become exercisable and the term thereof will be extended for up to one year following termination of employment. The Executive may also elect to cash out equity- based compensatory awards at the highest price per share paid by specified persons during the Employment Period or the six-month period prior to the date upon which the Employment Period commences. Upon the death of an Executive (other than during a Window Period), the Executive's legal representatives will be entitled to receive the following: (i) the employee benefits earned by the Executive as of the date of death, (ii) the Executive's then current salary for one year from the date of death and (iii) the continuation of welfare benefits until the end of the Employment Period. In addition, all options, restricted stock and other compensatory awards will immediately vest and become exercisable and the term thereof will be extended for up to one year following death. The Executive's legal representatives may elect to cash out equity-based compensatory awards at the highest price per share of common stock paid by specified persons during the Employment Period or the six-month period prior to the date upon which the Employment Period commences. Upon termination of an Executive's employment with EDS due to Disability, the Executive will be entitled to receive the same amounts and benefits as would be provided upon the termination of the Executive's employment by reason of death. If an Executive's employment is terminated, other than during a Window Period, (i) by EDS for Cause or (ii) by the Executive other than for Good Reason, the Executive will be entitled to receive only the compensation and benefits the Executive has earned as of the date of termination of the Executive's employment with EDS. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Compensation information with respect to the named executives for 1995 reflects compensation earned while EDS was a wholly owned subsidiary of General Motors. During that period, EDS' compensation committee was composed of John F. Smith, Jr., Harry J. Pearce and J. Michael Losh, all of whom are officers of General Motors. In connection with the Split-Off, such persons will resign from such positions and it is anticipated that Ray J. Groves and C. Robert Kidder will be appointed to the Compensation and Benefits Committee of EDS. INDEMNIFICATION AGREEMENTS EDS has entered into Indemnification Agreements (the "Indemnification Agreements") with its directors, nominees for director and certain of its officers (the "Indemnitees"), a form of which is filed with the 122 Commission as an exhibit to the Registration Statement of which this Solicitation Statement/Prospectus is a part. Under the terms of the Indemnification Agreements, EDS has generally agreed to indemnify, and advance expenses to, each Indemnitee to the fullest extent permitted by applicable law on the date of such agreements and to such greater extent as applicable law may thereafter permit. In addition, the Indemnification Agreements contain specific provisions pursuant to which EDS has agreed to indemnify each Indemnitee (i) if such person is, by reason of his or her status as a director, nominee for director, officer, agent or fiduciary of EDS or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise with which such person was serving at the request of EDS (any such status being hereinafter referred to as a "Corporate Status"), made or threatened to be made a party to any threatened, pending or completed action, suit, arbitration, alternative dispute resolution mechanism, investigation or other proceeding (each, a "Proceeding"), other than a Proceeding by or in the right of EDS, (ii) if such person is, by reason of his or her Corporate Status, made or threatened to be made a party to any Proceeding brought by or in the right of EDS to procure a judgment in its favor, except that no indemnification shall be made in respect of any claim, issue or matter in such Proceeding as to which such Indemnitee shall have been adjudged to be liable to EDS if applicable law prohibits such indemnification (unless and only to the extent that a court shall otherwise determine), (iii) against expenses actually and reasonably incurred by such person or on his or her behalf in connection with any Proceeding to which such Indemnitee was or is a party by reason of his or her Corporate Status and in which such Indemnitee is successful, on the merits or otherwise, (iv) against expenses actually and reasonably incurred by such person or on his or her behalf in connection with a Proceeding to the extent that such Indemnitee is, by reason of his or her Corporate Status, a witness or otherwise participates in any Proceeding at a time when such person is not a party in the Proceeding, and (v) against expenses actually and reasonably incurred by such person in any judicial adjudication of or any award in arbitration to enforce his or her rights under the Indemnification Agreements. Furthermore, under the terms of the Indemnification Agreements, EDS has agreed to pay all reasonable expenses incurred by or on behalf of an Indemnitee in connection with any Proceeding, whether brought by or in the right of EDS or otherwise, in advance of any determination with respect to entitlement to indemnification and within 15 days after the receipt by EDS of a written request from such Indemnitee for such payment. In the Indemnification Agreements, each Indemnitee has agreed that he or she will reimburse and repay EDS for any expenses so advanced to the extent that it shall ultimately be determined that he or she is not entitled to be indemnified by EDS against such expenses. The Indemnification Agreements also include provisions that specify the procedures and presumptions which are to be employed to determine whether an Indemnitee is entitled to indemnification thereunder. In some cases, the nature of the procedures specified in the Indemnification Agreements varies depending on whether there has occurred a "Change in Control" (as defined in the Indemnification Agreements) of EDS. 123 CLASS E COMMON STOCK INTRODUCTION Class E Common Stock is one of three classes of General Motors common stock. The other two classes of common stock are $1 2/3 Common Stock and Class H Common Stock. On the Record Date, approximately 485.7 million shares of Class E Common Stock, held by approximately 268,123 record holders, were issued and outstanding. Upon consummation of the Split-Off, each outstanding share of Class E Common Stock will be converted into one share of EDS Common Stock, and persons who held Class E Common Stock will become holders of EDS Common Stock. See "The Split-Off," "EDS Capital Stock" and "Comparison of Class E Common Stock and EDS Common Stock." Holders of Class E Common Stock have no direct rights in the equity or assets of EDS, but rather have rights in the equity and assets of General Motors (which include 100% of the stock of EDS). Class E Common Stock is designed to provide holders with financial returns based on the performance of EDS. The intent of this design objective is achieved through (i) allocations under the General Motors Certificate of Incorporation of the earnings of GM attributable to EDS between amounts available for the payment of dividends on Class E Common Stock and amounts available for the payment of dividends on the $1 2/3 Common Stock and (ii) the announced current dividend practices and policies of the GM Board, all as more fully described herein. General Motors, not EDS, is the issuer of Class E Common Stock. The GM Board is free to change dividend practices and policies with respect to Class E Common Stock, or any other class of General Motors common stock, at any time. PRICE RANGE AND DIVIDENDS The Class E Common Stock is listed and traded on the NYSE under the symbol "GME." The table below shows the range of reported per share sale prices on the NYSE Composite Tape for the Class E Common Stock for the periods indicated, and the dividends paid per share on the Class E Common Stock in such periods. The last reported sale price of the Class E Common Stock on the NYSE on April 12, 1996 was $52.75 per share.
CALENDAR YEAR HIGH LOW DIVIDENDS PAID - ------------- ------ ------ -------------- 1994 First Quarter.................................... $36.88 $27.50 $0.12 Second Quarter................................... 38.00 32.88 0.12 Third Quarter.................................... 38.50 33.00 0.12 Fourth Quarter................................... 39.50 34.75 0.12 1995 First Quarter.................................... $41.38 $36.88 $0.13 Second Quarter................................... 45.25 38.38 0.13 Third Quarter.................................... 47.50 41.50 0.13 Fourth Quarter................................... 52.63 43.88 0.13 1996 First Quarter.................................... $58.00 $50.00 $0.15 Second Quarter (through April 12, 1996).......... 56.75 52.25 --
DIVIDEND POLICY Subject to the rights of the holders of General Motors Preferred Stock (if any) and General Motors Preference Stock, under the General Motors Certificate of Incorporation, dividends on Class E Common Stock may be declared and paid out of the assets of General Motors only to the extent of the sum of (i) the paid in surplus of General Motors attributable to the Class E Common Stock plus (ii) an allocated portion of the earnings, determined as described herein, of GM attributable to EDS earned after General Motors' acquisition of EDS. The portion of General Motors' earnings attributable to EDS that is included in the amount available for the payment of dividends on Class E Common Stock (which amount is also used to calculate earnings per share 124 of Class E Common Stock) is determined by a fraction, the numerator of which is a number equal to the weighted average number of shares of Class E Common Stock outstanding (463.2 million for the first quarter of 1996) and the denominator of which was 484.4 million for the first quarter of 1996; provided, that such fraction shall never be greater than one. The amount so allocated is referred to in the General Motors Certificate of Incorporation as the "Available Separate Consolidated Net Income" of EDS. For purposes of determining the approximate earnings per share attributable to Class E Common Stock for financial reporting purposes, an investor may divide the quarterly earnings allocated to Class E Common Stock (the Available Separate Consolidated Net Income of EDS) by the weighted average number of shares of Class E Common Stock outstanding during such quarter, which is the numerator of the fraction described above. Approximately the same mathematical result may be obtained by dividing the quarterly earnings used for computation of Available Separate Consolidated Net Income of EDS (i.e., net income) by the denominator of the fraction described above. The denominator is sometimes referred to herein as the "Class E Dividend Base." Neither the February 1996 redemption of the Series C Preference Stock nor any conversion of shares of Series C Preference Stock into shares of Class E Common Stock prior to such redemption was dilutive of earnings attributable to Class E Common Stock for financial reporting purposes, as such shares affected the numerator but not the denominator of the fraction used in determining Available Separate Consolidated Net Income of EDS. After giving effect to the issuance of shares of Class E Common Stock upon the conversion of shares of Series C Preference Stock prior to such stock's redemption for a full quarter, such fraction would be approximately equal to one. The denominator used in determining the Available Separate Consolidated Net Income of EDS is adjusted as deemed appropriate by the GM Board to reflect subdivisions or combinations of the Class E Common Stock and to reflect certain transfers of capital to or from EDS. The GM Board's discretion to make such adjustments is limited by criteria set forth in the General Motors Certificate of Incorporation. In this regard, the GM Board has generally caused the denominator to decrease as shares of Class E Common Stock are purchased by EDS and to increase as shares of Class E Common Stock are used for EDS employee benefit plans or acquisitions. Dividend policy is one of the matters reviewed by the Capital Stock Committee of the GM Board. See "Relationship Between General Motors and EDS-- Pre-Split-Off Relationship" and "--Considerations Relating to Multi-Class Common Stock Capital Structure." The current dividend policy of the GM Board is to pay quarterly dividends on Class E Common Stock, when, as and if declared by the GM Board, at an annual rate equal to approximately 30% of the Available Separate Consolidated Net Income of EDS for the prior year. Under the current dividend policy, the quarterly dividend on the Class E Common Stock was $0.13 per share for 1995. In February 1996, the GM Board increased the quarterly dividend on Class E Common Stock from $0.13 per share to $0.15 per share. Under Delaware law and the General Motors Certificate of Incorporation, the GM Board is not required to declare dividends on any class of General Motors common stock. If and to the extent the GM Board chooses to declare dividends on any or all of the classes of its common stock, neither Delaware law nor the General Motors Certificate of Incorporation requires that there be any proportionate or other fixed relationship between the amount of dividends declared with respect to such different classes of common stock. The GM Board reserves the right to reconsider from time to time its practices and policies regarding dividends on General Motors' common stocks and to increase or decrease the dividends paid on General Motors' common stocks on the basis of General Motors' consolidated financial position, including liquidity, and other factors, including, with regard to Class E Common Stock, the earnings and consolidated financial position of EDS. Under the current dividend practices and policies of the GM Board, dividends on Class E Common Stock are not materially affected by developments involving the performance (operations, liquidity or financial condition) of General Motors (excluding EDS). Information concerning General Motors and its consolidated financial performance, including Management's Discussion and Analysis, may be found in the documents incorporated herein by reference, including the GM 1995 Form 10- K. There is no fixed relationship, on a per share or aggregate basis, between the cash dividends that may be paid by General Motors to holders of Class E Common Stock and cash dividends 125 or other amounts that may be paid by EDS to General Motors. However, it has been the practice of the EDS Board to pay quarterly cash dividends on the outstanding EDS common stock in an aggregate amount equal to the quarterly dividends per share paid by General Motors on Class E Common Stock multiplied by the Class E Dividend Base. See "Risk Factors Regarding General Motors after the Split-Off--Loss of Potential Availability of EDS Funds and Assets" and "Relationship Between General Motors and EDS--Pre-Split-Off Relationship." VOTING RIGHTS Under the General Motors Certificate of Incorporation, holders of Class E Common Stock may cast one-eighth of a vote per share on all matters submitted to General Motors stockholders for a vote, while holders of $1 2/3 Common Stock may cast one vote per share and holders of Class H Common Stock may cast one-half of a vote per share. Holders of all three classes of common stock vote together as a single class on all matters, except that separate class votes are required for certain amendments to the General Motors Certificate of Incorporation, including any amendment which adversely affects the rights, powers or privileges of any class, which must also be approved by the holders of that class voting separately as a class. LIQUIDATION RIGHTS In the event of the liquidation, dissolution or winding up of the business of General Motors, whether voluntary or involuntary, the General Motors Certificate of Incorporation provides that, after the holders of the Preferred Stock (if any) and Preference Stock receive the full preferential amounts to which they are entitled, holders of the Class E Common Stock, $1 2/3 Common Stock and Class H Common Stock will receive the assets remaining for distribution to the General Motors stockholders on a per share basis in proportion to the respective per share liquidation units of such classes and will have no direct claim against any particular assets of General Motors or any of its subsidiaries. Subject to adjustment, as described below, each share of Class E Common Stock, $1 2/3 Common Stock and Class H Common Stock would currently be entitled to liquidation units of approximately one-eighth (0.125), one (1.0) and one-half (0.5), respectively. Holders of Class E Common Stock have no direct rights in the equity or assets of EDS, but rather have rights in the equity and assets of General Motors (which include 100% of the stock of EDS). RECAPITALIZATION Under the General Motors Certificate of Incorporation, all outstanding shares of Class E Common Stock may be recapitalized as shares of $1 2/3 Common Stock (i) at any time after December 31, 1995, in the sole discretion of the GM Board (provided that, during each of the five full fiscal years preceding the exchange, the aggregate cash dividends on the Class E Common Stock have been no less than the product of the Payout Ratio (as defined below) for such year multiplied by the Available Separate Consolidated Net Income of EDS for the prior fiscal year) or (ii) automatically, if at any time General Motors disposes of substantially all of the business of EDS. In the event of such a recapitalization, each holder of Class E Common Stock would receive shares of $1 2/3 Common Stock having a market value, as of the valuation date provided for in the General Motors Certificate of Incorporation, equal to 120% of the market value of such holder's Class E Common Stock on such valuation date. Based on the dividends paid on Class E Common Stock in 1991 through 1995, the condition described in clause (i) above that would permit a recapitalization in the discretion of the GM Board during 1996 has been satisfied. As a result of the Merger, the General Motors Certificate of Incorporation will be amended so that the Split-Off will not result in any recapitalization of Class E Common Stock at the 120% exchange ratio. Holders of EDS Common Stock will have no rights comparable to such recapitalization rights. No fractional shares of $1 2/3 Common Stock would be issued in any such exchange. In lieu thereof, a holder of shares of Class E Common Stock would receive cash equal to the product of (A) the fraction of a share of $1 2/3 Common Stock to which the holder would otherwise have been entitled, multiplied by (B) the average market price per share of $1 2/3 Common Stock on such valuation date. 126 The "Payout Ratio" equals the lesser of (A) 0.25 or (B) the quotient of (x) the total cash dividends paid on $1 2/3 Common Stock for such fiscal year, divided by (y) the net income of General Motors for such fiscal year, minus the Available Separate Consolidated Net Income of EDS for such fiscal year and the Available Separate Consolidated Net Income of Hughes for such fiscal year. SUBDIVISION OR COMBINATION If General Motors subdivides (by stock split or otherwise) or combines (by reverse stock split or otherwise) the outstanding shares of the $1 2/3 Common Stock, the Class E Common Stock or the Class H Common Stock, the voting and liquidation rights of shares of Class E Common Stock and Class H Common Stock relative to $1 2/3 Common Stock will be appropriately adjusted. In the event of the issuance of shares of Class E Common Stock or Class H Common Stock as a dividend on shares of $1 2/3 Common Stock, the liquidation rights of the applicable class of Common Stock would be adjusted so that the relative aggregate liquidation rights of each stockholder would not be changed as a result of such dividend. CONSIDERATIONS RELATING TO MULTI-CLASS COMMON STOCK CAPITAL STRUCTURE Class E Common Stock is one of three classes of General Motors common stock. The General Motors Certificate of Incorporation restricts the power of the GM Board to declare and pay dividends on any one of the three classes of common stock to certain defined amounts which are attributable to each separate class of common stock and based on the legally available retained earnings of General Motors. For dividend purposes, this restriction serves to preserve the interest in retained earnings of holders of each class of GM common stock in relation to the interests therein of holders of the other two classes. However, this restriction does not result in a physical segregation of the assets of General Motors, EDS or Hughes, nor does it result in the establishment of separate accounts or dividend or liquidation preferences with respect to such assets for the benefit of the holders of any of the three separate classes of General Motors common stock. Holders of Class E Common Stock and Class H Common Stock have no direct rights in the equity or assets of EDS or Hughes, but rather, together with holders of $1 2/3 Common Stock, have certain liquidation rights in the equity and assets of General Motors (which include 100% of the stock of both EDS and Hughes). The existence of multiple classes of common stock with separate dividend rights as provided for in the General Motors Certificate of Incorporation can give rise to potential divergences among the interests of the holders of each of the separate classes of General Motors common stock with respect to various intercompany transactions and other matters. In this regard, the GM Board, in the discharge of its fiduciary duties, principally through its Capital Stock Committee (comprised entirely of independent directors of General Motors), oversees the policies, programs and practices of General Motors which may impact the potentially divergent interests of the three classes of General Motors common stock. The By-Laws of General Motors, in defining the role of the Capital Stock Committee, provide that such Committee shall oversee those matters in which the three classes of stockholders may have divergent interests, particularly as they relate to: (a) the business and financial relationships between General Motors or any of its units and EDS, between General Motors or any of its units and Hughes, and between EDS and Hughes; (b) dividends in respect of, disclosures to stockholders and the public concerning, and transactions by General Motors or any of its subsidiaries in, shares of Class E Common Stock or Class H Common Stock; and (c) any matters arising in connection therewith, all to the extent the Committee may deem appropriate, and to recommend such changes in such policies, programs and practices as the Committee may deem appropriate. In performing this function, the Capital Stock Committee's role is not to make decisions concerning matters referred to its attention, but rather to oversee the process by which decisions concerning such matters are made. The Committee does this with a view towards, among other things, assuring a process of fair dealing among General Motors, EDS and Hughes as well as fairness to the interests of all GM stockholders in the resolution of such matters. The Capital Stock Committee had a significant role in reviewing the terms of the Transactions to ensure the fairness thereof to all classes of General Motors common stock. See "Special Factors--Background of the Split- Off" and "Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions." 127 EDS CAPITAL STOCK Under the EDS Certificate of Incorporation, the authorized capital stock of EDS is 2,200,000,000 shares, of which 2,000,000,000 shares are EDS Common Stock, par value $0.01 per share, and 200,000,000 shares are preferred stock, par value $0.01 per share (the "EDS Preferred Stock"). The following descriptions (i) are summaries and do not purport to be complete and (ii) give effect to the consummation of the Split-Off. See "The Split-Off" and "Comparison of Class E Common Stock and EDS Common Stock." Reference is also made to the more detailed provisions of, and such descriptions are qualified in their entirety by reference to, the EDS Certificate of Incorporation and the EDS Bylaws, copies of which are filed with the Commission as exhibits to the Registration Statement of which this Solicitation Statement/Prospectus is a part. EDS COMMON STOCK Holders of EDS Common Stock will be entitled to one vote per share with respect to each matter submitted to a vote of stockholders of EDS, subject to voting rights that may be established for shares of EDS Preferred Stock, if any. Except as may be provided in connection with any EDS Preferred Stock or as may otherwise be required by law or the EDS Certificate of Incorporation, the EDS Common Stock will be the only capital stock of EDS entitled to vote in the election of directors. The EDS Common Stock will not have cumulative voting rights. Immediately prior to the consummation of the Split-Off, General Motors was the only holder of record of EDS Common Stock. Subject to the prior rights of holders of EDS Preferred Stock, if any, holders of the EDS Common Stock are entitled to receive such dividends as may be lawfully declared from time to time by the EDS Board. Upon any liquidation, dissolution or winding up of EDS, whether voluntary or involuntary, holders of the EDS Common Stock will be entitled to receive such assets as are available for distribution to stockholders after there shall have been paid or set apart for payment the full amounts necessary to satisfy any preferential or participating rights to which the holders of each outstanding series of EDS Preferred Stock are entitled by the express terms of such series. The outstanding shares of EDS Common Stock are fully paid and nonassessable. The EDS Common Stock will not have any preemptive, subscription or conversion rights. Additional shares of authorized EDS Common Stock may be issued, as authorized by the EDS Board from time to time, without stockholder approval, except as may be required by applicable stock exchange requirements. EDS PREFERRED STOCK The EDS Board is empowered, without approval of the stockholders, to cause shares of EDS Preferred Stock to be issued in one or more series, with the numbers of shares of each series and the powers, preferences, rights and limitations of each series to be determined by it. Among the specific matters that may be determined by the EDS Board are the rate of dividends, if any; rights and terms of conversion or exchange, if any; the terms of redemption, if any; the amount payable in the event of any voluntary liquidation, dissolution or winding up of the affairs of EDS; the terms of a sinking or purchase fund, if any; and voting rights, if any. The Series A EDS Preferred Stock described under "EDS Rights Agreement" below is a series of EDS Preferred Stock that has been authorized by the EDS Board. Although EDS has no current plans to issue EDS Preferred Stock, the issuance of shares of EDS Preferred Stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal. For example, a business combination could be impeded by the issuance of a series of EDS Preferred Stock containing class voting rights that would enable the holder or holders of such series to block any such transaction. Alternatively, a business combination could be facilitated by the issuance of a series of EDS Preferred Stock having sufficient voting rights to provide a required percentage vote of the stockholders. In 128 addition, under certain circumstances, the issuance of EDS Preferred Stock could adversely affect the voting power of the holders of the EDS Common Stock. Although the EDS Board is required to make any determination to issue any such stock based on its judgment as to the best interests of the stockholders of EDS, the EDS Board could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over prevailing market prices of such stock. The EDS Board does not at present intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or applicable stock exchange requirements. EDS RIGHTS AGREEMENT There will be attached to each share of EDS Common Stock offered hereby one right (a "Right") to purchase from EDS a unit consisting of one one-hundredth of a share (a "Unit") of Series A Junior Participating Preferred Stock, par value $0.01 per share (the "Series A EDS Preferred Stock"), at a purchase price of $200 per Unit, subject to adjustment in certain events (the "Purchase Price"). The following description of the Rights (i) is a summary and does not purport to be complete and (ii) gives effect to the consummation of the Split- Off. Reference is also made to the more detailed provisions of, and such description is qualified in its entirety by reference to, the EDS Rights Agreement, a copy of which is filed with the Commission as an exhibit to the Registration Statement of which this Solicitation Statement/Prospectus is a part. Initially, the Rights will be attached to all certificates representing outstanding shares of EDS Common Stock, including the shares of EDS Common Stock issued in the Split-Off, and no separate certificates for the Rights ("Rights Certificates") will be distributed. The Rights will separate from the EDS Common Stock and a "Distribution Date" will occur upon the earlier of (i) ten days following a public announcement that a person or group of affiliated or associated persons (an "Acquiring Person") has acquired, or obtained the right to acquire, beneficial ownership of 10% or more of the outstanding shares of EDS Common Stock (the date of the announcement being the "Stock Acquisition Date"), or (ii) ten business days (or such later date as may be determined by the EDS Board before the Distribution Date occurs) following the commencement of a tender offer or exchange offer that would result in a person's becoming an Acquiring Person. The GM Hourly Plan, and any trustee of or other fiduciary with respect to such plan (when acting in such capacity), will not be an Acquiring Person solely as a result of its acquiring EDS Common Stock in the Split-Off but may thereafter become an Acquiring Person if it shall purchase or otherwise become the beneficial owner of additional shares of EDS Common Stock constituting 1% or more of the then outstanding shares of EDS Common Stock unless the Hourly Plan is not then the beneficial owner of 10% or more of the then outstanding shares of EDS Common Stock. Until the Distribution Date, (a) the Rights will be evidenced by the certificates representing EDS Common Stock and will be transferred with and only with such certificates, (b) certificates representing EDS Common Stock will contain a notation incorporating the EDS Rights Agreement by reference and (c) the surrender for transfer of any certificate for EDS Common Stock will also constitute the transfer of the Rights associated with the stock represented by such certificate. The Rights are not exercisable until the Distribution Date and will expire at the close of business on March 12, 2006, unless earlier redeemed or exchanged by EDS as described below. As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of EDS Common Stock as of the close of business on the Distribution Date and, from and after the Distribution Date, the separate Rights Certificates alone will represent the Rights. All shares of EDS Common Stock issued prior to the Distribution Date will be issued with Rights. Shares of EDS Common Stock issued after the Distribution Date in connection with certain employee benefit plans or upon conversion of certain securities will be issued with Rights. Except as otherwise determined by the EDS Board, no other shares of EDS Common Stock issued after the Distribution Date will be issued with Rights. In the event (a "Flip-In Event") that a person becomes an Acquiring Person (except pursuant to a tender or exchange offer for all outstanding shares of EDS Common Stock at a price and on terms that a majority of the 129 directors of EDS who are not officers or employees of EDS and who are not representatives, nominees, affiliates or associates of the Acquiring Person determines to be fair to and otherwise in the best interests of EDS and its stockholders (a "Permitted Offer")), each holder of a Right will thereafter have the right to receive, upon exercise of such Right, a number of shares of EDS Common Stock (or, in certain circumstances, cash, property or other securities of EDS) having a Current Market Price (as defined in the EDS Rights Agreement) equal to two times the Purchase Price of the Right. Notwithstanding the foregoing, following the occurrence of any Flip-In Event, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person (or by certain related parties) will be null and void in the circumstances set forth in the EDS Rights Agreement. However, the Rights are not exercisable following the occurrence of any Flip-In Event until such time as the Rights are no longer redeemable by EDS as set forth below. In the event (a "Flip-Over Event") that, at any time on or after the Stock Acquisition Date, (i) EDS is acquired in a merger or other business combination transaction (other than certain mergers that follow a Permitted Offer), or (ii) 50% or more of EDS' assets or earning power is sold or transferred, each holder of a Right (except Rights that previously have become void as set forth above) shall thereafter have the right to receive, upon exercise, a number of shares of common stock of the acquiring company having a Current Market Price equal to two times the Purchase Price of the Right. Flip- In Events and Flip-Over Events are collectively referred to as "Triggering Events." The Purchase Price payable, and the number of Units of Series A EDS Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Series A EDS Preferred Stock, (ii) if holders of the Series A EDS Preferred Stock are granted certain rights or warrants to subscribe for Series A EDS Preferred Stock or certain convertible securities at less than the current market price of the Series A EDS Preferred Stock, or (iii) upon the distribution to holders of the Series A EDS Preferred Stock of evidences of indebtedness, cash or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above). With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price. No fractional Units will be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Series A EDS Preferred Stock on the last trading date prior to the date of exercise. Pursuant to the EDS Rights Agreement, EDS reserves the right to require prior to the occurrence of a Triggering Event that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Series A EDS Preferred Stock will be issued. At any time until ten days following the Stock Acquisition Date, EDS may redeem the Rights in whole, but not in part, at a price of $.01 per Right, payable, at the option of EDS, in cash, shares of EDS Common Stock or such other consideration as the EDS Board may determine. Immediately upon the effectiveness of the action of the EDS Board ordering redemption of the Rights, the Rights will terminate and the only right of the holders of Rights will be to receive the $.01 redemption price. At any time after the occurrence of a Flip-In Event and prior to a person's becoming the beneficial owner of 50% or more or the shares of EDS Common Stock then outstanding, EDS may, at its option, exchange the Rights (other than Rights owned by an Acquiring Person or an affiliate or an associate of an Acquiring Person, which will have become void), in whole or in part, at an exchange ratio of one share of EDS Common Stock and/or other equity securities deemed to have the same value as one share of EDS Common Stock, per Right, subject to adjustment. Other than certain provisions relating to the principal economic terms of the Rights, any of the provisions of the EDS Rights Agreement may be amended by the EDS Board prior to the Distribution Date. Thereafter, the provisions of the EDS Rights Agreement may be amended by the EDS Board in order to cure any ambiguity, defect or inconsistency, to make changes that do not materially adversely affect the interests of holders of Rights 130 (excluding the interests of any Acquiring Person), or to shorten or lengthen any time period under the EDS Rights Agreement; provided, however, that no amendment to lengthen the time period governing redemption shall be made at such time as the Rights are not redeemable. Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of EDS, including, without limitation, the right to vote or to receive dividends. Any shares of Series A EDS Preferred Stock that may be issued upon exercise of the Rights will be entitled to receive, when, as and if declared, preferential quarterly dividends in cash in an amount per share equal to the greater of $1.00 per quarter and 100 times the aggregate per share cash dividend paid on the EDS Common Stock, and noncash dividends payable in kind in an amount per share equal to 100 times any noncash dividend or other distribution declared on the EDS Common Stock. In the event of the liquidation, dissolution or winding up of EDS, holders of any such Series A EDS Preferred Stock will be entitled to receive (after satisfaction of or provision for liabilities and any preferential amounts payable with respect to any EDS Preferred Stock ranking senior to the Series A EDS Preferred Stock) liquidation payments per share in an amount equal to accrued but unpaid dividends plus the greater of $100.00 or 100 times the per share amount distributed to holders of EDS Common Stock. In the event of any merger, consolidation or other transaction in which shares of EDS Common Stock are exchanged, holders of shares of Series A EDS Preferred Stock will be entitled to receive a per share amount and type of consideration equal to 100 times the per share amount received by holders of EDS Common Stock. Any Series A EDS Preferred Stock will be redeemable at the option of EDS in whole at any time or in part from time to time, for cash in an amount per share equal to 100 times the market price of the EDS Common Stock (determined on the basis of an average closing price over a specified ten trading day period). Holders of Series A EDS Preferred Stock will have 100 votes per share and, except as otherwise provided in the EDS Certificate of Incorporation or required by law, shall vote together with holders of EDS Common Stock as a single class. The rights of the Series A EDS Preferred Stock as to dividends, liquidation and voting are protected by anti-dilution provisions. Whenever dividend payments on the Series A EDS Preferred Stock are in arrears, EDS will not (i) purchase or redeem any shares of Series A Preferred Stock or shares ranking on a parity with the Series A EDS Preferred Stock except in accordance with a purchase offer to all holders, (ii) declare or pay dividends on or purchase or redeem any shares of stock ranking junior to the Series A EDS Preferred Stock or (iii) declare or pay dividends on or purchase or redeem any shares of stock ranking on a parity with the Series A EDS Preferred Stock except dividends paid ratably on the Series A EDS Preferred Stock and all such parity stock and except purchases or redemptions of such parity stock in exchange for junior stock. If dividend payments on any Series A EDS Preferred Stock are in arrears for six quarters, the holders of the Series A EDS Preferred Stock (together with holders of any other Preferred Stock with similar rights) will have the right to elect two directors of EDS. The Rights will have certain antitakeover effects. The Rights will cause substantial dilution to any person or group that attempts to acquire EDS without the approval of the EDS Board. As a result, the overall effect of the Rights may be to render more difficult or discourage any attempt to acquire EDS even if such acquisition may be favorable to the interests of EDS' stockholders. Because the EDS Board can redeem the Rights or approve a Permitted Offer, the Rights should not interfere with a merger or other business combination approved by the EDS Board. The Rights have been distributed prior to the consummation of the Split-Off to protect EDS' stockholders from coercive or abusive takeover tactics and to give the EDS Board more negotiating leverage in dealing with prospective acquirors. LIMITATION ON EDS DIRECTORS' LIABILITY The EDS Certificate of Incorporation provides, as authorized by Section 102(b)(7) of the DGCL, that a director of EDS will not be personally liable to EDS or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to EDS or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. 131 The inclusion of this provision in the EDS Certificate of Incorporation may have the effect of reducing the likelihood of derivative litigation against directors, and may discourage or deter stockholders or management from bringing a lawsuit against directors for breach of their duty of care, even though such an action, if successful, might otherwise have benefited EDS and its stockholders. SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW EDS is a Delaware corporation and subject to Section 203 of the DGCL. Generally, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the time such stockholder became an interested stockholder, unless (i) prior to such time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder, (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, or (iii) at or subsequent to such time, the business combination is approved by the board of directors and authorized by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. A "business combination" includes (a) any merger or consolidation of the corporation with the interested stockholder, (b) any sale, lease, exchange or other disposition, except proportionately as a stockholder of such corporation, to or with the interested stockholder of assets of the corporation having an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the corporation or the aggregate market value of all the outstanding stock of the corporation, (c) certain transactions resulting in the issuance or transfer by the corporation of stock of the corporation to the interested stockholder, (d) certain transactions involving the corporation which have the effect of increasing the proportionate share of the stock of any class or series of the corporation which is owned by the interested stockholder or (e) certain transactions in which the interested stockholder receives financial benefits provided by the corporation. An "interested stockholder" generally is (i) any person that owns 15% or more of the outstanding voting stock of the corporation, (ii) any person that is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three-year period prior to the date on which it is sought to be determined whether such person is an interested stockholder and (iii) the affiliates or associates of any such person. The EDS Board has approved the distribution of EDS Common Stock to the GM Hourly Plan Special Trust pursuant to the Merger for purposes of Section 203 so long as the GM Hourly Plan Special Trust does not purchase or otherwise become the owner of additional shares of capital stock constituting 1% or more of the aggregate voting power of the outstanding capital stock of EDS at any time that it is the owner of 15% or more of the outstanding voting stock of EDS. The EDS Board further provided that such approval would not apply to any transferee of EDS capital stock from the GM Hourly Plan Special Trust. LIMITATIONS ON CHANGES IN CONTROL The EDS Bylaws contain provisions requiring that advance notice be delivered to EDS of any business to be brought by a stockholder before an annual meeting of stockholders and providing for certain procedures to be followed by stockholders in nominating persons for election to the EDS Board. Generally, such advance notice provisions provide that the stockholder must give written notice to the Secretary of EDS not less than 90 days nor more than 150 days before the scheduled date of the annual meeting of stockholders of EDS. The notice must set forth specific information regarding such stockholder and such business or director nominee, as described in the EDS Bylaws. It is currently anticipated that the deadline for receipt of such notices with respect to EDS' 1997 Annual Meeting of Stockholders will be on March 6, 1997. The EDS Certificate of Incorporation provides that, except as may be provided by the EDS Certificate of Incorporation or in the resolution or resolutions providing for the issuance of any series of EDS Preferred Stock, the number of directors shall not be fewer than three nor more than fifteen and provides for a classified Board of Directors, consisting of three classes as nearly equal in size as practicable. Each class holds office until the third annual stockholders' meeting for election of directors following the most recent election of such class, except that the initial terms of the three classes expire in 1997, 1998 and 1999, respectively. See "EDS Management 132 and Executive Compensation-- Directors and Executive Officers." A director of EDS may be removed only for cause. The EDS Certificate of Incorporation provides that stockholders may not act by written consent in lieu of a meeting, unless such written consent is unanimous. Special meetings of the stockholders may be called by the Chairman of the EDS Board or by the EDS Board, but may not be called by stockholders. The EDS Bylaws may be amended by the EDS Board or by the affirmative vote of the holders of at least 66 2/3% of the aggregate voting power of the outstanding capital stock of EDS entitled to vote in the election of directors. The EDS Certificate of Incorporation also contains a "fair price" provision that applies to certain business combination transactions involving any person or group that beneficially owns at least 10% of the aggregate voting power of the outstanding capital stock of EDS (a "Related Person"). The "fair price" provision requires the affirmative vote of the holders of (i) at least 80% of the voting stock of EDS and (ii) at least 66 2/3% of the voting stock of EDS not beneficially owned by the Related Person, to approve certain transactions between the Related Person and EDS or its subsidiaries, including any merger, consolidation or share exchange, any sale, lease, exchange, pledge or other disposition of assets of EDS or its subsidiaries having a fair market value of at least $10 million, any transfer or issuance of securities of EDS or any of its subsidiaries, any adoption of a plan or proposal by EDS of voluntary liquidation or dissolution of EDS, certain reclassifications of securities or recapitalizations of EDS or certain other transactions, in each case involving the Related Person. This voting requirement will not apply to certain transactions, including (a) any transaction in which the consideration to be received by the holders of each class of capital stock of EDS is (x) the same in form and amount as that paid in a tender offer in which the Related Person acquired at least 50% of the outstanding shares of such class and which was consummated not more than one year earlier or (y) not less in amount than the highest per share price paid by the Related Person for shares of such class or (b) any transaction approved by EDS' continuing directors (as defined in the EDS Certificate of Incorporation). The GM Hourly Plan, and any trustee of or other fiduciary with respect to such plan (when acting in such capacity), will not be a Related Person solely as a result of its acquiring EDS Common Stock in the Split-Off but may thereafter become a Related Person if it shall purchase or otherwise become the beneficial owner of additional shares of capital stock constituting 1% or more of the aggregate voting power of the outstanding capital stock of EDS unless the GM Hourly Plan is not then the beneficial owner of 10% or more of the aggregate voting power of the outstanding capital stock of EDS. This provision could have the effect of delaying or preventing a change in control of EDS in a transaction or series of transactions that did not satisfy the "fair price" criteria. The provisions of the EDS Certificate of Incorporation relating to the EDS Board, the limitation of actions taken by written consent, the calling of special meetings, the amendment of the EDS Bylaws and the "fair price" provision may be amended only by the affirmative vote of the holders of at least 80% of the aggregate voting power of the outstanding capital stock of EDS entitled to vote for the election of directors. The foregoing provisions of the EDS Certificate of Incorporation and the EDS Bylaws, together with the EDS Rights Agreement and the provisions of Section 203 of the DGCL, could have the effect of delaying, deferring or preventing a change in control of EDS or the removal of existing management, of deterring potential acquirors from making an offer to stockholders of EDS and of limiting any opportunity to realize premiums over prevailing market prices for EDS Common Stock in connection therewith. For a description of certain other factors that could limit such changes in control and offers, see "Risk Factors Regarding EDS after the Split-Off--Certain Limitations on Changes in Control of EDS." This could be the case notwithstanding that a majority of EDS' stockholders might benefit from such a change in control or offer. EDS TRANSFER AGENT AND REGISTRAR The Bank of New York will serve as the Transfer Agent and Registrar for the EDS Common Stock. 133 COMPARISON OF CLASS E COMMON STOCK AND EDS COMMON STOCK GENERAL Upon consummation of the Split-Off, each outstanding share of Class E Common Stock will be converted into one share of EDS Common Stock, holders of Class E Common Stock will become stockholders of EDS rather than of General Motors, and the Class E Common Stock will cease to exist. See "The Split-Off." As stockholders of EDS, such holders' rights will continue to be governed by Delaware law and will be governed by the EDS Certificate of Incorporation and the EDS Bylaws, which differ in certain material respects from the General Motors Certificate of Incorporation and the General Motors By-Laws, as summarized below. For a more detailed description of the terms of the Class E Common Stock and the EDS Common Stock and the applicable provisions of Delaware law and the Certificate of Incorporation and Bylaws of both General Motors and EDS, see "Class E Common Stock" and "EDS Capital Stock." See also "Risk Factors Regarding EDS after the Split-Off--No Prior Public Market for EDS Common Stock; No Assurance as to Market Price." The following discussion relating to the EDS Common Stock, the EDS Certificate of Incorporation and the EDS Bylaws give effect to the consummation of the Split-Off. DIVIDEND POLICY Under the General Motors Certificate of Incorporation, dividends on the Class E Common Stock may be declared and paid only to the extent of the sum of (i) the paid in surplus of General Motors attributable to the Class E Common Stock plus (ii) an allocated portion of the earnings of GM attributable to EDS, determined as described in "Class E Common Stock." The current dividend policy of the GM Board is to pay quarterly dividends on Class E Common Stock, when, as and if declared by the GM Board, at an annual rate equal to approximately 30% of Available Separate Consolidated Net Income of EDS for the prior year. Under this dividend policy, the quarterly dividend on Class E Common Stock for 1995 was $0.13 per share. In February 1996, the GM Board increased the quarterly dividend on Class E Common Stock to $0.15 per share. Dividend policy with respect to EDS capital stock will be determined by the EDS Board, which is not obligated to declare any dividends on any class of EDS capital stock. For a description of EDS' currently anticipated dividend policy following the Split-Off, see "Plans and Proposals of EDS--EDS Dividend Policy." VOTING RIGHTS Holders of Class E Common Stock may cast one-eighth of a vote per share on all matters submitted to a vote of GM stockholders under the General Motors Certificate of Incorporation and vote together as a single class with holders of the $1 2/3 Common Stock and Class H Common Stock on all matters (including the election of directors), with specified exceptions. Holders of EDS Common Stock will be entitled to one vote per share under the EDS Certificate of Incorporation with respect to all matters submitted to a vote of EDS stockholders. Holders of EDS Common Stock will have the right to vote directly on matters relating to EDS, while holders of Class E Common Stock vote directly on matters relating to General Motors. Except as may be provided in connection with any EDS Preferred Stock or as may otherwise be required by law or the EDS Certificate of Incorporation, the EDS Common Stock will be the only capital stock of EDS entitled to vote in the election of directors. LIQUIDATION RIGHTS The General Motors Certificate of Incorporation provides that upon the liquidation, dissolution or winding up of General Motors, after the holders of General Motors Preferred Stock (if any) and Preference Stock receive the full preferential amounts to which they are entitled, each holder of Class E Common Stock will share in the distribution of the available remaining assets of General Motors (as distinguished from EDS) with all other holders of GM common stock in proportion to their respective liquidation units of approximately one-eighth (0.125) per share of Class E Common Stock, one (1.0) per share of $1 2/3 Common Stock and one-half (0.5) per share of Class H Common Stock. Under the EDS Certificate of Incorporation, holders of EDS Common Stock will receive the assets of EDS available for distribution to its stockholders in the event of its liquidation, dissolution or winding up, provided that preferential or participating amounts owing to the holders of any EDS Preferred Stock have been paid or set aside for payment previously. 134 RECAPITALIZATION Holders of EDS Common Stock will have no comparable right to that which they possess as holders of Class E Common Stock with respect to the potential recapitalization of their Class E Common Stock into $1 2/3 Common Stock at a 120% exchange ratio, as currently provided by the General Motors Certificate of Incorporation upon a disposition by General Motors of substantially all of the business of EDS and under certain other circumstances. Holders of EDS Common Stock will, however, have the potential to realize premiums over prevailing market prices for EDS Common Stock in connection with certain corporate transactions, including tender offers for EDS Common Stock and change in control transactions involving EDS, although there can be no assurance in this regard. See "--Certain Limitations on Changes in Control of EDS." Such premiums, if any, will not be limited by any formula in the EDS Certificate of Incorporation comparable to that relating to the recapitalization of Class E Common Stock in the General Motors Certificate of Incorporation. CERTAIN LIMITATIONS ON CHANGES IN CONTROL OF EDS The EDS Certificate of Incorporation and the EDS Bylaws contain certain provisions, such as a "fair price" provision applicable to certain business combinations, a provision prohibiting stockholder action by written consent unless such action is unanimous and provisions limiting the ability of stockholders to call special meetings, which are not present in the General Motors Certificate of Incorporation or the General Motors By-Laws and which could have the effect of delaying, deferring or preventing a change in control of EDS and of limiting any opportunity to realize premiums over prevailing market prices for EDS Common Stock in connection therewith. The EDS Rights Agreement, which also has no equivalent at General Motors, could have the same effect. EDS, like General Motors, is subject to Section 203 of the DGCL. Furthermore, in order to preserve the tax-free status of the Split-Off, under the Separation Agreement, EDS will be prohibited, until after the two- year anniversary of the Effective Time and unless certain conditions are satisfied, from entering into (i) certain secondary capital stock transactions whereby a person would acquire, from holders of outstanding shares of EDS capital stock, a number of shares of EDS capital stock that would comprise more than 15% of the number of issued and outstanding shares of EDS Common Stock; or (ii) any other transaction that would be reasonably likely to jeopardize the tax-free status of the Split-Off. In addition, the Separation Agreement will prohibit EDS, until after the six-month anniversary of the Effective Time, from entering into any transaction that would result in any person acquiring from EDS a number of shares of EDS capital stock that, when aggregated with all other shares of EDS capital stock then owned by such person, would constitute more than 20% of the total combined voting power of EDS voting stock or 20% of the total number of outstanding shares of any class or series of EDS non-voting stock. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--Separation Agreement." The Master Services Agreement will also provide General Motors with certain termination rights upon the occurrence of certain changes in control of EDS. See "Relationship Between General Motors and EDS--Post-Split-Off Arrangements--IT Services Agreements." In addition, the GM Hourly Plan Special Trust is a party to the Registration Rights Agreement, which contains certain restrictions on its ability to transfer the shares of Class E Common Stock held by it (including by tendering into a tender offer), which restrictions will continue to apply to its holdings of EDS Common Stock after the consummation of the Split-Off. General Motors and the GM Hourly Plan Special Trust are also parties to the Transfer Agreement, which is intended to preserve the tax-free status of the Split-Off and which contains restrictions on the ability of the GM Hourly Plan Special Trust to transfer Class E Common Stock and to vote in favor of certain business combinations involving EDS, which restrictions will apply to the EDS Common Stock for a period generally of two years after the Split-Off. See "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS--GM Hourly Plan Special Trust." The contractual restrictions to which the shares of EDS Common Stock owned by the GM Hourly Plan Special Trust are subject, as well as the terms of the Separation Agreement and the IT Services Agreements, could have the effect of making more difficult or discouraging certain change in control transactions involving EDS, including tender offers for EDS Common Stock, that could give the holders of EDS Common Stock the opportunity to realize a premium over the then prevailing market price of such stock. 135 SOLICITATION OF WRITTEN CONSENT OF GENERAL MOTORS COMMON STOCKHOLDERS MATTERS TO BE CONSIDERED Transactions This Solicitation Statement/Prospectus is being furnished to General Motors common stockholders in connection with the solicitation by the GM Board of written consents approving the Transactions, including the adoption of the Merger Agreement, pursuant to which, among other things, (i) Mergeco will be merged with and into General Motors, with General Motors being the surviving corporation, (ii) each outstanding share of Class E Common Stock will be converted automatically into one share of EDS Common Stock and (iii) provisions in the General Motors Certificate of Incorporation regarding the Class E Common Stock (including the provisions that require Class E Common Stock to be recapitalized into $1 2/3 Common Stock at a 120% exchange ratio upon a disposition by GM of substantially all of the business of EDS and under certain other circumstances) will be deleted and certain other provisions therein will be amended as described herein. The full text of the Merger Agreement, including the attached Article Fourth of the General Motors Certificate of Incorporation, as proposed to be amended, is attached as Appendix A to this Solicitation Statement/Prospectus and is incorporated herein by reference. See "The Split-Off." Consummation of the Transactions is conditioned upon, among other things, receiving the consent of the common stockholders of General Motors. Approval of the Transactions is independent of the vote on the Amended EDS Incentive Plan and will require the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. If the Transactions, including the Merger Agreement, are so approved, the Merger will become effective upon the filing of a certificate of merger with the Secretary of State of the State of Delaware. Amended EDS Incentive Plan This Solicitation Statement/Prospectus is also being furnished by General Motors to solicit written consents of General Motors common stockholders to approve the Amended EDS Incentive Plan, which amends and restates the Existing EDS Incentive Plan. Approval of the Amended EDS Incentive Plan is independent of the vote on the Transactions and will require the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, and (ii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. The full text of the Amended EDS Incentive Plan is attached as Appendix D to this Solicitation Statement/Prospectus and is incorporated herein by reference. See "EDS Management and Executive Compensation--Amended EDS Incentive Plan." Approval of the Amended EDS Incentive Plan by the common stockholders of General Motors is being sought to ensure that the deductibility by EDS, for U.S. federal income tax purposes, of certain performance-based awards made under the Plan will not be limited by Section 162(m) of the Code. Section 162(m) restricts a publicly traded company from claiming and receiving a deduction, for U.S. federal income tax purposes, in respect of compensation paid to certain employees in an amount in excess of $1 million for any such employee during any taxable year. An exception applies to this limitation, however, in the case of certain performance-based compensation. It is intended that approval of the Amended EDS Incentive Plan by the common stockholders of General Motors will satisfy certain requirements for such performance-based exception. See "EDS Management and Executive Compensation--Amended EDS Incentive Plan--Certain Tax Code Limitations on Deductibility." 136 ACTION BY WRITTEN CONSENT Transactions In lieu of a special meeting of General Motors common stockholders, action on the Transactions, including the Merger Agreement, will be taken by written consent. The Transactions will be consummated on a date to be determined by GM, which is expected to be as soon as practicable after consents have been received and not revoked from holders of the number of outstanding shares of $1 2/3 Common Stock, Class E Common Stock and Class H Common Stock required for their approval, but which will not in any event be sooner than 20 business days after the date of mailing of this Solicitation Statement/Prospectus. Notwithstanding the foregoing, no consent shall be effective to approve the Transactions unless, within 60 days of the earliest dated consent to the Transactions delivered to General Motors, the number of consents required to approve the Transactions are delivered to General Motors. Amended EDS Incentive Plan If written consents have been received and not revoked from holders of the number of outstanding shares of $1 2/3 Common Stock, Class E Common Stock and Class H Common Stock required for the approval of the Amended EDS Incentive Plan prior to the consummation of the Split-Off, the Amended EDS Incentive Plan will become effective in its entirety upon such consummation. Notwithstanding the foregoing, no consent shall be effective to approve the Amended EDS Incentive Plan unless, within 60 days of the earliest dated consent to the Amended EDS Incentive Plan delivered to General Motors, the number of consents required to approve the Amended EDS Incentive Plan are delivered to General Motors. If the Amended EDS Incentive Plan is not approved by the common stockholders of General Motors, such plan will nonetheless become effective upon consummation of the Split-Off insofar as it relates to Nonemployee Directors (as defined in "EDS Management and Executive Compensation--Amended EDS Incentive Plan") but will not become effective insofar as it relates to employees of EDS and its subsidiaries. Furthermore, if the Amended EDS Incentive Plan is not approved by the common stockholders of General Motors, the Existing EDS Incentive Plan will remain in effect. See "EDS Management and Executive Compensation--Existing EDS Incentive Plan." General Only General Motors common stockholders of record on April 10, 1996 (the Record Date) are entitled to consent with respect to each of the two proposals being submitted for General Motors common stockholder consent. On the Record Date, there were outstanding approximately 755.3 million shares of $1 2/3 Common Stock held by approximately 614,126 holders of record, approximately 485.7 million shares of Class E Common Stock held by approximately 268,123 holders of record and approximately 97.9 million shares of Class H Common Stock held by approximately 260,893 holders of record. When voting together as a single class in connection with each of the two proposals, holders of record of $1 2/3 Common Stock are entitled to one vote per share, holders of record of Class E Common Stock are entitled to one-eighth of a vote per share and holders of record of Class H Common Stock are entitled to one-half of a vote per share. As of the Record Date, directors and officers of General Motors held an aggregate of 660,285 outstanding shares of $1 2/3 Common Stock, 233,465 outstanding shares of Class E Common Stock, and 173,061 outstanding shares of Class H Common Stock. As of the Record Date, persons expected to be directors and executive officers of EDS upon consummation of the Split-Off held an aggregate of 20 outstanding shares of $1 2/3 Common Stock, 787,502 outstanding shares of Class E Common Stock, and 10 outstanding shares of Class H Common Stock. In each case, such holdings constituted, as of the Record Date, less than 1% of the outstanding shares of each class of GM common stock. See "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS." The GM Board has unanimously recommended that each of the two proposals being submitted for General Motors common stockholder consent be approved. To the best of General Motors' knowledge, all of General 137 Motors' directors and executive officers currently intend to consent to each of the two proposals and, except as described under "Summary--The Transactions" and "Special Factors--Background of the Split-Off" and "Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions," none of General Motors' executive officers who are not directors have made any recommendations with respect to either proposal. As of the Record Date, the GM Hourly Plan Special Trust beneficially owned approximately 149.5 million shares of Class E Common Stock (or approximately 31% of the Class E Common Stock outstanding). The GM Hourly Plan Trustees, as independent fiduciaries within the meaning of ERISA, have the authority and discretion to direct the voting of such shares, including in connection with each of the two proposals described herein. As of the date hereof, the GM Hourly Plan Trustees have not informed General Motors of their intent with respect to such proposals. For information regarding the procedures by which shares held in savings and incentive plans of General Motors will be voted, see "--Consents" below. CONSENTS The shares represented by each executed consent submitted with respect to the proposal to approve the Transactions, including the adoption of the Merger Agreement, will be deemed to have approved the Transactions. The shares represented by each executed consent submitted with respect to the proposal to approve the Amended EDS Incentive Plan will be deemed to have approved the Amended Incentive Plan. Approval of the Amended EDS Incentive Plan is independent of the vote on the Transactions. Failure to execute and submit a consent to either proposal will have the effect of a vote against such proposal. In addition, under the rules of the NYSE, brokers who hold shares in street names may not consent on behalf of customers to non-routine proposals such as those to approve the Transactions, including the adoption of the Merger Agreement, and to approve the Amended EDS Incentive Plan, without specific instructions from such customers. Thus, "broker non-votes" with respect to either the proposal to approve the Transactions, including the adoption of the Merger Agreement, or the proposal to approve the Amended EDS Incentive Plan will have the effect of a vote against such proposal. If a General Motors common stockholder is a participant in the General Motors Savings-Stock Purchase Program for Salaried Employees in the United States, the General Motors Personal Savings Plan for Hourly-Rate Employees in the United States, the General Motors Canadian Savings-Stock Purchase Program, the EDS Deferred Compensation Plan, the EDS Puerto Rico Savings Plan, the Hughes Salaried Employees' Thrift and Savings Plan, the Hughes Tucson Bargaining Employees' Thrift and Savings Plan, the Hughes California Hourly Employees' Thrift and Savings Plan, the Hughes Thrift and Savings Plan, the Saturn Individual Savings Plan for Represented Members, the Saturn Personal Choices Savings Plan for Non-Represented Members or the GMAC Mortgage Corporation Savings Incentive Plan, each consent will also serve as a voting instruction for the trustees, plan committees or independent fiduciaries of those plans. With respect to the General Motors Savings-Stock Purchase Program for Salaried Employees in the United States, the General Motors Personal Savings Plan for Hourly-Rate Employees in the United States, the Saturn Individual Savings Plan for Represented Members, the Saturn Personal Choices Savings Plan for Non-Represented Members and the EDS Deferred Compensation Plan, if voting instructions are not received for shares in such plans, those shares will be voted by the trustee, plan committee or independent fiduciary. For the remainder of the plans, shares in such plans will not be voted unless the consent is executed and returned. If a General Motors common stockholder participates in any of these plans or maintains other accounts under a different name (e.g., with and without a middle initial), such stockholder may receive more than one set of solicitation materials. To ensure that all shares are voted, such stockholder must execute and return every consent received. Brokers, dealers, banks, voting trustees and their nominees who desire a supply of this solicitation material for transmittal by them to beneficial owners should write to General Motors Corporation, c/o Morrow & Co., Inc., 909 Third Avenue, 20th Floor, New York, NY 10022-4799. 138 Any consent given pursuant to this solicitation with respect to either of the two proposals being submitted for General Motors common stockholder consent may be revoked by the person giving it at any time before unrevoked consents representing the requisite number of shares required to approve the corporate action with respect to such proposal are delivered to General Motors. Consents may be revoked by filing with the Secretary of General Motors a written notice of revocation or another form of written consent bearing a date later than the date of the consent. Any such notice of revocation or written consent should be sent to General Motors Corporation, 3044 West Grand Boulevard, Detroit, Michigan 48202-3091, Attention: Secretary. General Motors and EDS will bear the cost of preparing and mailing Solicitation Statement/Prospectus materials to General Motors common stockholders. General Motors will solicit written consents by mail, and the directors, officers and employees of General Motors may also solicit written consents by telephone, telegram or personal interview. These persons will receive no additional compensation for such services. In addition, General Motors has retained Morrow & Co., Inc. to assist in soliciting written consents. General Motors has agreed to pay Morrow & Co., Inc. a fee of $125,000 and reasonable out-of-pocket expenses. Arrangements will be made to furnish copies of solicitation materials to fiduciaries, custodians and brokerage houses for forwarding to beneficial owners of $1 2/3 Common Stock, Class E Common Stock and Class H Common Stock. 139 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF GENERAL MOTORS AND EDS GENERAL MOTORS The following table sets forth, as of February 29, 1996, beneficial ownership of all classes of common stock of General Motors for each current director, the Chief Executive Officer and the four other most highly compensated executive officers of General Motors and all current directors and officers of General Motors as a group. As of the date hereof, all of the outstanding common stock of EDS was owned by General Motors. Upon consummation of the Split-Off, each outstanding share of Class E Common Stock will be automatically converted into one share of EDS Common Stock. Each of the individuals/groups listed below is the owner of less than one percent of the outstanding shares and voting power of any class of common stock of General Motors (based on the number of shares of the applicable class outstanding on the Record Date), except that the GM Hourly Plan owns 30.9% of the outstanding shares and voting power of the Class E Common Stock (2.2% of the combined voting power of the $1 2/3 Common Stock, Class E Common Stock, and Class H Common Stock). The Capital Group Companies, Inc. is the parent of six investment management companies which beneficially own 5.3% of the outstanding shares and voting power of the Class H Common Stock (0.3% of the combined voting power of the $1 2/3 Common Stock, Class E Common Stock, and Class H Common Stock). No managed account by itself owns 5% or more of the Class H Common Stock. Except as otherwise noted in the footnotes, each individual has sole voting and investment power with respect to the shares beneficially owned and the totals of shares owned by the individual nominees and all directors and officers as a group. These shares do not include any shares of $1 2/3 Common Stock, Class E Common Stock or Class H Common Stock held by the pension and profit sharing plans or endowment funds of other corporations or by educational and charitable institutions of which such directors and officers serve as directors or trustees.
SHARES BENEFICIALLY DEFERRED STOCK DIRECTORS CLASS OF STOCK OWNED STOCK UNITS TOTAL OPTIONS(A) - --------- -------------------- ------------ ----------- ------ ---------- A. L. Armstrong (b)..... $1 2/3 Common Stock 1,500 13,477 14,977 -0- Class E Common Stock 112 3,848 3,960 -0- Class H Common Stock 48 1,586 1,634 -0- J. H. Bryan (b)......... $1 2/3 Common Stock 2,000 2,758 4,758 -0- T. E. Everhart (b)(c)... $1 2/3 Common Stock 400 5,644 6,044 -0- Class E Common Stock -0- 3,944 3,944 -0- Class H Common Stock -0- 1,098 1,098 -0- C. T. Fisher, III $1 2/3 Common Stock 14,766 6,735 21,501 -0- (b)(d)(e).............. Class E Common Stock 224 1,924 2,148 -0- Class H Common Stock 58 2,120 2,178 -0- J. W. Marrion, Jr. (b).. $1 2/3 Common Stock 1,000 5,627 6,627 -0- A. D. McLaughlin (b).... $1 2/3 Common Stock 923 1,131 2,054 -0- Class E Common Stock -0- 226 226 -0- Class H Common Stock -0- 560 560 -0- H. J. Pearce (f)........ $1 2/3 Common Stock 11,124 25,001 36,125 123,138 Class E Common Stock 4,332 -0- 4,332 22,300 Class H Common Stock 21,858 8,402 30,260 35,284 E. T. Pratt, Jr. (b)(d)(g).............. $1 2/3 Common Stock 200 16,491 16,691 -0- Class E Common Stock 40 14,416 14,456 -0- Class H Common Stock 10 11,432 11,442 -0-
140
SHARES BENEFICIALLY DEFERRED STOCK DIRECTORS CLASS OF STOCK OWNED STOCK UNITS TOTAL OPTIONS(A) - --------- -------------------- ------------ ----------- ----------- ---------- J. G. Smale (b)......... $1 2/3 Common Stock 16,000 4,538 20,538 -0- Class E Common Stock 200 -0- 200 -0- Class H Common Stock 200 -0- 200 -0- J. F. Smith, Jr. (f).... $1 2/3 Common Stock 58,992 55,117 114,109 497,200 Class E Common Stock 27,328 -0- 27,328 -0- Class H Common Stock 17,897 12,759 30,656 -0- L. W. Sullivan (b)...... $1 2/3 Common Stock 100 1,654 1,754 -0- Class E Common Stock -0- 108 108 -0- Class H Common Stock -0- 117 117 -0- D. Weatherstone (b)..... $1 2/3 Common Stock 6,000 10,599 16,599 -0- Class E Common Stock -0- 6,881 6,881 -0- Class H Common Stock -0- 564 564 -0- T. H. Wyman (b)(d)...... $1 2/3 Common Stock 1,000 4,764 5,764 -0- Class E Common Stock 500 412 912 -0- Class H Common Stock 250 765 1,015 -0- OTHER NAMED EXECUTIVES - ---------------------- C. M. Armstrong (h)(i).. $1 2/3 Common Stock 4,950 -0- 4,950 25,000 Class H Common Stock 34,508 9,578 44,086 242,500 L. R. Hughes (f)........ $1 2/3 Common Stock 18,254 27,413 45,667 175,046 Class E Common Stock 13,793 -0- 13,793 -0- Class H Common Stock 7,609 6,232 13,841 -0- G. R. Wagoner, Jr. (f).. $1 2/3 Common Stock 13,379 27,094 40,473 160,457 Class E Common Stock 8,881 -0- 8,881 -0- Class H Common Stock 4,599 6,232 10,831 -0- All directors and officers of General Motors as a group...... $1 2/3 Common Stock 660,285 568,939 1,229,224 4,250,629 Class E Common Stock 233,465 31,759 255,224 22,300 Class H Common Stock 173,061 136,446 309,507 309,584 GM Hourly Plan Special Trust.................. Class E Common Stock 149,537,219 -0- 149,537,219 -0- c/o United States Trust Company of New York 114 West 47th Street New York, NY 10036 The Capital Group Companies, Inc......... Class H Common Stock 5,070,200 -0- 5,070,200 -0- 333 South Hope Street Los Angeles, CA 90071
- -------- (a) General Motors common stocks that may be acquired within 60 days through exercise of stock option. (b) Deferred Stock Units--Under a plan adopted by the GM Board, non-employee directors of General Motors are required to retain a portion of the annual retainer in deferred stock units of General Motors common stock. Directors may also elect to defer receipt of all or a portion of their remaining compensation by converting amounts deferred into units of any class of General Motors common stock. In anticipation of the Split-Off, after January 1, 1996 no further amounts could be deferred into Class E Common Stock units. 141 Further, under the Director Long-Term Stock Incentive Plan, directors have been credited with General Motors common stock units related to their length of service on the GM Board. Under both plans, these stock units are credited with dividend equivalents in the form of additional stock units of the same class. Distribution of amounts deferred is not available until age 70, following termination of service on the GM Board, and will be paid in cash based on the number of stock units and the market price of the shares at the time of payment. (c) Does not include 32,000 shares of $1 2/3 Common Stock, 16,700 shares of Class E Common Stock and 1,400 shares of Class H Common Stock held in the endowment fund of the California Institute of Technology (the "Institute") or the Beckman Foundation Equity Index Portfolio, the IDS Beckman Foundation portfolio and the Sarofim Beckman Foundation portfolio which it oversees. Dr. Everhart is a member of the Institute's 11-member Investment Committee which has the power to acquire or dispose of the financial investments of the Institute. (d) Deferred Stock Units--Under a plan adopted by the Hughes Board of Directors (the "Hughes Board"), members of the Hughes Board who are not employees of either General Motors of Hughes may elect to defer receipt of all or a portion of their compensation as a director of Hughes. Provisions of the Hughes deferral plan are identical in all significant respects to provisions of the GM plan described in footnote (b) above, except that the portion required to be retained will be in the form of Class H Common Stock. (e) Includes 11,378 shares of $1 2/3 Common Stock held in a trust of which Mr. Fischer is a co-trustee and in which he, among other family members, has a residuary interest; 1,688 shares of $1 2/3 Common Stock held in two trusts in which Mr. Fischer has a one-seventh remainderman interest; and 500 shares of $1 2/3 Common Stock held in one trust of which Mr. Fisher is a co-trustee and the beneficiary is a relative of Mr. Fisher. (f) "Shares Beneficially Owned" includes shares credited under the General Motors Savings-Stock Purchase Program ("S-SPP"). Under this program, participants may contribute up to 15% of eligible salary, subject to maximum limits established by the Code. "Deferred Stock Units" include shares under the General Motors Benefit Equalization Plan-Savings ("BEP- S"). This Plan is a non-qualified "excess benefit" plan that is exempt from ERISA and the Code limitations, and provides executives with the full GM matching contribution without regard to such limitations. Amounts credited under the Plan are maintained in share units of $1 2/3 Common Stock. Upon distribution of an employee's S-SPP account, all amounts in the executive's BEP-S account will be paid in cash. Deferred stock units also include undelivered incentive awards which will vest upon the occurrence of certain events and which are subject to forfeiture under certain circumstances. (g) Does not include shares held by a family member for which Mr. Pratt disclaims voting or investment power. (h) Includes 280 shares of $1 2/3 Common Stock held by Mr. Armstrong's wife. Beneficial ownership of these shares is expressly disclaimed. (i) "Shares Beneficially Owned" includes shares credited under the Hughes Salaried Employees' Thrift and Savings Plan. Under this program, participants may contribute of to 12% of eligible salary, subject to maximum limits established by the Code. "Deferred Stock Units" include shares under the Hughes Salaried Employees' Excess Benefits Plan. This plan is a non-qualified "excess benefit" plan that is exempt from ERISA and the Code limitations, and provides executives with the full Hughes matching contribution without regard to such limitations. Amounts credited under the plan are maintained in share units of Class H Common Stock. Upon distribution of an employee's Excess Savings account, all amounts will be paid in cash. 142 EDS The following table sets forth certain information regarding the beneficial ownership of Class E Common Stock as of March 15, 1996, by each of the persons expected to be a director of EDS immediately after consummation of the Split- Off, by each other executive officer identified under the Executive Compensation table above and by all persons expected to be directors and executive officers of EDS upon consummation of the Split-Off as a group. None of such persons beneficially owns any $1 2/3 Common Stock or Class H Common Stock other than Mr. Alberthal, who beneficially owns 20 shares of $1 2/3 Common Stock and 10 shares of Class H Common Stock. Upon consummation of the Split-Off, each outstanding share of Class E Common Stock will be automatically converted into one share of EDS Common Stock, and the persons shown herein as holding Class E Common Stock will own an identical number of shares of EDS Common Stock and approximately the same percentage of the outstanding shares of such class. Each of the individuals/groups listed below is the owner of less than one percent of the outstanding shares and voting power of the Class E Common Stock (based on the number of shares of Class E Common Stock outstanding on the Record Date).
SHARES BENEFICIALLY NAME OF BENEFICIAL OWNER OWNED(A) ------------------------ ------------ Lester M. Alberthal, Jr........................ 109,062 Gary J. Fernandes.............................. 52,000 Jeffrey M. Heller.............................. 321,092 John R. Castle, Jr............................. 35,394 Dean Linderman................................. 79,856 James A. Baker, III............................ -0- Richard B. Cheney.............................. -0- Ray J. Groves.................................. -0- Ray L. Hunt.................................... -0- C. Robert Kidder............................... 1,000 Judith Rodin................................... -0- Enrique J. Sosa................................ -0- Directors and executive officers of EDS as a group (15 persons).................................. 787,751
- -------- (a) Excludes units granted under the Existing EDS Incentive Plan to Messrs. Alberthal, Fernandes, Heller, Castle and Linderman and all officers and directors as a group representing 422,000, 228,000, 298,000, 133,000, 248,000 and 1,743,000 shares of unvested restricted Class E Common Stock, respectively. All such units are scheduled to vest (subject to earlier vesting based on the achievement of performance goals by EDS) during the period from 1997 through the earlier of normal retirement age or 2009. GM HOURLY PLAN SPECIAL TRUST Of the approximately 485.7 million shares of Class E Common Stock outstanding as of the Record Date, approximately 149.5 million shares, or approximately 31%, were owned by the GM Hourly Plan Special Trust. The GM Hourly Plan Special Trust acquired the substantial majority of such shares pursuant to General Motors' contribution to the GM Hourly Plan, on March 13, 1995, of 173.2 million shares of Class E Common Stock. All of the contributed shares, together with an additional approximately 16.9 million shares of Class E Common Stock held by the GM Hourly Plan Special Trust at the time of the contribution, are subject to the restrictions on transfer in and other terms of a Registration Rights Agreement, dated March 12, 1995 (the "Registration Rights Agreement"), between General Motors and the GM Hourly Plan Trustees. Upon consummation of the Split-Off, EDS will succeed to all of the rights and obligations of General Motors under the Registration Rights Agreement (with the exception of certain indemnification provisions relating to prior offerings under the Registration Rights Agreement), and all of the provisions of the Registration Rights 143 Agreement applicable to the Class E Common Stock held by the GM Hourly Plan Special Trust will apply to the EDS Common Stock into which such Class E Common Stock is converted (for purposes of this discussion, the "Registrable Securities"). Under the Registration Rights Agreement, the GM Hourly Plan Special Trust may only transfer Registrable Securities in certain types of transactions and under certain circumstances, including "demand transfers" (which are defined under the Registration Rights Agreement to include public offerings and negotiated transactions, whether registered or not) and certain transfers to employee benefit plans maintained by General Motors and its subsidiaries. The Registration Rights Agreement provides that any underwritten public offering to be effected thereunder by the GM Hourly Plan Special Trust must be reasonably designed to achieve a broad public distribution of the securities being offered. Subject to certain limitations, the issuer of the Registrable Securities may postpone the filing or effectiveness of any registration statement requested by the GM Hourly Plan Special Trust or the making of any demand transfer at any time the issuer determines that such action would interfere with any proposal or plan by the issuer to engage in any material acquisition, merger, tender offer, securities offering or other material transaction or would require such issuer to make a public disclosure of previously non-public material information. The Registration Rights Agreement prohibits the GM Hourly Plan Special Trust from making a negotiated transfer (i) of more than 2% of the Registrable Securities then outstanding to any person and (ii) to any person who is then required to file or has filed a Schedule 13D under the Exchange Act with respect to the Registrable Securities. Following the consummation of the Split-Off, the GM Hourly Plan Special Trust will be permitted two demand transfers in any twelve-month period. Restrictions on the GM Hourly Plan Special Trust's transfer of Registrable Securities under the Registration Rights Agreement will terminate when the GM Hourly Plan Special Trust owns less than 2% of the EDS Common Stock then outstanding. The Registration Rights Agreement also imposes certain restrictions on the ability of the GM Hourly Plan Special Trust to tender its shares of Registrable Securities in a third-party tender offer until such Trust owns 7.5% or less of the EDS Common Stock on a fully diluted basis (after which time it may freely tender into any tender offer for EDS Common Stock). Until such time, in the event of a tender offer for EDS Common Stock, the right of the GM Hourly Plan Special Trust to tender its Registrable Securities will depend on whether EDS has in effect a stockholders rights plan (such as the EDS Rights Agreement). In general, the GM Hourly Plan Special Trust may tender its shares in a tender offer if a stockholders rights plan is in effect during the pendency of such tender offer, but the rights thereunder have been redeemed, revoked or invalidated by the EDS Board, or by a final and non- appealable court order, in connection with such tender offer. The GM Hourly Plan Special Trust will also be able to tender its shares in a tender offer if both (i) a stockholders rights plan is in effect during the pendency of such tender offer, but the rights thereunder have been redeemed, revoked or invalidated for any other reason, and (ii) either the EDS Board, or a majority of EDS' Independent Directors (as defined in the Registration Rights Agreement), has not recommended rejection of the tender offer, or there are then fewer than two Independent Directors on the EDS Board. Additionally, if (i) a stockholders rights plan is in effect during the pendency of a tender offer, but the rights thereunder have been redeemed, revoked or invalidated for any reason other than that described above and other than as a result of a proposal publicly or privately initiated, recommended, endorsed, supported or voted for by the GM Hourly Plan Special Trust, and (ii) the GM Hourly Plan Special Trust makes a good faith determination that the tender offer will likely result in the purchase of shares representing more than 50% of EDS' total voting power (without giving effect to any securities tendered or to be tendered by the GM Hourly Plan Special Trust), then the GM Hourly Plan Special Trust may tender shares in such tender offer, unless EDS gives notice to the GM Hourly Plan Special Trust. If EDS gives any such notice and the tender offer then results in the purchase of shares constituting more than 50% of the total voting power of EDS, then the GM Hourly Plan Special Trust will have the option to cause EDS to purchase the number of shares that would have been purchased from the GM Hourly Plan Special Trust in the tender offer if the GM Hourly Plan Special Trust had been permitted to tender, at the price per share, payable in cash, offered in the tender offer. Pursuant to the Registration Rights Agreement, on June 12, 1995, General Motors registered under the Securities Act an underwritten public offering of 40,550,000 shares (including an over-allotment option of 5,550,000 shares, which was exercised in full) of Class E Common Stock owned by the GM Hourly Plan Special 144 Trust. In the same offering, General Motors also registered 2,000,000 shares of Class E Common Stock owned by the GM Salaried Plan Trust. All such shares were sold to the public at a price per share of $42.375. General Motors received none of the proceeds from this offering of Class E Common Stock. The GM Hourly Plan Special Trust and the GM Salaried Plan Trust received aggregate proceeds from the offering, before deducting expenses, of $1,672,484,750 and $82,490,000, respectively. The GM Hourly Plan Special Trust has also agreed, pursuant to a Transfer Agreement dated as of March 12, 1995 (the "Transfer Agreement") between General Motors and the GM Hourly Plan Trustees, that for a period that generally terminates on the second anniversary of the Split-Off, it will vote against any merger of EDS that would not be a tax-free reorganization under Section 368 of the Code. In the Transfer Agreement, the GM Hourly Plan Special Trust additionally agreed to certain transfer restrictions intended to preserve the tax-free status of the Split-Off. Such restrictions generally terminate on the second anniversary of the Merger and do not apply to sales pursuant to public offerings meeting certain criteria. The Transfer Agreement could have the effect of delaying, deterring or preventing a change in control of EDS. The Separation Agreement provides that General Motors will not (i) amend or modify the Transfer Agreement in any material respect or (ii) waive the benefit of any material term of the Transfer Agreement, without the prior written consent of EDS. See "Relationship Between General Motors and EDS--Post Split-Off Arrangements--Separation Agreement." The GM Hourly Plan Trustees have been appointed, as fiduciaries within the meaning of ERISA, to manage the shares of Registrable Securities owned by the GM Hourly Plan Special Trust. The GM Hourly Plan Trustees have responsibility to manage prudently the shares of Registrable Securities held by the GM Hourly Plan Special Trust, in a manner consistent with maximizing the value of the GM Hourly Plan Special Trust's investment in Registrable Securities and in accordance with the GM Hourly Plan Trustees' determination of the extent to which the GM Hourly Plan Special Trust may prudently continue to hold such shares consistent with the diversification and related fiduciary requirements of ERISA. In accordance with the foregoing and in a manner consistent with the limitations and terms of the Registration Rights Agreement, the GM Hourly Plan Trustees have the authority and discretion to cause the GM Hourly Plan Special Trust to hold such shares or sell all or any portion thereof from time to time as they may deem appropriate, and to direct the voting of and the exercise of all other rights relating to such shares. The GM Hourly Plan Trustees have notified GM and EDS of their intent to manage the disposition of shares of EDS Common Stock in a manner consistent with maintaining an orderly market for the EDS Common Stock, although there can be no assurance in this regard. GM and EDS have been advised that, in order to discharge their fiduciary duties, the GM Hourly Plan Trustees continually look for attractive opportunities to sell a portion of their holdings of Class E Common Stock (and following the Split- Off, EDS Common Stock) consistent with their stated objectives of maximizing value for the GM Hourly Plan and maintaining an orderly market for such stock. There can be no assurance as to the timing or size of any offerings of shares owned by the GM Hourly Plan Special Trust since, subject to the terms of the Registration Rights Agreement and the Transfer Agreement, the GM Hourly Plan Trustees have the right to sell such shares at any time. The sale of shares by the GM Hourly Plan Special Trust will depend on, among other things, market conditions, the price of, and demand for, such shares, and other factors outside the control of EDS. The Department of Labor exemption obtained at the time of the contribution of the shares of Registrable Securities to the GM Hourly Plan Special Trust does not impose any time constraints on the GM Hourly Plan Special Trust for any dispositions of such shares. The compensation of the GM Hourly Plan Trustees is not contingent in any way on the sale or continued holding of shares of Registrable Securities by the GM Hourly Plan Special Trust. The Finance Committee of the GM Board is named fiduciary of the GM Hourly Plan pursuant to the provisions of ERISA, and a portion of the assets of the GM Hourly Plan (not including the shares of Registrable Securities owned by the GM Hourly Plan Special Trust) is subject to management by or under the supervision of General Motors Investment Management Corporation, a wholly owned subsidiary of General Motors. 145 APPENDIX A AGREEMENT AND PLAN OF MERGER BY AND BETWEEN GENERAL MOTORS CORPORATION AND GM MERGECO CORPORATION DATED AS OF APRIL , 1996 AGREEMENT AND PLAN OF MERGER Agreement entered into as of April , 1996 (the "Agreement") by and between General Motors Corporation, a Delaware corporation ("General Motors"), and GM Mergeco Corporation, a Delaware corporation ("Mergeco"). General Motors and Mergeco are referred to collectively herein as the "Parties." This Agreement contemplates a tax-free merger of Mergeco with and into General Motors. The Class E Stockholders will receive Holding Common Stock in exchange for their shares of Class E Common Stock pursuant to the Merger. Mergeco has been formed for the purpose of effectuating the split-off of Holding from General Motors and certain related transactions. The Parties expect that the Merger will further certain of their business objectives (including, without limitation, the split-off of Holding from General Motors in a tax-free transaction). Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the covenants herein contained, the Parties agree as follows: Section 1. Definitions "Agreement" has the meaning set forth in the preface above. "Class E Common Stock" means the Class E Common Stock, $0.10 par value per share, of General Motors. "Class E Stockholder" means any holder of record of Class E Common Stock. "Closing" has the meaning set forth in Section 2(b) below. "Closing Date" has the meaning set forth in Section 2(b) below. "Code" means the Internal Revenue Code of 1986, as amended. "Delaware Certificate of Merger" has the meaning set forth in Section 2(c) below. "Delaware General Corporation Law" means the General Corporation Law of the State of Delaware, as amended. "EDS" means Electronic Data Systems Corporation, a Texas corporation and a wholly owned subsidiary of Interco. "Effective Time" has the meaning set forth in Section 2(d)(i) below. "General Motors" has the meaning set forth in the preface above. "General Motors Common Stocks" means collectively the $1 2/3 Par Value Common Stock, par value $1 2/3 per share, of General Motors (the "$1 2/3 Common Stock"); the Class H Common Stock, par value $0.10 per share, of General Motors; and the Class E Common Stock. "Holding" means Electronic Data Systems Holding Corporation, a Delaware corporation and a wholly owned subsidiary of General Motors. "Holding Common Stock" means the common stock, $0.01 par value per share, of Holding. "Interco" means Electronic Data Systems Intermediate Corporation, a Delaware corporation and a wholly owned subsidiary of Holding. "IRS" means the Internal Revenue Service. A-1 "Master Services Agreement" means the Master Services Agreement to be entered into immediately prior to the Closing and after the consummation of the Reincorporation Merger by and between General Motors and Holding. "Mergeco" has the meaning set forth in the preface above. "Mergeco Share" means any share of the Common Stock, no par value, of Mergeco. "Merger" has the meaning set forth in Section 2(a) below. "Parties" has the meaning set forth in the preface above. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof). "Registration Rights Agreement" means the Registration Rights Agreement dated March 12, 1995 between General Motors and United States Trust Company of New York and its affiliate, U.S. Trust Company of California, N.A., as trustees of the General Motors Special Hourly Employees Pension Trust under the General Motors Hourly-Rate Employees Pension Plan. "Reincorporation Merger" has the meaning set forth in Section 3(e) below. "Requisite Stockholder Approval" means the consent of the holders of (i) a majority of the voting power of all outstanding shares of the General Motors Common Stocks, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Securities Exchange Act" means the Securities Exchange Act of 1934, as amended. "Separation Agreement" means the Separation Agreement to be entered into immediately prior to the Closing and after the consummation of the Reincorporation Merger by and between General Motors and Holding. "Special Inter-Company Payment" means $500 million in cash. "Subsidiary" means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors. "Surviving Corporation" has the meaning set forth in Section 2(a) below. "Tax Allocation Agreement" means the Amended and Restated Agreement for the Allocation of United States Federal, State and Local Income Tax to be entered into prior to the Closing by and between General Motors and Holding. "Transactions" means collectively (i) the split-off of Holding from General Motors in connection herewith, (ii) the consummation of the Merger pursuant hereto, (iii) the making of the Special Inter-Company Payment to Mergeco, (iv) the execution and delivery by General Motors and Holding of the Master Services Agreement, the Tax Allocation Agreement and the Separation Agreement in connection herewith and (v) the consummation of the other transactions and events contemplated hereby. A-2 Section 2. Basic Transaction. (a) The Merger. On the terms and subject to the conditions of this Agreement, Mergeco will merge with and into General Motors (the "Merger") at the Effective Time. General Motors shall be the corporation surviving the Merger (the "Surviving Corporation"). (b) The Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis, 200 East Randolph Street, Chicago, Illinois, on such date as General Motors may determine (the "Closing Date"), which date shall be after the day on which all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) are satisfied or waived. (c) Actions at the Closing. At the Closing, General Motors will cause to be filed with the Secretary of State of the State of Delaware, as provided in Section 251 of the Delaware General Corporation Law, a Certificate of Merger (the "Delaware Certificate of Merger"). (d) Effect of Merger. (i) General. The Merger shall become effective at such time (the "Effective Time") as General Motors files the Delaware Certificate of Merger with the Secretary of State of the State of Delaware. The Merger shall have the effect set forth in Section 259 of the Delaware General Corporation Law. The Surviving Corporation may, at any time after the Effective Time, take any action (including executing and delivering any document) in the name and on behalf of either General Motors or Mergeco in order to carry out and effectuate the transactions contemplated by this Agreement. (ii) Certificate of Incorporation. At the Effective Time, Article Fourth of the Certificate of Incorporation of General Motors will be amended to read in its entirety as set forth on Exhibit A hereto and the Certificate of Incorporation of General Motors as in effect at and as of immediately prior to the Effective Time, with Article Fourth as so amended and with all Certificates of Designations then in effect, shall be the Certificate of Incorporation of the Surviving Corporation. (iii) Bylaws. The Bylaws of General Motors as in effect at and as of immediately prior to the Effective Time will remain the Bylaws of the Surviving Corporation without any modification or amendment as a result of the Merger. (iv) Directors and Officers. The directors and officers of General Motors in office at and as of immediately prior to the Effective Time will remain the directors and officers of the Surviving Corporation (retaining their respective positions and terms of office). (v) Conversion of Class E Common Stock. At and as of the Effective Time, by virtue of the Merger and without any action on the part of any holder of any capital stock of General Motors, each share of Class E Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 2(d)(vi)) shall be converted into one fully paid and nonassessable share of Holding Common Stock. Upon such conversion, all such shares of Class E Common Stock shall be canceled and shall cease to exist. Accordingly, from and after the Effective Time, (i) for all purposes of determining the record holders of Holding Common Stock, the holders of Class E Common Stock immediately prior to the Effective Time shall be deemed to be holders of Holding Common Stock and (ii) subject to any transfer of such stock, each such holder shall be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, Holding Common Stock. Each such holder shall be entitled, upon proper surrender (in accordance with the requirements of the letter of transmittal and other instructions provided to such holder following the Effective Time) of the certificate or certificates representing the shares of Class E Common Stock formerly held by it, to receive one or more certificates representing the shares of Holding Common Stock then held by it. All classes and series of General Motors capital stock, other than Class E Common Stock, shall remain unaffected as a result of the Merger, except as otherwise set forth in Exhibit A hereto. A-3 (vi) Treasury Shares. Each share of Class E Common Stock held by General Motors as treasury stock immediately prior to the Effective Time shall be canceled and retired and shall cease to exist, and no stock or other consideration shall be delivered in exchange therefor. (vii) Mergeco Shares. Each Mergeco Share issued and outstanding immediately prior to the Effective Time shall be canceled and retired and shall cease to exist and no stock or other consideration shall be delivered in exchange therefor. (e) Closing of Transfer Records. After the Effective Time, transfers of shares of Class E Common Stock outstanding prior to the Effective Time shall not be made on the stock transfer books of the Surviving Corporation. Section 3. Conditions to Obligation to Close. The obligation of General Motors to consummate the Merger is subject to satisfaction of the following conditions: (a) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would be reasonably likely to (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation or (C) cause any of General Motors or its officers or directors to become liable for any material damages (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect); (b) the Transactions, including the adoption of this Agreement, shall have received the Requisite Stockholder Approval; (c) there shall have been no notification from Merrill Lynch, Pierce, Fenner & Smith Incorporated that its opinion dated March 31, 1996 to General Motors' board of directors that, as of that date and on the basis of and subject to the assumptions, limitations and other matters set forth therein, the Financial Effects of the Transactions (as defined in such opinion) are fair, from a financial point of view, to General Motors and, accordingly, to General Motors' common stockholders after consummation of the Merger, namely the holders of the $1 2/3 Common Stock and the Class H Common Stock, has been withdrawn or from Lehman Brothers Inc. or Morgan Stanley & Co. Incorporated that either of their respective opinions, each dated March 31, 1996, to General Motors' board of directors to the effect that, as of such date, based on and subject to the assumptions, limitations and other matters set forth therein, the financial effect of the Split-Off Transactions (as defined in such opinion) taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock, has been withdrawn; (d) there shall have been no notification from the IRS that its ruling that the transactions contemplated in the Merger constitute a tax-free distribution under Section 355 of the Code has been withdrawn or invalidated, and no determination by the GM Board that the representations and assumptions underlying such ruling are not true and correct in all material respects; (e) Interco shall have merged into Holding and thereafter EDS shall have merged into Holding (together, the "Reincorporation Merger"); (f) Mergeco shall have received the Special Inter-Company Payment from Holding; and (g) General Motors and Holding shall have executed and delivered the Master Services Agreement, the Separation Agreement, the Tax Allocation Agreement and a succession agreement with respect to the Registration Rights Agreement. Section 4. Termination. (a) Termination of Agreement. The Parties may terminate this Agreement (with the prior authorization of its board of directors, if applicable, whether before or after stockholder approval) as provided below: (i) the Parties may terminate this Agreement by mutual written consent at any time prior to the Effective Time; A-4 (ii) General Motors may terminate this Agreement by giving written notice to Mergeco at any time prior to the Effective Time in the event General Motors' board of directors concludes that termination would be in the best interests of General Motors and its stockholders; (iii) General Motors may terminate this Agreement by giving written notice to Mergeco at any time prior to the Effective Time in the event any opinion referred to in Section 3(c) is withdrawn; (iv) General Motors may terminate this Agreement by giving written notice to Mergeco at any time prior to the Effective Time in the event that General Motors has been notified by the IRS or otherwise believes that the Split-Off would not be treated as a tax-free exchange under Section 355 of the Code; and (v) General Motors may terminate this Agreement by giving written notice to Mergeco in the event the Transactions, including the adoption of this Agreement, fail to receive the Requisite Stockholder Approval. (b) Effect of Termination. If either Party terminates this Agreement pursuant to Section 4(a) above, all rights and obligations of the Parties hereunder shall terminate without any liability of any Party to any other Party (except for any liability of any Party then in breach). Section 5. Amendment. This Agreement may be amended at any time and from time to time if set forth in a writing executed by both Parties; provided, however, that any such amendment made after this Agreement has received Requisite Stockholder Approval shall not (i) alter or change the amount or kind of shares, securities, cash, property and/or rights to be received in exchange for or on conversion of the Class E Common Stock, (ii) alter or change any term of the Certificate of Incorporation of the Surviving Corporation or (iii) alter or change any of the terms and conditions of this Agreement if such alteration or change would adversely affect the holders of any class or series of General Motors capital stock. * * * * * A-5 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of the date first above written. /s/ General Motors Corporation /s/ GM Mergeco Corporation A-6 EXHIBIT A TO MERGER AGREEMENT ARTICLE FOURTH OF GENERAL MOTORS CERTIFICATE OF INCORPORATION, AFTER GIVING EFFECT TO THE MERGER The complete text of Article Fourth of the General Motors Certificate of Incorporation, as proposed to be amended, appears below. Added text is underlined. Deleted text has been lined through. ARTICLE FOURTH The total authorized capital stock of the Corporation is as follows: 3,706,000,000 2,706,000,000 shares, of which 6,000,000 shares shall be Preferred Stock, without par value ("Preferred Stock"), 100,000,000 shares shall be Preference Stock, $0.10 par value ("Preference Stock"), and 3,600,000,000 2,600,000,000 shares shall be Common Stock, of which 2,000,000,000 shares shall be Common Stock, $1 2/3 par value ("Common Stock"), 1,000,000,000 shares shall be Class E Common Stock, $0.10 par value ("Class E Common Stock") and 600,000,000 shares shall be Class H Common Stock, $0.10 par value ("Class H Common Stock"). DIVISION I: COMMON STOCK, CLASS E COMMON STOCKAND CLASS H COMMON STOCK. The Common Stock, the Class E Common Stock and the Class H Common Stock shall be identical in all respects and shall have equal rights and privileges, except as otherwise provided in this Article FOURTH. The relative rights, privileges and restrictions of the shares of each class are as follows: (a) Dividend Rights. Subject to the express terms of any outstanding series of Preferred Stock or Preference Stock, dividends may be paid in cash or otherwise upon the Common Stock, the Class E Common Stock and the Class H Common Stock out of the assets of the Corporation in the relationship and upon the terms provided for below with respect to each such class: (1) Dividends on Common Stock. Dividends on Common Stock may be declared and paid only to the extent of the assets of the Corporation legally available therefor reduced by an amount equal to the sum of (A) the paid in surplus attributable to the Class E Common Stock; (B) that portion of the earned surplus of the Corporation attributable to the Available Separate Consolidated Net Income of EDS (as defined in subparagraph (a)(5)) earned since the date of the acquisition by the Corporation of Electronic Data Systems Corporation, its subsidiaries and successors ("EDS"); (C) the paid in surplus attributable to the Class H Common Stock; and (D) (B) that portion of the earned surplus of the Corporation attributable to the Available Separate Consolidated Net Income of GMHE Hughes (as defined in subparagraph (a)(6) (a)(5)) earned since the date of the acquisition by the Corporation of GM Hughes Electronics Corporation, its subsidiaries and successors ("GMHE Hughes"). Dividends declared and paid with respect to shares of Common Stock and any adjustments to surplus resulting from either (i) the repurchase or issuance of any shares of Common Stock or (ii) any other reason deemed appropriate by the Board of Directors shall be subtracted from or added to the amounts available for the payment of dividends on Common Stock. Subject to the foregoing, the declaration and payment of dividends on the Common Stock, and the amount thereof, shall at all times be solely in the discretion of the Board of Directors of the Corporation. (2) Dividends on Class E Common Stock. Dividends on the Class E Common Stock may be declared and paid only to the extent of the assets of the Corporation legally available therefor reduced by an amount equal to the sum of (A) the paid in surplus attributable to the Common Stock; (B) the paid in surplus attributable to the Class H Common Stock; and (C) A-7 the earned surplus of the Corporation exclusive of that portion of such earned surplus attributable to the Available Separate Consolidated Net Income of EDS earned since the date of the acquisition of EDS by the Corporation. Dividends declared and paid with respect to shares of Class E Common Stock and any adjustments to surplus resulting from either (i) the repurchase or issuance of any shares of Class E Common Stock or (ii) any other reason deemed appropriate by the Board of Directors shall be subtracted from or added to the amounts available for the payment of dividends on Class E Common Stock. Subject to the foregoing, the declaration and payment of dividends on the Class E Common Stock, and the amount thereof, shall at all times be solely in the discretion of the Board of Directors of the Corporation. (3)(2) Dividends on Class H Common Stock Dividends on the Class H Common Stock may be declared and paid only to the extent of the assets of the Corporation legally available therefor reduced by an amount equal to the sum of (A) the paid in surplus attributable to the Common Stock; and (B) the paid in surplus attributable to the Class E Common Stock; and (C) the earned surplus of the Corporation exclusive of that portion of such earned surplus attributable to the Available Separate Consolidated Net Income of GMHE Hughes earned since the date of the acquisition of GMHE Hughes by the Corporation. Dividends declared and paid with respect to shares of Class H Common Stock and any adjustments to surplus resulting from either (i) the repurchase or issuance of any shares of Class H Common Stock or (ii) any other reason deemed appropriate by the Board of Directors shall be subtracted from or added to the amounts available for the payment of dividends on Class H Common Stock. Subject to the foregoing, the declaration and payment of dividends on the Class H Common Stock, and the amount thereof, shall be at all times be solely in the discretion of the Board of Directors of the Corporation. (4)(3) Discrimination Among Between Common Stock, Class E Common Stock and Class H Common Stock The Board of Directors, subject to the provisions of subparagraphs (a)(1), and (a)(2) and (a)(3), may, in its sole discretion, declare dividends payable exclusively to the holders of Common Stock, exclusively to the holders of Class E Common Stock, exclusively to the holders of Class H Common Stock or to the holders of any two or more of both such classes in equal or unequal amounts, notwithstanding the respective amounts of surplus available for dividends to each class, the respective voting and liquidation rights of each class, the amount of prior dividends declared on each class or any other factor. (5)(4) Available Separate Consolidated Net Income of EDS. The "Available Separate Consolidated Net Income of EDS" for any period during which Electronic Data Systems Corporation (together with its subsidiaries and successors, "EDS") was a direct or indirect wholly-owned subsidiary of the Corporation shall mean the separate net income of EDS on a consolidated basis, determined in accordance with generally accepted accounting principles without giving effect to any adjustment which would result from accounting for the acquisition of EDS by the Corporation using the purchase method, calculated for each quarterly accounting period and multiplied by a fraction, the numerator of which shall be the weighted average number of shares of Class E Common Stock outstanding during such accounting period and the denominator of which shall initially be 121,888,889; provided, that such fraction shall in no event be greater than one. The denominator of the foregoing fraction shall be adjusted from time to time as deemed appropriate by the Board of Directors of the Corporation (i) to reflect subdivisions (by stock split or otherwise) and combinations (by reverse stock split or otherwise) of the Class E Common Stock and stock dividends payable in shares of Class E Common Stock to holders of Class E Common Stock, (ii) to reflect the fair market value of contributions of cash or property by the Corporation to EDS or of cash or property of the Corporation to, or for the benefit of, employees of EDS in connection with employee benefit plans or arrangements of the Corporation or any of its subsidiaries, (iii) to reflect the number of shares of capital stock of the Corporation contributed to, or for the benefit of, employees of EDS in connection with benefit plans or arrangements of the Corporation or any of its subsidiaries, (iv) to reflect payments by EDS to the Corporation of amounts applied to the repurchase by the Corporation of shares of Class E Common Stock, and (v) to reflect the number of shares of Class E Common Stock repurchased by EDS and no longer outstanding; provided, that in the case of adjustments A-8 pursuant to clause (iv) or clause (v) above, adjustments shall be made only to the extent that the Board of Directors of the Corporation, in its sole discretion, shall have approved such repurchase of shares by the Corporation or EDS and, in the case of clause (iv) above, shall declare such payments by EDS to be applied to such repurchase. Any changes in the numerator or denominator of the foregoing fraction occurring after the end of a quarterly accounting period shall not result in an adjustment to the Available Separate Consolidated Net Income of EDS for such quarterly accounting period or any prior period. For all purposes, determination of the Available Separate Consolidated Net Income of EDS shall be in the sole discretion of the Board of Directors of the Corporation and shall be final and binding on all stockholders of the Corporation. (6)(5) Available Separate Consolidated Net Income of GMHE Hughes. The "Available Separate Consolidated Net Income of GMHE Hughes" shall mean the separate net income of GMHE Hughes on a consolidated basis, determined in accordance with generally accepted accounting principles without giving effect to any adjustment which would result from accounting for the acquisition of GMHE Hughes by the Corporation using the purchase method, calculated for each quarterly accounting period and multiplied by a fraction, the numerator of which shall be the weighted average number of shares of Class H Common Stock outstanding during such accounting period and the denominator of which shall initially be 200,000,000; provided, that such fraction shall in no event be greater than one. The denominator of the foregoing fraction shall be adjusted from time to time as deemed appropriate by the Board of Directors of the Corporation (i) to reflect subdivisions (by stock split or otherwise) and combinations (by reverse stock split or otherwise) of the Class H Common Stock and stock dividends payable in shares of Class H Common Stock to holders of Class H Common Stock, (ii) to reflect the fair market value of contributions of cash or property by the Corporation to GMHE Hughes or of cash or property of the Corporation to, or for the benefit of, employees of GMHE Hughes in connection with employee benefit plans or arrangements of the Corporation or any of its subsidiaries, (iii) to reflect the number of shares of capital stock of the Corporation contributed to, or for the benefit of, employees of GMHE Hughes in connection with benefit plans or arrangements of the Corporation or any of its subsidiaries, (iv) to reflect payments by GMHE Hughes to the Corporation of amounts applied to the repurchase by the Corporation of shares of Class H Common Stock, and (v) to reflect the number of shares of Class H Common Stock repurchased by GMHE Hughes and no longer outstanding; provided, that in the case of adjustments pursuant to clause (iv) or clause (v) above, adjustments shall be made only to the extent that the Board of Directors of the Corporation, in its sole discretion, shall have approved such repurchase of shares by the Corporation or GMHE Hughes and, in the case of clause (iv) above, shall declare such payments by GMHE Hughes to be applied to such repurchase. Any changes in the numerator or denominator of the foregoing fraction occurring after the end of a quarterly accounting period shall not result in an adjustment to the Available Separate Consolidated Net Income of GMHE Hughes for such quarterly accounting period or any prior period. For all purposes, determination of the Available Separate Consolidated Net Income of GMHE Hughes shall be in the sole discretion of the Board of Directors of the Corporation and shall be final and binding on all stockholders of the Corporation. (b) Voting Rights. The holders of Common Stock, Class E Common Stock and Class H Common Stock shall vote together as a single class on all matters; provided, however, that (i) the holders of Common Stock voting separately as a class shall be entitled to approve by the vote of a majority of the shares of Common Stock then outstanding any amendment, alteration or repeal of any of the provisions of this Certificate of Incorporation which adversely affects the rights, powers or privileges of the Common Stock; (ii) the holders of Class E Common Stock voting separately as a class shall be entitled to approve by the vote of a majority of the shares of Class E Common Stock then outstanding any amendment, alteration or repeal of any of the provisions of this Certificate of Incorporation which adversely affects the rights, powers or privileges of the Class E Common Stock; (iii) the holders of Class H Common Stock voting separately as a class shall be entitled to approve by the vote of a majority of the shares of Class H Common Stock then outstanding any amendment, alteration or repeal of any of the provisions of this Certificate of Incorporation which adversely affects the rights, powers or privileges of the Class H Common Stock; (iv) any increase in the number of authorized shares of Class E Common Stock shall be subject to approval by both (A) the holders of a majority of the shares of Common Stock, Class E Common A-9 Stock and Class H Common Stock then outstanding, voting together as a single class based upon their respective voting rights, and (B) the holders of a majority of the shares of Class E Common Stock then outstanding, voting separately as a class; and (v)(iii) any increase in the number of authorized shares of Class H Common Stock shall be subject to approval by both (A) the holders of a majority of the shares of Common Stock, Class E Common Stock and Class H Common Stock then outstanding, voting together as a single class based upon their respective voting rights, and (B) the holders of a majority of the shares of Class H Common Stock then outstanding, voting separately as a class. Subject to adjustment pursuant to paragraph (e) hereof, each holder of Common Stock shall be entitled to one vote, in person or by proxy, for each share of Common Stock standing in his name on the stock transfer books of the Corporation; each holder of Class E Common Stock shall be entitled to one- quarter (0.25) of a vote, in person or by proxy, for each share of Class E Common Stock standing in his name on the stock transfer books of the Corporation, and each holder of Class H Common Stock shall be entitled to one- half (0.5) of a vote, in person or by proxy, for each share of Class H Common Stock standing in his name on the stock transfer books of the Corporation. (c) Exchangeability. (1) After December 31, 1994, the Board of Directors of the Corporation, in its sole discretion and by a majority vote of the directors then in office, may at any time effect a recapitalization of the Corporation by declaring that all of the outstanding shares of Class E Common Stock shall be exchanged for fully paid and nonassessable shares of Common Stock in accordance with the applicable Exchange Rate (as defined in subparagraph (c)(7)); provided, that the Board of Directors may effect such recapitalization only if, during each of the five full fiscal years preceding such recapitalization, the Board of Directors has declared and paid cash dividends on the Class E Common Stock equal to or greater than the Class E Payout Ratio for such year (as defined in subparagraph (c)(3)) multiplied by the Available Separate Consolidated Net Income of EDS for the prior fiscal year. (2) After December 31, 1995, the Board of Directors of the Corporation, in its sole discretion and by a majority vote of the directors then in office, may at any time effect a recapitalization of the Corporation by declaring that all of the outstanding shares of Class H Common Stock shall be exchanged for fully paid and nonassessable shares of Common Stock in accordance with the applicable Exchange Rate (as defined in subparagraph (c)(7)(c)(4)); provided, that the Board of Directors may effect such recapitalization only if, during each of the five full fiscal years preceding such recapitalization, the Board of Directors has declared and paid cash dividends on the Class H Common Stock equal to or greater than the Class H Payout Ratio for such year (as defined in subparagraph (c)(4)(c)(2)) multiplied by the Available Separate Consolidated Net Income of GMHE Hughes for the prior fiscal year. (3) For purposes of this paragraph (c) of Division I of this Article FOURTH, the term "Class E Payout Ratio" shall mean, for any fiscal year, the lesser of (A) 0.25 or (B) the quotient of (x) the total cash dividends paid on the Common Stock in respect of such fiscal year, divided by (y) (i) the consolidated net income of the Corporation and its subsidiaries for such fiscal year minus (ii) the Available Separate Consolidated Net Income of EDS for such fiscal year minus (iii) the Available Separate Consolidated Net Income of GMHE for such fiscal year; provided, that nothing in this paragraph (c) shall be deemed to limit or restrict the authority of the Board of Directors of the Corporation to declare and pay dividends on Class E Common Stock and Common Stock at such times and in such amounts as the Board of Directors in its sole discretion (subject to paragraph (a)) may determine. (4)(2) For purposes of this paragraph (c) of Division I of this Article FOURTH, the term "Class H Payout Ratio" shall mean, for any fiscal year, the lesser of (A) 0.25 or (B) the quotient of (x) the total cash dividends paid on the Common Stock in respect of such fiscal year, divided by (y) (i) the consolidated net income of the Corporation and its subsidiaries for such fiscal year minus (ii) the Available Separate Consolidated Net Income of EDS for any portion of such fiscal year during which EDS was a direct or indirect wholly owned subsidiary of the Corporation, minus (iii) the Available Separate Consolidated Net Income of GMHE Hughes for such fiscal year; provided, that nothing in this paragraph (c) shall be deemed to limit or restrict the authority of the Board of A-10 Directors of the Corporation to declare and pay dividends on Class H Common Stock and Common Stock at such times and in such amounts as the Board of Directors in its sole discretion (subject to paragraph (a)) may determine. (5) In the event of the sale, transfer, assignment or other disposition by the Corporation of the business of EDS substantially as an entirety to a person, entity or group of which the Corporation is not a majority owner (whether by merger, consolidation, sale of assets or stock, liquidation, dissolution, winding up or otherwise), effective upon the consummation of such sale, transfer, assignment or other disposition and automatically without any action on the part of the Corporation or its Board of Directors or on the part of the holders of shares of Class E Common Stock, the Corporation shall be recapitalized and all outstanding shares of Class E Common Stock shall be exchanged for fully paid and nonassessable shares of Common Stock at the applicable Exchange Rate (as defined in subparagraph (c)(7)). (6)(3) In the event of the sale, transfer, assignment or other disposition by the Corporation of substantially all of the business of Hughes Aircraft Company, its subsidiaries and successors or of substantially all of the other business of GMHE Hughes to a person, entity or group of which the Corporation is not a majority owner (whether by merger, consolidation, sale of assets or stock, liquidation, dissolution, winding up or otherwise), effective upon the consummation of such sale, transfer, assignment or other disposition and automatically without any action on the part of the Corporation or its Board of Directors or on the part of the holders of shares of Class H Common Stock, the Corporation shall be recapitalized and all outstanding shares of Class H Common Stock shall be exchanged for fully paid and nonassessable shares of Common Stock at the applicable Exchange Rate (as defined in subparagraph (c)(7)(c)(4)). (7)(4) For purposes of this paragraph (c) of Division I of this Article FOURTH, the term "Exchange Rate" applicable to the Class E Common Stock and to the Class H Common Stock shall mean the number of shares of Common Stock for which each share of Class E Common Stock and Class H Common Stock, respectively, shall be exchangeable pursuant to subparagraphs (c)(1) and (c)(5) or (c)(2) and (c)(6)(c)(3), as the case may be, of this paragraph (c) determined as follows: Each share of Class E Common Stock or Class H Common Stock, as the case may be, shall be exchangeable for such number of shares of Common Stock (calculated to the nearest five decimal places) as is determined by dividing (A) the product resulting from multiplying (i) the Average Market Price Per Share (as defined in subparagraph (c)(8) or (c)(9), as the case may be), of such Class E Common Stock or (c)(5)) of such Class H Common Stock by (ii) 1.2, by (B) the Average Market Price Per Share of Common Stock. (8) For purposes of computing the Exchange Rate applicable to the Class E Common Stock pursuant to this paragraph (c) of Division I of this Article FOURTH, the Average Market Price Per Share of Common Stock or Class E Common Stock, as the case may be, shall mean the average of the daily closing prices per share for such Common Stock or Class E Common Stock for the fifteen (15) consecutive trading days ending one (1) trading day prior to either (A) in the case of an exchange pursuant to subparagraph (c)(1), the date the Exchange Notice (as defined in subparagraph (c)(12)) is mailed or (B) in the case of an exchange pursuant to subparagraph (c)(5), the date of the public announcement by the Corporation or one of its subsidiaries of the first to occur of the following: that the Corporation or one of its subsidiaries (1) has entered into an agreement in principle with respect to such transaction or (2) has entered into a definitive agreement with respect thereto. The closing price for each day shall be the closing sales price as reported in The Wall Street Journal or, if not reported therein, as reported in another newspaper of national circulation chosen by the Board of Directors of the Corporation or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way on the New York Stock Exchange, or if the Common Stock or Class E Common Stock is not then listed or admitted to trading on the New York Stock Exchange, on the largest principal national securities exchange on which such stock is then listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, then the last reported sale prices for such shares in the over-the-counter market, as reported on the National Association of Securities Dealers Automatic Quotation System, or, if such sale prices shall not be reported thereon, the average of the closing bid and asked prices so reported, or, if such bid and asked prices shall not be reported thereon, as the same shall be reported by the National Quotation Bureau Incorporated, or, A-11 in all other cases, an appraised market value furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors or the Finance Committee or Executive Committee of the Corporation for that purpose. (9)(5) For purposes of computing the Exchange Rate applicable to the Class H Common Stock pursuant to this paragraph (c) of Division I of this Article FOURTH, the Average Market Price Per Share of Common Stock or Class H Common Stock, as the case may be, shall mean the average of the daily closing prices per share for such Common Stock or Class H Common Stock for the fifteen (15) consecutive trading days ending one (1) trading day prior to either (A) in the case of an exchange pursuant to subparagraph (c)(2)(c)(1), the date the Exchange Notice (as defined in subparagraph (c)(12))(c)(8)) is mailed or (B) in the case of an exchange pursuant to subparagraph (c)(6)(c)(3), the date of the public announcement by the Corporation or one of its subsidiaries of the first to occur of the following: that the Corporation or one of its subsidiaries (1) has entered into an agreement in principle with respect to such transaction or (2) has entered into a definitive agreement with respect thereto. The closing price for each day shall be the closing sales price as reported in The Wall Street Journal or, if not reported therein, as reported in another newspaper of national circulation chosen by the Board of Directors of the Corporation or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way on the New York Stock Exchange, or if the Common Stock or Class H Common Stock is not then listed or admitted to trading on the New York Stock Exchange, on the largest principal national securities exchange on which such stock is then listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, then the last reported sale prices for such shares in the over-the- counter market, as reported on the National Association of Securities Dealers Automated Quotation System, or, if such sale prices shall not be reported thereon, the average of the closing bid and asked prices so reported, or, if such bid and asked prices shall not be reported thereon, as the same shall be reported by the National Quotation Bureau Incorporated, or, in all other cases, an appraised market value furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors or the Finance Committee or Executive Committee of the Corporation for that purpose. (10)(6) No fraction of a share of Common Stock shall be issued in connection with the exchange of shares of Class E Common Stock or Class H Common Stock into Common Stock, but in lieu thereof, each holder of Class E Common Stock or Class H Common Stock, as the case may be, who would otherwise be entitled to a fractional interest of a share of Common Stock shall, upon surrender of such holder's certificate or certificates representing shares of Class E Common Stock or Class H Common Stock, receive a cash payment (without interest) (the "Fractional Payment") equal to the product resulting from multiplying (A) the fraction of a share of Common Stock to which such holder would otherwise have been entitled by (B) the Average Market Price Per Share of the Common Stock on the Exchange Date (as defined in subparagraph (c)(12))(c)(8)). (11)(7) No adjustments in respect of dividends shall be made upon the exchange of any shares of Class E Common Stock or Class H Common Stock; provided, however, that if the Exchange Date with respect to Class E Common Stock or Class H Common Stock shall be subsequent to the record date for the payment of a dividend or other distribution thereon or with respect thereto but prior to the payment or distribution thereof, the registered holders of such shares at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on such shares on the date set for payment of such dividend or other distribution notwithstanding the exchange of such shares or the Corporation's default in payment of the dividend or distribution due on such date. (12)(8) At such time or times as the Corporation exercises it right to cause all of the shares of Class E Common Stock or Class H Common Stock to be exchanged for Common Stock in accordance with subparagraph (c)(1) or (c)(2) of this paragraph (c) of Division I of this Article FOURTH and at such time as the Corporation causes the exchange of such Class E Common Stock or Class H Common Stock for Common Stock as a result of a sale, transfer, assignment or other disposition of the type referred to in subparagraph (c)(5) or (c)(6)(c)(3) of this paragraph (c), the Corporation shall give notice of such exchange to the holders of Class E Common Stock or Class H Common Stock, as the case may be, whose shares are to be exchanged, by mailing by first-class mail a notice of such exchange (the "Exchange Notice"), in the case of an exchange in accordance with subparagraph A-12 (c)(1) or (c)(2) not less than thirty (30) nor more than sixty (60) days prior to the date fixed for such exchange (the "Exchange Date"), and in the case of an exchange in accordance with subparagraph (c)(5) or (c)(6)(c)(3) as soon as practicable before or after the Exchange Date, in either case to their last addresses as they shall appear upon the Corporation's books. Each such Exchange Notice shall specify the Exchange Date and the Exchange Rate applicable to such exchange, and shall state that issuance of certificates representing Common Stock to be received upon exchange of shares of Class E Common Stock or Class H Common Stock, as the case may be, shall be upon surrender of certificates representing such shares of Class E Common Stock or Class H Common Stock. (13)(9) Before any holder of shares of Class E Common Stock or Class H Common Stock shall be entitled to receive certificates representing such shares of Common Stock, he shall surrender at such office as the Corporation shall specify certificates for such shares of Class E Common Stock or Class H Common Stock, as the case may be, duly endorsed to the Corporation or in blank or accompanied by proper instruments of transfer to the Corporation or in blank, unless the Corporation shall waive such requirement. The Corporation will, as soon as practicable after such surrender of certificates representing such shares of Class E Common Stock or Class H Common Stock, issue and deliver at the office of the transfer agent representing the Common Stock to the person for whose account such shares of Class E Common Stock or Class H Common Stock were so surrendered, or to his nominee or nominees, certificates representing the number of whole shares of Common Stock to which he shall be entitled as aforesaid, together with the Fractional Payment, if any. (14)(10) From and after any applicable the Exchange Date, all rights of a holder of shares of Class E Common Stock or Class H Common Stock which were exchanged for shares of Common Stock shall cease except for the right, upon surrender of the certificates representing such shares of Class E Common Stock or Class H Common Stock, as the case may be, to receive certificates representing shares of Common Stock together with a Fractional Payment, if any, as contemplated by subparagraphs (c)(10)(c)(6) and (c)(13)(c)(9) of this paragraph (c) and rights to dividends as provided in subparagraph (c)(11)(c)(7). No holder of a certificate which immediately prior to the applicable Exchange Date represented shares of Class E Common Stock or Class H Common Stock, as the case may be, shall be entitled to receive any dividend or other distribution with respect to shares of Common Stock until surrender of such holder's certificate for a certificate or certificates representing shares of Common Stock. Upon such surrender, there shall be paid to the holder the amount of any dividends or other distributions (without interest) which theretofore became payable with respect to a record date after the Exchange Date, but which were not paid by reason of the foregoing, with respect to the number of whole shares of Common Stock represented by the certificate or certificates issued upon such surrender. From and after an the Exchange Date applicable to the Class E Common Stock or the Class H Common Stock, the Corporation shall, however, be entitled to treat the certificates for Class E Common Stock or Class H Common Stock, as the case may be, which have not yet been surrendered for exchange as evidencing the ownership of the number of whole shares of Common Stock for which the shares of Class E Common Stock or Class H Common Stock represented by such certificates shall have been exchanged, notwithstanding the failure to surrender such certificates. (15)(11) If any certificate for shares of Common Stock is to be issued in a name other than that in which the certificate representing shares of Class E Common Stock or Class H Common Stock surrendered in exchange therefor is registered, it shall be a condition of such issuance that the person requesting such issuance shall pay any transfer or other taxes required by reason of the issuance of certificates for such shares of Common Stock in a name other than that of the record holder of the certificate surrendered, or shall establish to the satisfaction of the Corporation or its agent that such tax has been paid or is not applicable. Notwithstanding anything to the contrary in this paragraph (c), the Corporation shall not be liable to a holder of shares of Class E Common Stock or Class H Common Stock for any shares of Common Stock or dividends or distributions thereon delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (16)(12) At such time as any Exchange Notice is delivered with respect to any shares of Class E Common Stock or Class H Common Stock, or at the time of the Exchange Date, if earlier, the Corporation shall have reserved and kept available, solely for the purpose of issuance upon exchange of the outstanding shares of Class E Common Stock or Class H Common Stock, as the case may be, such number of shares of Common Stock as A-13 shall be issuable upon the exchange of the number of shares of Class E Common Stock or Class H Common Stock specified or to be specified in the applicable Exchange Notice, provided, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the exchange of the outstanding shares of Class E Common Stock or Class H Common Stock, as the case may be, by delivery of purchased shares of Common Stock which are held in the treasury of the Corporation. (d) Liquidation Rights. In the event of the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after there shall have been paid or set apart for the holders of Preferred Stock and Preference Stock the full preferential amounts to which they are entitled, the holders of Common Stock, Class E Common Stock and Class H Common Stock shall be entitled to receive the assets of the Corporation remaining for distribution to its stockholders, on a per share basis in proportion to the respective per share liquidation units of such classes. Subject to adjustment pursuant to paragraph (e) hereof, each share of Common Stock, Class E Common Stock and Class H Common Stock shall initially be entitled to liquidation units of one (1.0), one-quarter (0.25), and one-half (0.5), respectively. (e) Subdivision or Combination. (1) If after December 20, 1985, the Corporation shall in any manner subdivide (by stock split or otherwise) or combine (by reverse stock split or otherwise) the outstanding shares of the Common Stock, Class E Common Stock or Class H Common Stock, or pay a stock dividend in shares of any class to holders of that class, the per share voting rights specified in paragraph (b) and the per share liquidation units specified in paragraph (d) of Class E Common Stock and Class H Common Stock relative to Common Stock shall be appropriately adjusted so as to avoid any dilution in the aggregate voting or liquidation rights of any class. Distribution by the Corporation of shares of any class of its common stock as a dividend on any other class of its common stock shall not require an adjustment pursuant to this paragraph (e)(1). (2) If after December 20, 1985, the Corporation shall distribute shares of Class E Common Stock or Class H Common Stock (such class being hereinafter referred to as the "Distributed Class") as a dividend (the "Dividend") on Common Stock (such class being hereinafter referred to as the "Recipient Class"), then the per share liquidation rights of the classes of common stock set forth in paragraph (d) above, as they may have been previously adjusted, shall be adjusted so that: (A) each holder of shares of any class other than the Recipient Class shall be entitled to, with respect to such holder's interest in each such class, the same percentage of the aggregate liquidation units of all shares of the Corporation's common stock immediately after the Dividend as such holder was entitled to, with respect to such holder's interest in such class immediately prior to the Dividend; and (B) each holder of shares of the Recipient Class shall be entitled to, with respect to such holder's interest in the Recipient Class and all shares of the Distributed Class issued with respect to such holder's shares of the Recipient Class, the same percentage of the aggregate liquidation units of all shares of the Corporation's common stock immediately after the Dividend as such holder was entitled to with respect to such holder's interest in the Recipient Class immediately prior to the Dividend; provided, that any adjustment pursuant to this subparagraph (e)(2)(B) shall be made to the liquidation units of the Recipient Class. Notwithstanding the foregoing provisions of this subparagraph (e)(2) or any other provision of this Article FOURTH, in the event of the payment of the first Dividend of Class H Common Stock on the Common Stock prior to September 16, 1986, no adjustment pursuant to this subparagraph (e)(2) shall be made to the liquidation rights of the Class H Common Stock, except to the extent that such Dividend shall exceed 20,000,000 shares of Class H Common Stock, but an adjustment shall be made to the liquidation rights of the Common Stock and the Class E Common Stock so that; (i) the ratio of the aggregate liquidation units of the Common Stock to the aggregate liquidation units of the Class E Common Stock, determined immediately prior to the Dividend, is the same as the ratio of the aggregate liquidation units of the Common Stock plus the Class H Common Stock A-14 distributed pursuant to the Dividend to the aggregate liquidation units of the Class E Common Stock, determined immediately after the Dividend; and (ii) the sum of the aggregate liquidation units of the Common Stock plus the Class E Common Stock, computed immediately prior to the Dividend, equals the sum of the aggregate liquidation units of the Common Stock plus the Class E Common Stock, computed immediately after the Dividend. In no event will any adjustments be made pursuant to this subparagraph (e)(2) if the adjustment called for herein would reduce the liquidation units of any class of common stock to less than zero. (3) The determination of any adjustment required under this paragraph (e) shall be made by the Corporation's Board of Directors; any such determination shall be binding and conclusive upon all holders of shares of all classes of the Corporation's common stock. Following any such determination, the Secretary of the Corporation shall maintain a record of any such adjustment. DIVISION II: PREFERRED STOCK. A statement of the relative rights of the holders of Preferred Stock and a statement of the limits of variation between each series of Preferred Stock as to rate of dividends and price of redemption, a statement of the provisions in these respects of the Preferred Stock-$5 Series and the Preferred Stock-$3.75 Series, and a statement of the voting powers and the designations, powers, privileges and rights, and the qualifications, limits or restrictions thereof of the various series thereof, except so far as the Board of Directors is expressly authorized to fix the same by resolution or resolutions for the various series of the Preferred Stock, are as follows: Preferred Stock of the Corporation may be issued in various series as may be determined from time to time by the Board of Directors, each such series to be distinctly designated, provided, however, that of the Preferred Stock authorized or to be authorized, 1,875,366 shares shall be designated as Preferred Stock-$5 Series and 1,000,000 shares shall be designated as Preferred Stock-$3.75 Series. The Board of Directors may from time to time authorize the issuance of Preferred Stock-$5 Series additional to the said 1,875,366 shares. All shares of any one series of Preferred Stock shall be alike in every particular, and all series shall rank equally and be identical in all respects except as to the dividend rate and the amount payable upon the exercise of the right to redeem. The dividend rate on the Preferred Stock-$5 Series shall be $5.00 per annum and no more, the dividend rate on the Preferred Stock-$3.75 Series shall be $3.75 per annum and no more, and the dividend on the Preferred Stock of each series additional to the $5 Series and the $3.75 Series shall be such rate as may be fixed by the Board of Directors in the resolution or resolutions providing for the issuance of the Preferred Stock of such series, and as shall be stated on the face or back of the certificates of stock therefor. The amount payable upon the exercise of the right to redeem the Preferred Stock-$5 Series shall be $120.00 a share and accrued dividends, the amount payable upon the exercise of the right to redeem the Preferred Stock-$3.75 Series shall be $100.00 a share and accrued dividends, and the amount payable on the exercise of the right to redeem Preferred Stock of each series additional to the $5 Series and the $3.75 Series shall be an amount as may be fixed by the Board of Directors in the resolution or resolutions providing for the issuance of the Preferred Stock of such series, and as shall be stated on the face or back of the certificates of stock therefor. All other provisions herein set forth in respect of the Preferred Stock of the Corporation shall apply to all the Preferred Stock of the Corporation, irrespective of any variations between the Preferred Stock of the different series. The holders of the Preferred Stock shall be entitled to receive cumulative dividends, when and as declared by the Board of Directors, at the rates fixed for the respective series in the Certificate of Incorporation or in the resolution or resolutions of the Board of Directors providing for the issuance of the respective series, and no more, payable quarterly on the dates to be fixed by the By-Laws. The periods between such dates commencing A-15 on such dates are herein designated as "dividend periods." Dividends on all shares of any one series shall commence to accrue and be cumulative from the first day of the current dividend period within which shares of such series are first issued, but in the event of the issue of additional shares of such series subsequent to the date of the first issue of said shares of such series, all dividends paid on the shares of such series prior to the issue of such additional shares and all dividends declared payable to holders of record of shares of such series of a date prior to such issue shall be deemed to have been paid in respect of the additional shares so issued. Such dividends on the Preferred Stock shall be in preference and priority to any payment on any other class of stock of the Corporation. The dividends on the Preferred Stock shall be cumulative and shall be payable before any dividend on the Common Stock, Class E Common Stock or Class H Common Stock or any series of the Preference Stock shall be paid or set apart so that if in any year dividends a the rates determined for the respective series of the Preferred Stock shall not be paid thereon, the deficiency shall be payable before any dividend shall be paid upon or set apart for the Common Stock, Class E Common Stock or Class H Common Stock or any series of the Preference Stock. Dividends shall not be declared and paid on the shares of Preferred Stock of any one series for any dividend period unless dividends have been or are contemporaneously paid or declared and set apart for payment thereof on the shares of Preferred Stock of all series, for all the dividend periods terminating on the same or an earlier date. Whenever all cumulative dividends on the Preferred Stock outstanding shall have been paid and a sum sufficient for the payment of the next ensuing quarterly dividend on the Preferred Stock outstanding shall have been set aside from the surplus or net profits, the Board of Directors may declare dividends on the Common Stock, Class E Common Stock or Class H Common Stock or any series of the Preference Stock, payable then or thereafter, out of any remaining surplus or net profits, and no holders of any shares of any series of Preferred Stock, as such, shall be entitled to share therein; provided, however, that subsequent to the issue of any Preferred Stock herein provided to be issued, additional to 1,875,366 of Preferred Stock-$5 Series, no dividends other than dividends payable in Common Stock, Class E Common Stock or Class H Common Stock shall be paid on the Common Stock, Class E Common Stock or Class H Common Stock or any series of the Preference Stock unless the aggregate of the Common Stock, Class E Common Stock and Class H Common Stock capital and surplus shall exceed $335,700,600 by an amount not less than $100.00 in respect of each such additional share of Preferred Stock issued and outstanding; and provided further, that no cash dividends shall be paid on the Common Stock, Class E Common Stock or Class H Common Stock or any series of the Preference Stock after the issue of Preferred Stock so long as the net quick assets in excess of current liabilities of the Corporation are less than $75.00 in respect of each share of outstanding Preferred Stock. Net quick assets referred to above shall be made up of cash, drafts, notes and accounts receivable, inventories, and marketable securities, and the aforesaid current liabilities shall consist of obligations maturing within one year, as set forth in the books of the Corporation. At the option of the Board of Directors, the Preferred Stock shall be subject to redemption at the amounts fixed for the respective series in the Certificate of Incorporation or in the resolution or resolutions of the Board of Directors providing for the issuance of the respective series, together, in the case of each class or series, with accrued dividends on the shares to be redeemed, on any dividend paying date in such manner as the Board of Directors may determine. The holders of the Preferred Stock shall not have any voting power whatsoever, except upon the question of selling, conveying, transferring or otherwise disposing of the property and assets of the Corporation as an entirety and except as otherwise required by law; provided, however:. In the event that the Corporation shall fail to pay any dividend on the shares of any series of the Preferred Stock when it regularly becomes due, and failure to make such payment shall continue for a period of six months, the holders of the shares of Preferred Stock as a class, during the continuance of such non-payment and until the Corporation shall have paid all accrued dividends on the shares of all series of Preferred Stock, shall have the exclusive right to elect one quarter of the total number of directors of the Corporation. A-16 Unless the holders of at least three-fourths of the shares of Preferred Stock, as a class, then outstanding shall consent thereto either in writing or at a special meeting, the Corporation shall not mortgage or pledge or place any specific lien upon the whole or any part of the property of the Corporation, but this prohibition shall not be construed to apply to the execution of any purchase money mortgage or any other purchase money lien, nor to the assumption of any mortgage or other lien upon property purchased, nor to the renewal or renewals thereof or to substitutions therefor, in whole or in part, nor shall it prevent the Corporation at any time from pledging securities belonging to it for the purpose of securing cash to be used in the ordinary course of its business, provided such cash advances are procured upon its obligations which shall mature not more than three years from the date thereof; nor shall any amendment to any provision contained in this Certificate of Incorporation in reference to the rights and security of the holders of the Preferred Stock be authorized, unless such amendment is consented to by the holders of three-fourths of the shares of Preferred Stock then issued and outstanding. DIVISION III: PREFERENCE STOCK The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article FOURTH, to provide for the issuance of Preference Stock from time to time in one or more series of any number of shares, with a distinctive serial designation for each series, provided that the aggregate number of shares issued and not cancelled of any and all such series shall not exceed the total number of shares of Preference Stock authorized by this Article FOURTH, all as shall hereafter be stated and expressed in the resolution or resolutions providing for the issue of such Preference Stock from time to time adopted by the Board of Directors. Subject to said limitations, and provided that each series of Preference Stock shall rank junior to the Preferred Stock with respect to the payment of dividends and distributions in liquidation, each series of Preference Stock (a) may have such voting powers, full or limited, or may be without voting powers; (b) may be subject to redemption at such time or times and at such prices; (c) may be entitled to receive dividends (which may be cumulative or noncumulative) at such rate or rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or series of stock; (d) may have such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; (e) may be made convertible into, or exchangeable for, shares of any other class or classes of or any other series of the same or any other class or classes of stock of the Corporation or any other issuer, at such price or prices or at such rates of exchange, and with such adjustments; (f) may be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of shares of such series in such amount or amounts; (g) may be entitled to the benefit of conditions and restrictions upon the creation of indebtedness of the Corporation or any subsidiary, upon the issue of any additional stock (including additional shares of such series or of any other series) and upon the payment of dividends or the making of other distributions on, and the purchase, redemption or other acquisition by the Corporation or any subsidiary of any outstanding stock of the Corporation; and (h) may have such other relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof; all as shall be stated in said resolution or resolutions providing for the issue of such series of Preference Stock. Shares of any series of Preference Stock which have been redeemed (whether through the operation of a sinking fund or otherwise) or which, if convertible or exchangeable, have been converted into or exchanged for shares of stock of any other class or classes shall have the status of authorized and unissued shares of Preference Stock of the same series and may be reissued as a part of the series of which they were originally a part or may be reclassified and reissued as part of a new series of Preference Stock to be created by resolution or resolutions of the Board of Directors or as part of any other series of Preference Stock, all subject to the conditions or restrictions on issuance set forth in the resolution or resolutions adopted by the Board of Directors providing for the issue of any series of Preference Stock. DIVISION IV: MISCELLANEOUS. From time to time, the Preferred Stock, the Preference Stock, the Common Stock, the Class E Common Stock and the Class H Common Stock may be increased or decreased according to law, and may be issued in A-17 such amounts and proportions as shall be determined by the Board of Directors, and as may be permitted by law, except that no shares of Preferred Stock in addition to 1,875,366 shares of the Preferred Stock-$5 Series shall be issued unless the sum total of the Common Stock, Class E Common Stock and Class H Common Stock capital and surplus shall exceed $335,700,600 by an amount at least equal to $100.00 in respect of each additional share of the Preferred Stock to be issued. In the event of any liquidation or dissolution or winding up, whether voluntary or otherwise, of the Corporation, the holders of the Preferred Stock shall be entitled to be paid the redemption price of each series in full, as aforesaid, out of the assets whether capital or surplus, $100.00 a share, and, in every case, the unpaid dividends accrued on such shares, whether or not earned or declared, before any distribution of the assets to be distributed shall be made to the holders of Common Stock, Class E Common Stock or Class H Common Stock or any series of the Preference Stock; but the holders of such shares shall be entitled to no further participation in such distribution. If the assets distributable on such liquidation, dissolution or winding up shall be insufficient to permit the payment to the holders of the Preferred Stock of the full amount of $100.00 a share the redemption price of each series in full as aforesaid and accrued dividends as aforesaid, the said assets shall be distributed pro rata among the holders of the respective series of the Preferred Stock. After all payments are made as aforesaid, any required payments shall be made with respect to the Preference Stock, if any, outstanding, and the remaining assets and funds shall be divided among and paid to the holders of Common Stock, Class E Common Stock and Class H Common Stock pro rata in proportion to the respective per share liquidation units of such classes. The merger or consolidation of the Corporation into or with any other corporation shall not be or be deemed to be a distribution of assets or a dissolution, liquidation or winding up for the purposes of this paragraph. Any Preferred Stock, Preference Stock, Common Stock, Class E Common Stock or Class H Common Stock, authorized hereunder or under any amendment hereof, in the discretion of the Board of Directors, may be issued, except as herein otherwise provided, in payment for property or services, or as bonuses to employes of the Corporation or employes of subsidiary companies, or for other assets or securities including cash, necessary or desirable, in the judgment of the Board of Directors, to be purchased or acquired from time to time for the Corporation, or for any other lawful purpose of the Corporation. If it seems desirable so to do, the Board of Directors may from time to time issue scrip for fractional shares of stock. Such scrip shall not confer upon the holder any right to dividends or any voting or other rights of a stockholder of the Corporation, but the Corporation shall from time to time, within such time as the Board of Directors may determine or without limit of time if the Board of Directors so determines, issue one or more whole shares of stock upon the surrender of scrip for fractional shares aggregating the number of whole shares issuable in respect of the scrip so surrendered, provided that the scrip so surrendered shall be properly endorsed for transfer if in registered form. A-18 APPENDIX B FAIRNESS OPINIONS APPENDIX B-1 MERRILL LYNCH FAIRNESS OPINION [LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED] March 31, 1996 Board of Directors General Motors Corporation General Motors Building 3044 West Grand Boulevard Detroit, Michigan 48202-3091 Ladies and Gentlemen: General Motors Corporation ("GM") proposes to split off from GM (the "Split- Off") its wholly owned subsidiary Electronic Data Systems Holding Corporation (together with its subsidiaries, unless the context requires otherwise, "EDS") in accordance with the terms of a proposed merger agreement (the "Merger Agreement") to be entered into between GM and GM Mergeco Corporation, a wholly owned subsidiary of EDS ("Mergeco"), pursuant to which Mergeco will be merged with and into GM (the "Merger"). As a condition to the consummation of the Merger, EDS will contribute to the capital of Mergeco $500 million in cash (the "Special Inter-Company Payment"). As a result of the Merger, (i) each outstanding share of GM's Class E Common Stock, par value $0.10 per share (the "Class E Common Stock"), will be converted into one share of common stock, par value $0.01 per share, of EDS ("EDS Common Stock") and, upon such conversion, all such shares of Class E Common Stock will be cancelled and will cease to exist (the "Class E Common Stock Conversion"), (ii) GM's $1 2/3 Par Value Common Stock, par value $1 2/3 per share (the "$1 2/3 Common Stock"), and GM's Class H Common Stock, par value $0.10 per share (the "Class H Common Stock"), will remain outstanding and (iii) the Special Inter-Company Payment will become an asset of GM. You have advised us that GM has received a private letter ruling (the "Private Letter Ruling") from the Internal Revenue Service to the effect that the Split-Off will be treated as a tax-free exchange under Section 355 of the Internal Revenue Code of 1986, as amended. In connection with the Split-Off, GM and EDS also propose to enter into a long-term master services agreement and certain related agreements (collectively, the "New MSA") governing certain of the terms on which EDS will provide information technology and other services to GM and its affiliates after the Split-Off. The New MSA modifies certain of the terms on which such services are provided under the Master Agreement effective as of September 1, 1985 between GM and EDS, as amended by the Addendum dated May 29, 1987, and certain related agreements (collectively, the "Current MSA"), including, among other things, (1) by giving GM and its affiliates the option, with respect to purchases of information technology services covered under the New MSA, to subject a portion of such purchases to competitive bidding and to source such purchases with bidders other than EDS, (2) by providing certain goals for EDS to meet in reducing the cost to GM and its affiliates of the services to be provided by EDS, (3) by lengthening, commencing in 1997, the time available to GM and its affiliates to make payments for services and (4) by providing for an initial term of 10 years following the consummation of the Split-Off, subject to renewal (such modifications being collectively referred to as the "MSA Modifications"). GM and EDS also propose to enter into a separation agreement (the "Separation Agreement") and a tax allocation agreement (the "Tax Allocation Agreement"), which will establish certain transitional and other arrangements in connection with the Split-Off. Pursuant to the Separation Agreement, GM would provide EDS a $50 million allowance relating to the resolution of various uncertain, contingent or other matters arising directly or indirectly out of the separation of GM and EDS (the "Separation Allowance"). B-1 You have advised us that, as of December 31, 1995, defined benefit pension plans covered by Title IV of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), sponsored by GM and certain of its subsidiaries (the "GM Pension Plans") were underfunded, on an SFAS No. 87 basis, and the projected benefit obligations exceeded plan assets by approximately $3 billion in the aggregate. You have also advised us that you expect that the Pension Benefit Guaranty Corporation (the "PBGC") will, in accordance with an agreement dated March 3, 1995 between GM and the PBGC, as amended on March 5, 1996 (the "GM-PBGC Agreement"), release EDS and its subsidiaries, upon consummation of the Merger, from all fixed or contingent liabilities under Title IV of ERISA with respect to the GM Pension Plans. In addition, you have advised us that, as of the date hereof, approximately 31% of the currently outstanding Class E Common Stock is held by the GM Special Hourly Employees Pension Trust (the "Hourly Plan Special Trust") and approximately 1% of such stock is held by the GM Salaried Employees Pension Trust (such holdings are collectively referred to as the "Plan Holdings"). Under the Registration Rights Agreement (as defined below), the Hourly Plan Special Trust has certain registration rights with respect to the Class E Common Stock that it holds and will have the same rights with respect to the EDS Common Stock into which such stock will be converted in the Merger. The Registration Rights Agreement also contains certain restrictions on transfer of the shares of Class E Common Stock held by the Hourly Plan Special Trust (and the EDS Common Stock into which such Class E Common Stock will be converted in the Merger). The Hourly Plan Special Trust has agreed with GM, pursuant to a Transfer Agreement dated as of March 12, 1995 (the "Transfer Agreement"), to certain additional transfer restrictions intended to preserve the tax-free status of the Split-Off. The Merger and related transactions, including the making of the Special Inter-Company Payment and the execution and delivery of the New MSA, are collectively referred to herein as the "Transactions". The Special Inter- Company Payment, the Separation Allowance, the expenses of implementing the Transactions to be borne by GM and the financial effects on GM (excluding EDS) of (i) the MSA Modifications, (ii) the removal of certain potential conflicts between the business of EDS and certain other businesses of GM and its subsidiaries, (iii) any change in the market price of the Plan Holdings as a result of the Transactions and (iv) the Class E Common Stock Conversion are collectively referred to herein as the "Financial Effects of the Transactions". You have asked us to advise you with respect to the fairness, from a financial point of view, to GM and, accordingly, to GM's common stockholders after consummation of the Merger, namely the holders of the $1 2/3 Common Stock and the Class H Common Stock, of the Financial Effects of the Transactions. In arriving at the opinion set forth below, we have, among other things: (1) Reviewed GM's Annual Reports, Forms 10-K and related financial information for the five fiscal years ended December 31, 1994, GM's audited financial statements for the year ended December 31, 1995, drafts of GM's Annual Report and Form 10-K for that year and GM's Forms 10-Q for the quarterly periods ending March 31, 1995, June 30, 1995 and September 30, 1995; (2) Reviewed EDS's Annual Reports and related financial information for the five fiscal years ended December 31, 1994 and EDS's audited financial statements for the year ended December 31, 1995; (3) Conducted discussions with members of senior management of GM concerning their views regarding (a) the use of information technology services by GM in the future and (b) the strategic rationale for, and the financial effects on GM (excluding EDS) of, the Split-Off, including the financial benefits to GM of the removal of certain potential conflicts between the business of EDS and certain other businesses of GM and its subsidiaries; (4) Reviewed certain forecasts furnished to us by GM management of GM's future expenditures for information technology services; (5) Reviewed certain estimates furnished to us by GM management of the expenses of implementing the Transactions to borne by GM; B-2 (6) Reviewed certain information, including financial forecasts, relating to the business, earnings, cash flow, assets and prospects of EDS, furnished to us by EDS; (7) Reviewed published reports of equity analysts regarding their expectations with respect to the future earnings of EDS and the impact of the Split-Off on such earnings; (8) Conducted discussions with members of senior management of EDS concerning their views regarding the strategic rationale for, and the financial effects on EDS of, the Split-Off and various strategic alternatives available to EDS, both as a wholly owned subsidiary of GM and as an independent, publicly traded company; (9) Compared certain financial ratios of EDS, on a pro forma basis giving effect to the Split-Off, to the financial ratios of certain companies that we deemed to be reasonably similar to EDS; (10) Reviewed the historical market prices for the Class E Common Stock to be converted into EDS Common Stock in the Split-Off and considered the potential impact of the Split-Off on the market price thereof; (11) Considered the financial benefits to GM of its rights of ownership and control of EDS (taking into account the terms of the Class E Common Stock and the GM Board's policies with respect to the exercise of such rights), all of which would terminate as a result of the Class E Common Stock Conversion; (12) Compared the financial terms of the Split-Off with the financial terms of certain transactions that we deemed to be relevant; (13) Considered the alternatives available to EDS and GM in developing and implementing strategic alliances and other strategic alternatives for EDS, as a wholly owned subsidiary of GM, with third parties; (14) Reviewed a draft dated March 27, 1996 of the Merger Agreement; (15) Reviewed a draft dated March 26, 1996 of the Separation Agreement and a draft dated March 28, 1996 of the Tax Allocation Agreement; (16) Reviewed the Current MSA and a draft dated March 22, 1996 of the New MSA; (17) Reviewed GM's Restated Certificate of Incorporation and By-laws; (18) Reviewed (a) the GM-PBGC Agreement, (b) the Escrow Agreement (the "Escrow Agreement") made as of March 5, 1996 by and among Bankers Trust Company (the "Escrow Agent"), the PBGC and GM and (c) forms of Releases and Covenants Not to Sue (the "PBGC Releases") to be provided pursuant to the GM-PBGC Agreement and held by the Escrow Agent in escrow pursuant to the Escrow Agreement; (19) Reviewed the Registration Rights Agreement (the "Registration Rights Agreement") dated March 12, 1995 between GM and United States Trust Company of New York and its affiliate, U.S. Trust Company of California, N.A., as trustees of the Hourly Plan Special Trust, and the Transfer Agreement; (20) Reviewed the Final Exemption published by the Department of Labor in the Federal Register dated March 15, 1995; (21) Reviewed the Private Letter Ruling and the request to the Internal Revenue Service for such ruling; (22) Reviewed a draft dated March 28, 1996 of the Solicitation Statement/Prospectus to be furnished to the holders of the $1 2/3 Common Stock, the Class H Common Stock and the Class E Common Stock; and (23) Reviewed such other financial studies and analyses and performed such other investigations and took into account such other matters as we deemed necessary, including our assessment of general economic, market and monetary conditions. In preparing our opinion, we have assumed and relied on the accuracy and completeness of all information supplied or otherwise made available to us by GM and EDS, and we have not independently verified such information or undertaken an independent evaluation or appraisal of any of the assets or liabilities of GM or B-3 EDS or been furnished with any such evaluation or appraisal. With respect to the forecasts furnished by GM management of GM's future expenditures for information technology services, we have assumed that they are reasonably based and reflect the best currently available estimates and judgments of such management as to such expected expenditures. We have assumed that the executed PBGC Releases will be released from escrow in accordance with the terms of the Escrow Agreement. In addition, we have assumed that any appreciation in the market price of the Plan Holdings as a result of the Transactions will directly reduce GM's pension expense and unfunded pension liability. You have advised us that the consummation of the Transactions will not result in any default or similar event under any loan agreement, instrument of indebtedness or other contract of GM or EDS that will not be waived. Our opinion does not in any manner address the fairness of the Transactions to EDS or to the holders of Class E Common Stock, matters as to which our opinion has not been requested. Furthermore, we express no opinion as to the prices at which EDS Common Stock will trade subsequent to the Split-Off. Our opinion is necessarily based upon financial, economic, market and other conditions as they exist and can be evaluated on the date hereof. In connection with the preparation of this opinion, we have not been authorized by GM or the GM Board of Directors to solicit, nor have we solicited, third- party indications of interest with respect to a business combination or other extraordinary transaction involving EDS or any of its assets. We wish to advise you that certain elements of the Transactions are not susceptible to precise quantification and that, in connection with the preparation of this opinion, we have made judgments and estimates that we consider reasonable and appropriate under the circumstances. We have acted as financial advisor to GM, its Board of Directors and the negotiating team designated by GM's Board of Directors to develop the terms of the Transactions from the perspective of the holders of the $1 2/3 Common Stock and the Class H Common Stock and will receive a fee for our services that is contingent upon the consummation of the Split-Off. We have also, in the past, provided financial advisory and financing services to GM (including financial advisory services in connection with GM's contribution of Class E Common Stock to the Hourly Plan Special Trust) and have received fees for the rendering of such services. In addition, in the ordinary course of our business, we may actively trade shares of the $1 2/3 Common Stock, the Class H Common Stock, the Class E Common Stock and other securities of GM for our own account and for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities. On the basis of, and subject to the foregoing, we are of the opinion that the Financial Effects of the Transactions are fair, from a financial point of view, to GM and, accordingly, to GM's common stockholders after consummation of the Merger, namely the holders of the $1 2/3 Common Stock and the Class H Common Stock. Very truly yours, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED B-4 APPENDIX B-2 LEHMAN BROTHERS FAIRNESS OPINION [Lehman Brothers Inc. Letterhead] March 31, 1996 General Motors Corporation General Motors Building 3044 West Grand Boulevard Detroit, Michigan 48202 Attention: Board of Directors Members of the Board: We understand that the Board of Directors (the "General Motors Board") of General Motors Corporation ("General Motors") is considering a tax-free split- off (the "Split-Off") of General Motors' wholly owned subsidiary, Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"). The Split- Off will be accomplished through a merger (the "Merger") of GM Mergeco Corporation ("Mergeco") with and into General Motors pursuant to the proposed Agreement and Plan of Merger to be entered into between General Motors and Mergeco (the "Merger Agreement"), with General Motors as the surviving corporation in the Merger. Mergeco is an indirectly wholly owned subsidiary of EDS organized for the purpose of effecting the Split-Off. In the Merger, each outstanding share of Class E Common Stock, $.10 par value per share, of General Motors ("Class E Common Stock") will be converted into one share of EDS common stock, $0.01 par value per share (the "EDS Common Stock"). There will be attached to each share of EDS Common Stock a purchase right for EDS Series A Junior Participating Preferred Stock. As a result of the Split-Off, EDS will become an independent, publicly held company, holders of the Class E Common Stock will become stockholders of EDS rather than of General Motors, and the Class E Common Stock will cease to exist. The terms and conditions of the proposed Split-Off are set forth in more detail in the draft, dated March 27, 1996, of the joint Solicitation Statement/Prospectus of General Motors and EDS (the "Statement"). Immediately prior to and as a condition of the consummation of the Merger, EDS will contribute to Mergeco $500 million in cash (the "Special Inter- Company Payment"). As a result of the Merger, all of the assets of Mergeco, which will consist entirely of the cash contributed by EDS, will become assets of General Motors. Immediately before the Merger, General Motors and EDS will enter into a new master service agreement (the "Master Services Agreement") pursuant to which EDS will continue to serve as General Motors' principal supplier of information technology services for an initial term of ten years following the Split-Off, which may be extended by agreement of the parties. The information technology and other services to be provided by EDS under the Master Services Agreement will generally be similar to those provided to General Motors under an existing master agreement between General Motors and EDS (the "Existing Master Services Agreement"). However, the Master Services Agreement will reflect certain significant changes to the pricing and terms under which such services are to be provided by EDS. Additionally, General Motors and EDS will enter into a Separation Agreement and certain related agreements, including a Tax Allocation Agreement (collectively, the "Separation Agreement"), establishing certain arrangements between General Motors and EDS deemed necessary by General Motors and EDS in order to address various business, legal and regulatory issues resulting from the Split-Off. The Merger and the related transactions, including the Special Inter-Company Payment, the Split-Off Changes (as defined below) effected pursuant to the execution and delivery of the Master Services Agreement and the execution and delivery of the Separation Agreement are collectively referred to as the "Split-Off Transactions". B-5 We have been engaged by General Motors to act as financial advisor to a team appointed by the General Motors Board (the "E Team") which has been charged with negotiating the terms and conditions of the proposed Split-Off from the perspective of the holders of the Class E Common Stock. We have been requested to render to the General Motors Board our opinion with respect to the fairness, from a financial point of view, to the holders of Class E Common Stock, of the financial effect of the Split-Off Transactions taken as a whole and in connection with such opinion to provide our financial advice to General Motors and its Board of Directors. We have not been requested to opine as to, and our opinion does not in any manner address, General Motors' or EDS' underlying business decision to proceed with or effect the proposed Split-Off Transactions. In arriving at our opinion, we reviewed, among other things, (1) historical financial statements of EDS and certain other historical financial and operating data of EDS, (2) historical financial statements of General Motors, (3) certain publicly available information with respect to EDS and General Motors, (4) certain projected financial data with respect to EDS, both with and without giving effect to the Split-Off, prepared by EDS management, (5) reported prices and trading activity for the Class E Common Stock, (6) drafts of the Statement, (7) the terms of the Class E Common Stock as set forth in General Motors' certificate of incorporation as currently in effect, (8) the terms of the EDS Common Stock as set forth in EDS' certificate of incorporation as currently in effect, (9) the private letter ruling received by General Motors from the IRS with respect to the tax-free nature of the Split-Off, (10) a summary of terms for the Master Services Agreement provided to the General Motors Board in connection with its March 31, 1996 meeting, (11) the Registration Rights Agreement, dated March 12, 1995 between General Motors and the Trustees of the General Motors Hourly Plan Pension Trust and (12) the Shareholder Rights Agreement between EDS and Bank of New York dated as of March 12, 1996. In addition, we have held discussions with management of EDS, and in certain cases management of General Motors, with respect to, among other things, (1) the operations and financial condition of EDS and the plans of EDS management with respect to the business and affairs of EDS both prior to and after the Split-Off, (2) the projected financial data for EDS prepared by EDS management, (3) the benefits and detriments to EDS of ownership by General Motors, (4) the expected impact of the Split-Off Transactions on EDS' operations and the financial and strategic flexibility of EDS, and the new business opportunities available to EDS, after the Split-Off, (5) certain terms of (A) the Agreement, dated March 3, 1995, between General Motors and the Pension Benefit Guaranty Corporation (the "GM-PBGC Agreement"), (B) the Existing Master Services Agreement and the proposed Master Services Agreement, and certain other information technology services agreements to be entered into in connection with the Master Services Agreement, and (C) the proposed Separation Agreement, and (6) the effect of the Master Services Agreement (including the related changes to the terms of the underlying services agreements, and certain other information technology services agreements to be entered into in connection with the Master Services Agreement, to the extent that they relate to the financial effect of the Master Services Agreement as projected by EDS management) and the Separation Agreement on the business, results of operations and financial condition of EDS and on the business relationship between General Motors and EDS (including, but not limited to, their relationship as customer and vendor, respectively). In addition, we undertook such other studies, analyses and investigations as we deemed appropriate for purposes of rendering our opinion. In arriving at our opinion, we have assumed and relied upon the accuracy and completeness of all of the financial and other information used by us without assuming any responsibility for independent verification of such information and have further relied upon the assurances of management of EDS and General Motors that they are not aware of any facts that would make such information inaccurate or misleading. With respect to the projected financial data of EDS prepared by EDS management (which reflect, among other things, with respect to periods following the Split-Off, estimates of the expected value of certain benefits to be derived by EDS from the Split-Off), upon the advice of EDS management and with your consent we have assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of EDS management as to the expected future prospects and financial performance of EDS, and we have relied on such projections in rendering our opinion. With respect to the estimates prepared by EDS management of the value of certain benefits and detriments of the Split-Off to EDS, with your consent, we have relied on such estimates and assumed that they were reasonably prepared and reflected the best currently available judgments of EDS management as to such benefits and detriments. We also took into account and B-6 considered your determination, as described in the Statement, that a split-off of EDS would be proposed only in a transaction that would not result in the recapitalization of shares of Class E Common Stock into Common Stock, $1 2/3 par value, of General Motors at a 120% exchange ratio as provided for under certain circumstances under the terms of General Motors' certificate of incorporation. Furthermore, we believe that following the Split-Off, the EDS Common Stock would very likely be included in the Standard and Poor's 500 Index, and we have rendered our opinion on that basis. In arriving at our opinion, we have not conducted a physical inspection of the properties and facilities of EDS and have not made or obtained any evaluations or appraisals of the assets or liabilities of EDS. You have not authorized us to solicit, and we have not solicited, any indications of interest from any third party with respect to the purchase of all or a part of EDS, its business or the Class E Common Stock. We have not been asked to, and we do not, express an opinion as to the prices at which EDS Common Stock will actually trade following the Merger and we can provide no assurance that the trading price of a share of EDS Common Stock following the Split-Off will be equal to or in excess of the trading price of a share of Class E Common Stock prior to the Split-Off. Our opinion necessarily is based upon market, economic and other conditions as they exist on, and can be evaluated as of, the date of this letter. In connection with the review of the financial effect on EDS of the Master Services Agreement, both EDS management and General Motors management advised us that certain changes would have been made to the Existing Master Services Agreement commencing in 1996 even in the absence of the Split-Off. EDS management identified to us those changes that EDS management believed would have been made to the Existing Master Services Agreement commencing in 1996 even in the absence of the Split-Off, the financial effect of which, as projected by EDS management, would begin to impact EDS in 1996 and continue over time. The changes to the Existing Master Services Agreement which would have been made in the absence of the Split-Off are referred to herein as the "Base Changes." Under different base cases identified by EDS management, the Base Changes assumed to occur vary to the extent they reflect different assumptions regarding certain rate reductions and changes in payment terms. General Motors management advised us that General Motors management believed that changes that differ from or are in addition to the Base Changes identified by EDS management, which changes, taken as a whole, would have been more favorable to General Motors and less favorable to EDS than the Base Changes identified by EDS management, would have been made to the Existing Master Services Agreement even in the absence of the Split-Off. No assurances can be given as to exactly which changes to the Existing Master Service Agreement would have been implemented absent the Split-Off or which changes might be implemented in the future if the Split-Off is not consummated. In considering the fairness, from a financial point of view, to holders of Class E Common Stock of the financial effect of the Split-Off Transactions taken as a whole, we have considered, among other things, (1) the $500 million Special Inter-Company Payment which was recommended to the General Motors Board by the Capital Stock Committee on March 22, 1996 and is proposed to be approved as of the date hereof in connection with the Split-Off Transactions, (2) the allowance of $50 million provided to EDS under the Separation Agreement (and in rendering our opinion, with your consent, we assumed that a substantial amount of such allowance will be used for the benefit of EDS under the Separation Agreement), (3) that EDS management has estimated that, as a result of the allowance identified in the immediately preceding clause, there will be no net payments made by EDS to General Motors under the terms of the Separation Agreement (other than payments, if any, to be made under the provisions thereof with respect to indemnification obligations or the allocation of contingent liabilities, to which we gave no effect in rendering this opinion), (4) the financial effect on EDS, as projected by EDS management, of the changes other than the Base Changes (such changes being referred to herein as the "Split-Off Changes") effected pursuant to the Master Services Agreement, (5) the financial effect, as projected by EDS management, of projected declines following the Split-Off in sales of certain goods and services provided by EDS to General Motors and its affiliates other than under the Existing Master Services Agreement or the Master Services Agreement, as the case may be, (6) transaction costs, estimated by EDS management and (7) certain estimated benefits of the Split-Off to EDS or holders of Class E Common Stock, including (A) the Derivative Stock Differential (as defined in the Statement), (B) the value of the inclusion of the EDS Common Stock in the Standard & Poor's 500 Index, (C) the value to EDS of the removal of certain limitations on EDS' ability to participate in major strategic alliances (including among others, mergers and B-7 acquisitions which can be effected using EDS Common Stock), which was estimated by EDS management to be at least $500 million and (D) the present value to EDS of projected new business growth and customer relationships, which was estimated by EDS management. Accordingly, to the extent described herein, we took into account and considered certain benefits as estimated by EDS management that may be realized by EDS as a result of the opportunity to pursue the business purposes of the Split-Off. At the request of the E Team, and with your consent, we have assumed that the Base Changes would have been made to the Existing Master Services Agreement in 1996 even in the absence of the Split-Off (or any other change in the nature of General Motors' ownership of EDS), and that the financial effect thereof would begin in 1996 and continue over time as reflected in the projections prepared by EDS management and therefore, in performing our analyses in connection with rendering this opinion, at the request of the E Team and with your consent, we did not address, and gave no effect to, the financial effect on EDS or holders of Class E Common Stock of the Base Changes effected pursuant to the Master Services Agreement. Based on information regarding the historical financial and operating results of EDS and discussions with EDS management, if neither the Base Changes nor any other significant modifications to the terms of the Existing Master Services Agreement would have been made in the absence of a Split-Off, then the decrement in the present value of cash flows attributable to goods and services projected by EDS management to be provided to General Motors and its affiliates in accordance with the terms of the Existing Master Services Agreement (both under analyses performed on a consolidated company basis for EDS (including goods and services provided to General Motors and its affiliates and to all other customers) and under analyses performed on a basis reflecting only goods and services provided to General Motors and affiliates under the terms of the Existing Master Services Agreement) resulting from changes to the Existing Master Services Agreement arising as a result of the Split-Off would have been significantly larger than under the analyses we have conducted. At the request of the E Team and with your consent, we did not consider, and gave no effect to, contingent liabilities or indemnification obligations of EDS arising under the Separation Agreement or otherwise in connection with the Split-Off. At the request of the E Team, upon the advice of General Motors management and its legal and accounting advisors, and with your consent, we also assumed that the proposed Merger would be tax free to the holders of Class E Common Stock receiving EDS Common Stock in the Merger and that the Unconditional Releases under the GM-PBGC Agreement would become effective as of the effectiveness of the Merger. Based upon and subject to the foregoing, we are of the opinion as of the date hereof that the financial effect of the Split-Off Transactions taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock. We have been engaged by General Motors to act as financial advisor to the E Team in connection with the Split-Off. We have been advised by you that it is intended that our fee will be paid by EDS. A significant portion of our fee is contingent on consummation of the Split-Off. In addition, General Motors has agreed to indemnify us for certain liabilities that may arise out of the rendering of this opinion. We also have performed various investment banking services for each of General Motors and EDS in the past (including representation of General Motors and EDS in connection with the 1995 contribution by General Motors of approximately 173 million shares of Class E Common Stock to the General Motors Hourly Plan Special Trust) and have received customary fees for such services. In March 1996, two of the senior investment bankers actively involved in the transaction for Lehman Brothers in its capacity as financial advisor to the E Team joined Morgan Stanley, at which time Morgan Stanley also began advising the E Team. Since such time, Morgan Stanley and Lehman Brothers have performed their services in cooperation, both relying to a significant degree on the due diligence of those two individuals. However, Lehman Brothers has performed its own independent internal review and analysis in arriving at this opinion. In the ordinary course of our business, we actively trade in the debt and equity securities of General Motors, including the Class E Common Stock, for our own account and for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities. B-8 This opinion is for the use and benefit of the Board of Directors of General Motors, the Capital Stock Committee of the Board of Directors of General Motors, the E Team and the Board of Directors of EDS and is rendered to the General Motors Board in connection with its consideration of the Split-Off Transactions. This opinion is not intended to be and does not constitute a recommendation to any holder of Class E Common Stock, or any other class of capital stock of General Motors, as to whether such stockholder should consent to the Transactions (as defined in the Statement). Very truly yours, [Lehman Brothers Inc.] B-9 APPENDIX B-3 MORGAN STANLEY FAIRNESS OPINION [MORGAN STANLEY & CO. INCORPORATED LETTERHEAD] March 31, 1996 General Motors Corporation General Motors Building 3044 West Grand Boulevard Detroit, Michigan 48202 Attention: Board of Directors Members of the Board: We understand that the Board of Directors (the "General Motors Board") of General Motors Corporation ("General Motors") is considering a tax-free split- off (the "Split-Off") of General Motors' wholly owned subsidiary, Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"). The Split- Off will be accomplished through a merger (the "Merger") of GM Mergeco Corporation ("Mergeco") with and into General Motors pursuant to the proposed Agreement and Plan of Merger to be entered into between General Motors and Mergeco (the "Merger Agreement"), with General Motors as the surviving corporation in the Merger. Mergeco is an indirectly wholly owned subsidiary of EDS organized for the purpose of effecting the Split-Off. In the Merger, each outstanding share of Class E Common Stock, $.10 par value per share, of General Motors ("Class E Common Stock") will be converted into one share of EDS common stock, $0.01 par value per share (the "EDS Common Stock"). There will be attached to each share of EDS Common Stock a purchase right for EDS Series A Junior Participating Preferred Stock. As a result of the Split-Off, EDS will become an independent, publicly held company, holders of the Class E Common Stock will become stockholders of EDS rather than of General Motors, and the Class E Common Stock will cease to exist. The terms and conditions of the proposed Split-Off are set forth in more detail in the draft, dated March 27, 1996, of the joint Solicitation Statement/Prospectus of General Motors and EDS (the "Statement"). Immediately prior to and as a condition of the consummation of the Merger, EDS will contribute to Mergeco $500 million in cash (the "Special Inter- Company Payment"). As a result of the Merger, all of the assets of Mergeco, which will consist entirely of the cash contributed by EDS, will become assets of General Motors. Immediately before the Merger, General Motors and EDS will enter into a new master service agreement (the "Master Services Agreement") pursuant to which EDS will continue to serve as General Motors' principal supplier of information technology services for an initial term of ten years following the Split-Off which may be extended by agreement of the parties. The information technology and other services to be provided by EDS under the Master Services Agreement will generally be similar to those provided to General Motors under an existing master agreement between General Motors and EDS (the "Existing Master Services Agreement"). However, the Master Services Agreement will reflect certain significant changes to the pricing and terms under which such services are to be provided by EDS. Additionally, General Motors and EDS will enter into a Separation Agreement and certain related agreements, including a Tax Allocation Agreement (collectively, the "Separation Agreement"), establishing certain arrangements between General Motors and EDS deemed necessary by General Motors and EDS in order to address various business, legal and regulatory issues resulting from the Split-Off. The Merger and the related transactions, including the Special Inter-Company Payment, the B-10 Split-Off Changes (as defined below) effected pursuant to the execution and delivery of the Master Services Agreement and the execution and delivery of the Separation Agreement are collectively referred to as the "Split-Off Transactions". We have been engaged by General Motors to act as financial advisor to a team appointed by the General Motors Board (the "E Team") which has been charged with negotiating the terms and conditions of the proposed Split-Off from the perspective of the holders of the Class E Common Stock. We have been requested to render to the General Motors Board our opinion with respect to the fairness, from a financial point of view, to the holders of Class E Common Stock, of the financial effect of the Split-Off Transactions taken as a whole and in connection with such opinion to provide our financial advice to General Motors and its Board of Directors. We have not been requested to opine as to, and our opinion does not in any manner address, General Motors' or EDS' underlying business decision to proceed with or effect the proposed Split-Off Transactions. In arriving at our opinion, we reviewed, among other things, (1) historical financial statements of EDS and certain other historical financial and operating data of EDS, (2) historical financial statements of General Motors, (3) certain publicly available information with respect to EDS and General Motors, (4) certain projected financial data with respect to EDS, both with and without giving effect to the Split-Off, prepared by EDS management, (5) reported prices and trading activity for the Class E Common Stock, (6) drafts of the Statement, (7) the terms of the Class E Common Stock as set forth in General Motors' certificate of incorporation as currently in effect, (8) the terms of the EDS Common Stock as set forth in EDS' certificate of incorporation as currently in effect, (9) the private letter ruling received by General Motors from the IRS with respect to the tax-free nature of the Split-Off, (10) a summary of terms for the Master Services Agreement provided to the General Motors Board in connection with its March 31, 1996 meeting, (11) the Registration Rights Agreement, dated March 12, 1995 between General Motors and the Trustees of the General Motors Hourly Plan Pension Trust and (12) the Shareholder Rights Agreement between EDS and Bank of New York dated as of March 12, 1996. In addition, we have held discussions with management of EDS, and in certain cases management of General Motors, with respect to, among other things, (1) the operations and financial condition of EDS and the plans of EDS management with respect to the business and affairs of EDS both prior to and after the Split-Off, (2) the projected financial data for EDS prepared by EDS management, (3) the benefits and detriments to EDS of ownership by General Motors, (4) the expected impact of the Split-Off Transactions on EDS' operations and the financial and strategic flexibility of EDS, and the new business opportunities available to EDS, after the Split-Off, (5) certain terms of (A) the Agreement, dated March 3, 1995, between General Motors and the Pension Benefit Guaranty Corporation (the "GM-PBGC Agreement"), (B) the Existing Master Services Agreement and the proposed Master Services Agreement, and certain other information technology services agreements to be entered into in connection with the Master Services Agreement, and (C) the proposed Separation Agreement, and (6) the effect of the Master Services Agreement (including the related changes to the terms of the underlying services agreements, and certain other information technology services agreements to be entered into in connection with the Master Services Agreement, to the extent that they relate to the financial effect of the Master Services Agreement as projected by EDS management) and the Separation Agreement on the business, results of operations and financial condition of EDS and on the business relationship between General Motors and EDS (including, but not limited to, their relationship as customer and vendor, respectively). In addition, we undertook such other studies, analyses and investigations as we deemed appropriate for purposes of rendering our opinion. In arriving at our opinion, we have assumed and relied upon the accuracy and completeness of all of the financial and other information used by us without assuming any responsibility for independent verification of such information and have further relied upon the assurances of management of EDS and General Motors that they are not aware of any facts that would make such information inaccurate or misleading. With respect to the projected financial data of EDS prepared by EDS management (which reflect, among other things, with respect to periods following the Split-Off, estimates of the expected value of certain benefits to be derived by EDS from the Split-Off), upon the advice of EDS management and with your consent we have assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of EDS management as to the expected future prospects and financial performance of EDS, and we B-11 have relied on such projections in rendering our opinion. With respect to the estimates prepared by EDS management of the value of certain benefits and detriments of the Split-Off to EDS, with your consent, we have relied on such estimates and assumed that they were reasonably prepared and reflected the best currently available judgments of EDS management as to such benefits and detriments. We also took into account and considered your determination, as described in the Statement, that a split-off of EDS would be proposed only in a transaction that would not result in the recapitalization of shares of Class E Common Stock into Common Stock, $1 2/3 par value, of General Motors at a 120% exchange ratio as provided for under certain circumstances under the terms of General Motors' certificate of incorporation. Furthermore, we believe that following the Split-Off, the EDS Common Stock would very likely be included in the Standard and Poor's 500 Index, and we have rendered our opinion on that basis. In arriving at our opinion, we have not conducted a physical inspection of the properties and facilities of EDS and have not made or obtained any evaluations or appraisals of the assets or liabilities of EDS. You have not authorized us to solicit, and we have not solicited, any indications of interest from any third party with respect to the purchase of all or a part of EDS, its business or the Class E Common Stock. We have not been asked to, and we do not, express an opinion as to the prices at which EDS Common Stock will actually trade following the Merger and we can provide no assurance that the trading price of a share of EDS Common Stock following the Split-Off will be equal to or in excess of the trading price of a share of Class E Common Stock prior to the Split-Off. Our opinion necessarily is based upon market, economic and other conditions as they exist on, and can be evaluated as of, the date of this letter. In connection with the review of the financial effect on EDS of the Master Services Agreement, both EDS management and General Motors management advised us that certain changes would have been made to the Existing Master Services Agreement commencing in 1996 even in the absence of the Split-Off. EDS management identified to us those changes that EDS management believed would have been made to the Existing Master Services Agreement commencing in 1996 even in the absence of the Split-Off, the financial effect of which, as projected by EDS management, would begin to impact EDS in 1996 and continue over time. The changes to the Existing Master Services Agreement which would have been made in the absence of the Split-Off are referred to herein as the "Base Changes." Under different base cases identified by EDS management, the Base Changes assumed to occur vary to the extent they reflect different assumptions regarding certain rate reductions and changes in payment terms. General Motors management advised us that General Motors management believed that changes that differ from or are in addition to the Base Changes identified by EDS management, which changes, taken as a whole, would have been more favorable to General Motors and less favorable to EDS than the Base Changes identified by EDS management, would have been made to the Existing Master Services Agreement even in the absence of the Split-Off. No assurances can be given as to exactly which changes to the Existing Master Service Agreement would have been implemented absent the Split-Off or which changes might be implemented in the future if the Split-Off is not consummated. In considering the fairness, from a financial point of view, to holders of Class E Common Stock of the financial effect of the Split-Off Transactions taken as a whole, we have considered, among other things, (1) the $500 million Special Inter-Company Payment which was recommended to the General Motors Board by the Capital Stock Committee on March 22, 1996 and is proposed to be approved as of the date hereof in connection with the Split-Off Transactions, (2) the allowance of $50 million provided to EDS under the Separation Agreement (and in rendering our opinion, with your consent, we assumed that a substantial amount of such allowance will be used for the benefit of EDS under the Separation Agreement), (3) that EDS management has estimated that, as a result of the allowance identified in the immediately preceding clause, there will be no net payments made by EDS to General Motors under the terms of the Separation Agreement (other than payments, if any, to be made under the provisions thereof with respect to indemnification obligations or the allocation of contingent liabilities, to which we gave no effect in rendering this opinion), (4) the financial effect on EDS, as projected by EDS management, of the changes other than the Base Changes (such changes being referred to herein as the "Split-Off Changes") effected pursuant to the Master Services Agreement, (5) the financial effect, as projected by EDS management, of projected declines following the Split-Off in sales of certain goods and services provided by EDS to General Motors and its affiliates other than under the Existing Master Services Agreement or the Master Services Agreement, as the case may be, (6) transaction costs, estimated by EDS B-12 management and (7) certain estimated benefits of the Split-Off to EDS or holders of Class E Common Stock, including (A) the Derivative Stock Differential (as defined in the Statement), (B) the value of the inclusion of the EDS Common Stock in the Standard & Poor's 500 Index, (C) the value to EDS of the removal of certain limitations on EDS' ability to participate in major strategic alliances (including among others, mergers and acquisitions which can be effected using EDS Common Stock), which was estimated by EDS management to be at least $500 million and (D) the present value to EDS of projected new business growth and customer relationships, which was estimated by EDS management. Accordingly, to the extent described herein, we took into account and considered certain benefits as estimated by EDS management that may be realized by EDS as a result of the opportunity to pursue the business purposes of the Split-Off. At the request of the E Team, and with your consent, we have assumed that the Base Changes would have been made to the Existing Master Services Agreement in 1996 even in the absence of the Split-Off (or any other change in the nature of General Motors' ownership of EDS), and that the financial effect thereof would begin in 1996 and continue over time as reflected in the projections prepared by EDS management and therefore, in performing our analyses in connection with rendering this opinion, at the request of the E Team and with your consent, we did not address, and gave no effect to, the financial effect on EDS or holders of Class E Common Stock of the Base Changes effected pursuant to the Master Services Agreement. Based on information regarding the historical financial and operating results of EDS and discussions with EDS management, if neither the Base Changes nor any other significant modifications to the terms of the Existing Master Services Agreement would have been made in the absence of a Split-Off, then the decrement in the present value of cash flows attributable to goods and services projected by EDS management to be provided to General Motors and its affiliates in accordance with the terms of the Existing Master Services Agreement (both under analyses performed on a consolidated company basis for EDS (including goods and services provided to General Motors and its affiliates and to all other customers) and under analyses performed on a basis reflecting only goods and services provided to General Motors and affiliates under the terms of the Existing Master Services Agreement) resulting from changes to the Existing Master Services Agreement arising as a result of the Split-Off would have been significantly larger than under the analyses we have conducted. At the request of the E Team and with your consent, we did not consider, and gave no effect to, contingent liabilities or indemnification obligations of EDS arising under the Separation Agreement or otherwise in connection with the Split-Off. At the request of the E Team, upon the advice of General Motors management and its legal and accounting advisors, and with your consent, we also assumed that the proposed Merger would be tax free to the holders of Class E Common Stock receiving EDS Common Stock in the Merger and that the Unconditional Releases under the GM-PBGC Agreement would become effective as of the effectiveness of the Merger. Based upon and subject to the foregoing, we are of the opinion as of the date hereof that, the financial effect of the Split-Off Transactions taken as a whole is fair, from a financial point of view, to the holders of Class E Common Stock. We have been engaged by General Motors to act as financial advisor to the E Team in connection with the Split-Off. We have been advised by you that it is intended that our fee will be paid by EDS. A significant portion of our fee is contingent on consummation of the Split-Off. In addition, General Motors has agreed to indemnify us for certain liabilities that may arise out of the rendering of this opinion. In addition, certain senior personnel providing financial advice to the E Team and involved in rendering this opinion represented General Motors in connection with its acquisition of EDS and the related creation and issuance of the Class E Common Stock. In March 1996, two of the senior investment bankers actively involved in the transaction for Lehman Brothers in its capacity as financial advisor to the E Team joined Morgan Stanley, at which time Morgan Stanley also began advising the E Team. Since such time as Morgan Stanley also began acting in this capacity, it and Lehman Brothers have performed their services in cooperation, both relying to a significant degree on the work performed by the same individuals. However, we have performed our own independent internal review and analysis in arriving at this opinion. In the ordinary course of our business, we actively trade in the debt and equity securities of General Motors, including the Class E Common Stock, for our own account and for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities. B-13 This opinion is for the use and benefit of the Board of Directors of General Motors, the Capital Stock Committee of the Board of Directors of General Motors, the E Team and the Board of Directors of EDS and is rendered to the General Motors Board in connection with its consideration of the Split-Off Transactions. This opinion is not intended to be and does not constitute a recommendation to any holder of Class E Common Stock, or any other class of capital stock of General Motors, as to whether such stockholder should consent to the Transactions (as defined in the Statement). Very truly yours, [Morgan Stanley & Co. Incorporated] B-14 APPENDIX C EDS CONSOLIDATED FINANCIAL STATEMENTS
INDEX PAGE ----- ---- Independent Auditors' Report.............................................. C-1 Consolidated Statements of Income......................................... C-2 Consolidated Balance Sheets............................................... C-3 Consolidated Statements of Cash Flows..................................... C-4 Notes to Consolidated Financial Statements................................ C-5
INDEPENDENT AUDITORS' REPORT The Board of Directors Electronic Data Systems Corporation: We have audited the accompanying consolidated balance sheets of Electronic Data Systems Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income and cash flows for each of the years in the three-year period ended December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Electronic Data Systems Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP Dallas, Texas January 24, 1996 C-1 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 --------- -------- -------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Systems and other contracts revenues.............. $12,422.1 $9,960.1 $8,507.3 --------- -------- -------- Costs and expenses Cost of revenues................................ 9,601.6 7,529.4 6,390.6 Selling, general, and administrative............ 1,291.5 1,187.1 1,005.4 --------- -------- -------- Total costs and expenses...................... 10,893.1 8,716.5 7,396.0 --------- -------- -------- Operating income.................................. 1,529.0 1,243.6 1,111.3 Interest and other income, net (Note 20).......... (62.0) 40.6 20.0 --------- -------- -------- Income before income taxes........................ 1,467.0 1,284.2 1,131.3 Provision for income taxes (Note 11).............. 528.1 462.3 407.3 --------- -------- -------- Separate Consolidated Net Income.................. $ 938.9 $ 821.9 $ 724.0 ========= ======== ======== Earnings Per Share Attributable to GM Class E Common Stock..................................... $ 1.96 $ 1.71 $ 1.51 ========= ======== ========
Revenues related to GM and affiliates amounted to $3,891.1 million, $3,547.2 million, and $3,323.7 million for 1995, 1994, and 1993, respectively. See accompanying notes to consolidated financial statements. C-2 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ------------------ 1995 1994 --------- -------- (IN MILLIONS) ASSETS Current assets Cash and cash equivalents................................. $ 548.9 $ 608.2 Marketable securities (Note 3)............................ 89.7 149.6 Accounts receivable, net.................................. 2,872.0 2,082.1 Accounts receivable from GM and affiliates................ 297.0 65.4 Inventories............................................... 181.2 137.8 Prepaids and other........................................ 392.7 311.0 --------- -------- Total current assets.................................... 4,381.5 3,354.1 --------- -------- Property and equipment, at cost less accumulated depreciation (Note 4)...................................... 3,242.4 2,756.6 --------- -------- Operating and other assets Land held for development, at cost (Note 5)............... 105.1 97.4 Investment in leases and other (Note 6)................... 1,573.5 1,308.8 Software, goodwill, and other intangibles, net (Notes 7 and 19).................................................. 1,529.9 1,269.6 --------- -------- Total operating and other assets........................ 3,208.5 2,675.8 --------- -------- Total Assets............................................ $10,832.4 $8,786.5 ========= ======== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities Accounts payable.......................................... $ 603.9 $ 571.1 Accrued liabilities (Note 8).............................. 1,704.5 1,451.0 Deferred revenue.......................................... 629.3 536.7 Income taxes (Note 11).................................... 75.9 111.0 Notes payable (Note 9).................................... 247.8 203.4 --------- -------- Total current liabilities............................... 3,261.4 2,873.2 --------- -------- Deferred income taxes (Note 11)............................. 739.7 659.8 --------- -------- Notes payable (Note 9)...................................... 1,852.8 1,021.0 --------- -------- Commitments and contingent liabilities (Notes 17 and 18) Stockholder's equity (Notes 10 and 12) Common stock, without par value; authorized 1,000.0 shares. Issued and outstanding 483.7 and 481.7 shares at December 31, 1995 and 1994, respectively................. 517.7 455.1 Retained earnings......................................... 4,460.8 3,777.4 --------- -------- Total stockholder's equity.............................. 4,978.5 4,232.5 --------- -------- Total Liabilities and Stockholder's Equity.............. $10,832.4 $8,786.5 ========= ========
See accompanying notes to consolidated financial statements. C-3 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, -------------------------------- 1995 1994 1993 --------- ---------- --------- (IN MILLIONS) CASH FLOWS FROM OPERATING ACTIVITIES Net income................................. $ 938.9 $ 821.9 $ 724.0 --------- ---------- --------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............ 1,107.8 771.1 626.8 Deferred compensation.................... 58.8 62.0 33.8 Other.................................... 33.0 30.9 (17.7) Changes in assets and liabilities, net of effects of acquired companies: (Increase) in accounts receivable...... (611.5) (605.4) (200.8) (Increase) decrease in accounts receivable from GM and affiliates..... (227.8) 51.1 (56.0) (Increase) in inventories.............. (41.9) (1.9) (15.5) (Increase) in prepaids and other....... (59.7) (57.0) (26.8) Increase (decrease) in accounts payable and accrued liabilities............... (76.0) 453.2 27.4 Increase in deferred revenue........... 81.0 79.1 137.1 Increase (decrease) in taxes payable... 56.4 (72.5) 188.7 --------- ---------- --------- Total adjustments.................... 320.1 710.6 697.0 --------- ---------- --------- Net cash provided by operating activities.. 1,259.0 1,532.5 1,421.0 --------- ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales of marketable securities................................ 163.6 370.0 234.2 Proceeds from investments in leases and other assets.............................. 87.8 134.6 217.3 Payments for purchases of property and equipment................................. (1,261.5) (1,186.0) (816.4) Payments for investments in leases and other assets.............................. (356.3) (395.7) (170.6) Payments related to acquisitions, net of cash acquired............................. (234.9) (186.6) (122.1) Payments for purchases of software and other intangibles......................... (92.0) (77.0) (119.0) Payments for purchases of marketable securities................................ (100.9) (248.9) (292.5) Other...................................... 12.7 49.9 1.4 --------- ---------- --------- Net cash used in investing activities...... (1,781.5) (1,539.7) (1,067.7) --------- ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable................ 7,466.7 10,821.0 2,527.7 Payments on notes payable.................. (6,776.3) (10,300.7) (2,648.7) Net decrease in current notes payable with maturities less than 90 days................................... -- (102.9) (99.0) Employee stock transactions and related tax benefit................................... 26.0 20.2 33.9 Dividends paid to GM....................... (251.3) (231.1) (192.1) --------- ---------- --------- Net cash provided by (used in) financing activities................................ 465.1 206.5 (378.2) --------- ---------- --------- Effect of Exchange Rate Changes on Cash and Cash Equivalents............................ (1.9) 25.5 (13.6) --------- ---------- --------- Net Increase (Decrease) in Cash and Cash Equivalents................................. (59.3) 224.8 (38.5) Cash and Cash Equivalents at Beginning of Year........................................ 608.2 383.4 421.9 --------- ---------- --------- Cash and Cash Equivalents at End of Year..... $ 548.9 $ 608.2 $ 383.4 ========= ========== =========
See accompanying notes to consolidated financial statements. C-4 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Electronic Data Systems Corporation is a provider of information technology using advanced computer and communications technologies to meet the business needs of its clients. As used herein, the terms "EDS" and "the Company" refer to Electronic Data Systems Corporation and its consolidated subsidiaries. EDS offers its clients a continuum of services in over 40 countries worldwide. This continuum includes the management of computers, networks, information systems, information processing facilities, business operations, and related personnel, as well as management consulting services. (See Note 14 for geographic segment information.) General Motors Corporation (GM) acquired all of the capital stock of EDS in October 1984. Prior to that time, EDS had been an independent, publicly held corporation. Electronic Data Systems Holding Corporation was incorporated in Delaware in 1994 for the purpose of holding the capital stock of EDS, which was incorporated in Texas in 1962. Accordingly, EDS is an indirect wholly owned subsidiary of GM. Principles of Consolidation The consolidated financial statements include the accounts of EDS and all majority-owned subsidiaries. The Company's investments in companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for under the equity method, with the remaining investments carried at cost. Earnings Attributable to GM Class E Common Stock on a Per Share Basis have been determined based on the relative amounts available for the payment of dividends to holders of GM Class E common stock. Holders of GM Class E common stock have no direct rights in the equity or assets of EDS, but rather have rights in the equity and assets of GM (which includes 100 percent of the stock of EDS). Dividends on the GM Class E common stock are declared out of the Available Separate Consolidated Net Income of EDS earned since the acquisition of EDS by GM. The Available Separate Consolidated Net Income of EDS is determined quarterly and is equal to the Separate Consolidated Net Income of EDS, excluding the effects of purchase accounting adjustments arising from the acquisition of EDS, which are not reflected in the accompanying consolidated financial statements, multiplied by a fraction, the numerator of which is the weighted average number of shares of GM Class E common stock outstanding during the quarter, and the denominator of which was 483.7 million EDS common shares at December 31, 1995 (the Class E Dividend Base). GM Series C depositary shares represent ownership of one-tenth of a share of GM Series C convertible preference stock. GM Series C depositary shares and GM Series C preference stock are convertible into GM Class E common stock and are common stock equivalents for purposes of computing Earnings Attributable to GM Class E Common Stock on a Per Share Basis. On November 2, 1992, GM Series E-II and E-III preference stocks, previously held by the GM pension plans, were converted to GM Class E common stock. In 1993 and 1992, GM Series E-I preference stock was converted to GM Class E common stock, or redeemed by GM. The issuances and conversions of such preference stocks have no dilutive effect on the GM Class E common stock because, to the extent that shares of GM Class E common stock deemed to be outstanding would increase, such increased shares would increase the numerator of the fraction used to determine Available Separate Consolidated Net Income, but would have no effect on the denominator. Additionally, unvested units in the Company's stock incentive plan would have no material dilutive effect on the denominator. C-5 ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The denominator used in determining the Available Separate Consolidated Net Income of EDS is adjusted as deemed appropriate by the GM Board of Directors to reflect subdivisions or combinations of the GM Class E common stock and to reflect certain transfers of capital to or from EDS. The GM Board's discretion to make such adjustments is limited by criteria set forth in GM's Certificate of Incorporation. In 1988, EDS initiated a program to purchase 11.0 million shares of GM Class E common stock in order to meet certain future requirements of the Company's employee benefit plans. As of December 31, 1989, the Company had purchased 11.0 million shares of GM Class E common stock to be distributed to key employees under the provisions of the 1984 Plan. The GM Board has generally caused the denominator used in calculating the Available Separate Consolidated Net Income of EDS to decrease as shares are purchased and to increase as shares are used for the employee benefit plans. In March 1995, GM contributed 173 million newly issued shares of GM Class E Common Stock to the General Motors Hourly-Rate Employees Pension Plan. The current GM Board policy is that the cash dividends on the GM Class E Common Stock, when, as, and if declared by the GM Board in its sole discretion, will equal approximately 30 percent of the prior year's Available Separate Consolidated Net Income of EDS. The following table summarizes certain amounts discussed above (in millions, except per share amounts):
YEARS ENDED DECEMBER 31, -------------------- 1995 1994 1993 ------ ------ ------ Separate Consolidated Net Income.................... $938.9 $821.9 $724.0 Available Separate Consolidated Net Income.......... $795.5 $444.4 $367.2 Average Number of Shares of GM Class E Common Stock Outstanding (Numerator)............................ 404.6 260.3 243.0 Class E Dividend Base (Denominator)................. 483.7 481.7 480.6 Earnings Attributable to GM Class E Common Stock on a Per Share Basis.................................. $1.96 $1.71 $1.51 Cash Dividends Per Share of GM Class E Common Stock. $0.52 $0.48 $0.40
Debt and Marketable Equity Securities Marketable securities at December 31, 1995 and 1994, consist of securities issued by the U.S. Treasury, states, and political subdivisions, as well as mortgage-backed debt, corporate debt and corporate equity securities. The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, effective January 1, 1994. Pursuant to SFAS No. 115, the provisions of the Statement were not applied retroactively. The change had no material cumulative effect on the Company's financial position or results of operations. Under SFAS No. 115, the Company classifies all of its debt and marketable equity securities as available-for-sale. Management determines the appropriate classification of all securities at the time of purchase and reevaluates such designation as of each balance sheet date. Noncurrent available-for-sale securities are reported within the balance sheet classification "Investment in Leases and Other." The Company's available-for- sale securities are recorded at fair value. Unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as a separate component of stockholder's equity until realized. A decline in the fair value of any available-for-sale security below cost that is deemed other than temporary is charged to earnings, resulting in the establishment of a new cost basis for the security (see Note 3). Inventory Valuation Inventories are stated principally at the lower of cost or market using the first-in, first-out method. C-6 APPENDIX D AMENDED EDS INCENTIVE PLAN 1996 INCENTIVE PLAN OF ELECTRONIC DATA SYSTEMS CORPORATION 1. Plan. This 1996 Incentive Plan of Electronic Data Systems Corporation (the "Plan") is a continuation of the 1984 Electronic Data Systems Corporation Stock Incentive Plan (the "Existing Plan"), which was adopted by General Motors Corporation, a Delaware corporation ("General Motors"), to reward certain corporate officers and key employees of the predecessor of Electronic Data Systems Holding Corporation (to be renamed "Electronic Data Systems Corporation" upon the consummation of the Reincorporation (as hereinafter defined)), a Delaware corporation (the "Company"), and its subsidiaries by enabling them to acquire shares of Class E Common Stock, par value $.10 per share ("GM Class E Common Stock"), of General Motors. Upon the Amendment Effective Date (as hereinafter defined), the Existing Plan shall be amended and restated in its entirety as set forth herein and shall be assumed by the Company and neither General Motors nor the committee appointed by General Motors to administer the Existing Plan (the "Predecessor Committee") shall have any further rights or responsibilities hereunder. 2. Objectives. This Plan is designed to attract and retain key employees of the Company and its Subsidiaries (as hereinafter defined), to attract and retain qualified directors of the Company, to encourage the sense of proprietorship of such employees and Directors, and to stimulate the active interest of such persons in the development and financial success of the Company and its Subsidiaries. These objectives are to be accomplished by making Awards (as hereinafter defined) under this Plan and thereby providing Participants (as hereinafter defined) with a proprietary interest in the growth and performance of the Company and its Subsidiaries. 3. Definitions. As used herein, the terms set forth below shall have the following respective meanings: "Amendment Effective Date" has the meaning set forth in paragraph 19 hereof. "Annual Director Award Date" means, for each year beginning on or after the Amendment Effective Date, the first business day of the month next succeeding the date upon which the annual meeting of stockholders of the Company is held in such year. "Authorized Officer" means the Chairman of the Board or the Chief Executive Officer of the Company (or any other senior officer of the Company to whom either of them shall delegate the authority to execute any Award Agreement). "Award" means an Employee Award or a Director Award. "Award Agreement" means any Employee Award Agreement or Director Award Agreement. "Board" means the Board of Directors of the Company. "Cash Award" means an award denominated in cash. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Committee" means the Compensation and Benefits Committee of the Board or such other committee of the Board as is designated by the Board to administer the Plan. "Common Stock" means the Common Stock, par value $.01 per share, of the Company. "Director" means an individual serving as a member of the Board. "Director Award" means the grant of a Director Option or Director Restricted Stock. D-1 "Director Award Agreement" means a written agreement between the Company and a Participant who is a Nonemployee Director setting forth the terms, conditions and limitations applicable to a Director Award. "Director Options" means Nonqualified Options granted to Nonemployee Directors pursuant to the applicable terms, conditions and limitations specified in paragraph 9(a) hereof. "Director Restricted Stock" means Common Stock granted to Nonemployee Directors pursuant to the applicable terms, conditions and limitations specified in paragraph 9(b) hereof. "Disability" means, with respect to a Nonemployee Director, the inability to perform the duties of a Director for a continuous period of more than three months by reason of any medically determinable physical or mental impairment. "Dividend Equivalents" means, with respect to shares of Restricted Stock that are to be issued at the end of the Restriction Period, an amount equal to all dividends and other distributions (or the economic equivalent thereof) which are payable to stockholders of record during the Restriction Period on a like number of shares of Common Stock. "Employee" means an employee of the Company or any of its Subsidiaries. "Employee Award" means the grant of any Option, SAR, Stock Award, Cash Award or Performance Award, whether granted singly, in combination or in tandem, to a Participant who is an Employee pursuant to such applicable terms, conditions and limitations as the Committee may establish in order to fulfill the objectives of the Plan. "Employee Award Agreement" means a written agreement between the Company and a Participant who is an Employee setting forth the terms, conditions and limitations applicable to an Employee Award. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. "Fair Market Value" of a share of Common Stock means, as of a particular date, (i) if shares of Common Stock are listed on a national securities exchange, the mean between the highest and lowest sales price per share of Common Stock on the consolidated transaction reporting system for the principal national securities exchange on which shares of Common Stock are listed on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, (ii) if shares of Common Stock are not so listed but are quoted on the Nasdaq National Market, the mean between the highest and lowest sales price per share of Common Stock reported by the Nasdaq National Market on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported or (iii) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by the Nasdaq Stock Market, or, if not reported by the Nasdaq Stock Market, by the National Quotation Bureau Incorporated. "Incentive Option" means an Option that is intended to comply with the requirements set forth in Section 422 of the Code. "Noncompetition Provisions" has the meaning set forth in paragraph 8(c) hereof. "Nonemployee Director" has the meaning set forth in paragraph 4(b) hereof. "Nonqualified Stock Option" means an Option that is not an Incentive Option. "Option" means a right to purchase a specified number of shares of Common Stock at a specified price. "Participant" means an Employee or Director to whom an Award has been made under this Plan. D-2 "Performance Award" means an award made pursuant to this Plan to a Participant who is an Employee that is subject to the attainment of one or more Performance Goals. "Performance Goal" means a standard established by the Committee, to determine in whole or in part whether a Performance Award shall be earned. "Reincorporation" means (i) the merger of Electronic Data Systems Intermediate Corporation, a Delaware corporation and direct wholly owned subsidiary of the Company, with and into the Company and (ii) the merger of Electronic Data Systems Corporation, a Texas corporation and indirect wholly owned subsidiary of the Company, with and into the Company. "Restricted Stock" means any Common Stock that is restricted or subject to forfeiture provisions. "Restriction Period" means a period of time beginning as of the date upon which an Award of Restricted Stock is made pursuant to this Plan and ending as of the date upon which the Common Stock subject to such Award is no longer restricted or subject to forfeiture provisions. "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, or any successor rule. "SAR" means a right to receive a payment, in cash or Common Stock, equal to the excess of the Fair Market Value or other specified valuation of a specified number of shares of Common Stock on the date the right is exercised over a specified strike price (in each case, as determined by the Committee). "Split-Off" means the issuance or delivery of shares of Common Stock upon conversion of all of the outstanding shares of GM Class E Common Stock as a result of the merger of GM Mergeco Corporation, a Delaware corporation and indirect wholly owned subsidiary of the Company, with and into General Motors in accordance with the terms of the Merger Agreement to be entered into between General Motors and GM Mergeco Corporation. "Stock Award" means an award in the form of shares of Common Stock or units denominated in shares of Common Stock. "Subsidiary" means (i) in the case of a corporation, any corporation of which the Company directly or indirectly owns shares representing more than 50% of the combined voting power of the shares of all classes or series of capital stock of such corporation which have the right to vote generally on matters submitted to a vote of the stockholders of such corporation and (ii) in the case of a partnership or other business entity not organized as a corporation, any such business entity of which the Company directly or indirectly owns more than 50% of the voting, capital or profits interests (whether in the form of partnership interests, membership interests or otherwise). "Transactions" has the meaning set forth in paragraph 19 hereof. 4. Eligibility. (a) Employees. Key Employees eligible for Employee Awards under this Plan are those who hold positions of responsibility and whose performance, in the judgment of the Committee, can have a significant effect on the success of the Company and its Subsidiaries. (b) Directors. Directors eligible for Director Awards under this Plan are those who are not employees of the Company or any of its Subsidiaries ("Nonemployee Directors"). 5. Common Stock Available for Awards. Subject to the provisions of paragraph 15 hereof, there shall be available for Awards under this Plan granted wholly or partly in Common Stock (including rights or options which may be exercised for or settled in Common Stock) an aggregate of 60,000,000 shares of Common Stock (in addition to any shares that are the subject of Awards outstanding as of the Amendment Effective Date), of D-3 which an aggregate of not more than 400,000 shares shall be available for Director Awards and the remainder shall be available for Employee Awards. The number of shares of Common Stock that are the subject of Awards under this Plan, that are forfeited or terminated, expire unexercised, are settled in cash in lieu of Common Stock or in a manner such that all or some of the shares covered by an Award are not issued to a Participant or are exchanged for Awards that do not involve Common Stock, shall again immediately become available for Awards hereunder. The Committee may from time to time adopt and observe such procedures concerning the counting of shares against the Plan maximum as it may deem appropriate. The Board and the appropriate officers of the Company shall from time to time take whatever actions are necessary to file any required documents with governmental authorities, stock exchanges and transaction reporting systems to ensure that shares of Common Stock are available for issuance pursuant to Awards. 6. Administration. (a) This Plan, as it applies to Participants who are Employees but not with respect to Participants who are Nonemployee Directors, shall be administered by the Committee. To the extent required in order for Employee Awards to be exempt from Section 16 of the Exchange Act by virtue of the provisions of Rule 16b-3, the Committee shall consist of at least two members of the Board who meet the requirements of the definition of "disinterested person" set forth in Rule 16b-3(c)(2)(i) promulgated under the Exchange Act. (b) Subject to the provisions hereof, insofar as this Plan relates to the Employee Awards, the Committee shall have full and exclusive power and authority to administer this Plan and to take all actions which are specifically contemplated hereby or are necessary or appropriate in connection with the administration hereof. Insofar as this Plan relates to Employee Awards, the Committee shall also have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of this Plan. The Committee may, in its discretion, provide for the extension of the exercisability of an Employee Award, accelerate the vesting or exercisability of an Employee Award, eliminate or make less restrictive any restrictions contained in an Employee Award, waive any restriction or other provision of this Plan or an Employee Award or otherwise amend or modify an Employee Award in any manner that is either (i) not adverse to the Participant to whom such Employee Award was granted or (ii) consented to by such Participant. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Employee Award in the manner and to the extent the Committee deems necessary or desirable to carry it into effect. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. (c) No member of the Committee or officer of the Company to whom the Committee has delegated authority in accordance with the provisions of paragraph 7 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by any officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute. 7. Delegation of Authority. The Committee may delegate to the Chief Executive Officer and to other senior officers of the Company its duties under this Plan pursuant to such conditions or limitations as the Committee may establish, except that the Committee may not delegate to any person the authority to grant Awards to, or take other action with respect to, Participants who are subject to Section 16 of the Exchange Act. 8. Employee Awards. (a) The Committee shall determine the type or types of Employee Awards to be made under this Plan and shall designate from time to time the Employees who are to be the recipients of such Awards. Each Employee Award may be embodied in an Employee Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion and shall be signed by the Participant to whom the Employee Award is made and by an Authorized Officer for and on behalf of the Company. Employee Awards may consist of those listed in this paragraph 8(a) hereof and may be D-4 granted singly, in combination or in tandem. Employee Awards may also be made in combination or in tandem with, in replacement of, or as alternatives to, grants or rights under this Plan or any other employee plan of the Company or any of its Subsidiaries, including the plan of any acquired entity; provided that no Option may be issued in exchange for the cancellation of an Option with a lower exercise price. An Employee Award may provide for the grant or issuance of additional, replacement or alternative Employee Awards upon the occurrence of specified events, including the exercise of the original Employee Award granted to a Participant. All or part of an Employee Award may be subject to conditions established by the Committee, which may include, but are not limited to, continuous service with the Company and its Subsidiaries, achievement of specific business objectives, increases in specified indices, attainment of specified growth rates and other comparable measurements of performance. Upon the termination of employment by a Participant who is an Employee, any unexercised, deferred, unvested or unpaid Employee Awards shall be treated as set forth in the applicable Employee Award Agreement. (i) Stock Option. An Employee Award may be in the form of an Option. An Option awarded pursuant to this Plan may consist of an Incentive Option or a Nonqualified Option. The price at which shares of Common Stock may be purchased upon the exercise of an Incentive Option shall be not less than the Fair Market Value of the Common Stock on the date of grant. The price at which shares of Common Stock may be purchased upon the exercise of a Nonqualified Option shall be not less than, but may exceed, the Fair Market Value of the Common Stock on the date of grant. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Options awarded pursuant to this Plan, including the term of any Options and the date or dates upon which they become exercisable, shall be determined by the Committee. (ii) Stock Appreciation Right. An Employee Award may be in the form of an SAR. The terms, conditions and limitations applicable to any SARs awarded pursuant to this Plan, including the term of any SARs and the date or dates upon which they becomes exercisable, shall be determined by the Committee. (iii) Stock Award. An Employee Award may be in the form of a Stock Award. The terms, conditions and limitations applicable to any Stock Awards granted pursuant to this Plan shall be determined by the Committee. (iv) Cash Award. An Employee Award may be in the form of a Cash Award. The terms, conditions and limitations applicable to any Cash Awards granted pursuant to this Plan shall be determined by the Committee. (v) Performance Award. Without limiting the type or number of Employee Awards that may be made under the other provisions of this Plan, an Employee Award may be in the form of a Performance Award. A Performance Award shall be paid, vested or otherwise deliverable solely on account of the attainment of one or more pre-established, objective Performance Goals established by the Committee prior to the earlier to occur of (x) 90 days after the commencement of the period of service to which the Performance Goal relates and (y) the elapse of 25% of the period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A Performance Goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a Performance Goal may be based on one or more of business criteria that apply to the individual, one or more business units of the Company, or the Company as a whole, and may include one or more of the following: increased revenue, net income, stock price, market share, earnings per share, return on equity, return on assets or decrease in costs. Unless otherwise stated, such a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to Performance Goals and Performance Awards, it is the intent of the Plan to conform with the standards of Section 162(m) of the Code and Treasury Regulations (S) 1.162-27(e)(2)(i), and the Committee in establishing such goals and interpreting the Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of D-5 Performance Goals, the Committee must certify in writing that applicable Performance Goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Performance Awards made pursuant to this Plan shall be determined by the Committee. (b) Notwithstanding anything to the contrary contained in this Plan, the following limitations shall apply to any Employee Awards made hereunder: (i) no Participant may be granted, during any one-year period, Employee Awards consisting of Options or SARs that are exercisable for more than 1,500,000 shares of Common Stock; (ii) no Participant may be granted, during any one-year period, Employee Awards consisting of shares of Common Stock or units denominated in such shares (other than any Employee Awards consisting of Options or SARs) covering or relating to more than 300,000 shares of Common Stock (the limitation set forth in this clause (ii), together with the limitation set forth in clause (i) above, being hereinafter collectively referred to as the "Stock Based Awards Limitations"); and (iii) no Participant may be granted Employee Awards consisting of cash or in any other form permitted under this Plan (other than Employee Awards consisting of Options or SARs or otherwise consisting of shares of Common Stock or units denominated in such shares) in respect of any one-year period having a value determined on the date of grant in excess of $5,000,000. (c) Prior to the Amendment Effective Date, certain awards consisting of shares of GM Class E Common Stock or units denominated in such shares (the "Existing Stock Awards") have been made to Employees under the Existing Plan as in effect from time to time. As of the Amendment Effective Date, each Existing Stock Award shall be adjusted so that such award shall consist of or relate to a number of shares of Common Stock equal to the number of shares of GM Class E Common Stock that are the subject of such Existing Stock Award immediately prior to such date, without any alteration or enlargement of the rights of the holders thereof. Notwithstanding anything to the contrary contained in this Plan, all Existing Stock Awards that are subject to the restrictions and other provisions relating to competition by participants and related matters that are set forth in Section 10 of the Existing Plan (the "Noncompetition Provisions") shall continue to be subject to the Noncompetition Provisions after the Amendment Effective Date, as fully and to the same extent as if Section 10 of the Existing Plan were set forth herein in its entirety. The Noncompetition Provisions shall apply to all Existing Awards, but shall not apply to any Awards made after the Amendment Effective Date unless otherwise determined by the Committee. 9. Director Awards. Each Nonemployee Director of the Company shall be granted Director Awards in accordance with this paragraph 9 and subject to the applicable terms, conditions and limitations set forth in this Plan and the applicable Director Award Agreement. Notwithstanding anything to the contrary contained herein, Director Awards shall not be made in any year in which a sufficient number of shares of Common Stock are not available to make such Awards under this Plan. (a) Director Options. On the Amendment Effective Date, each Nonemployee Director shall be automatically awarded a Director Option that provides for the purchase of 1,500 shares of Common Stock. In addition, on each Annual Director Award Date, each Nonemployee Director shall automatically be granted a Director Option that provides for the purchase of 1,500 shares of Common Stock. In the event that a Nonemployee Director is elected after the Amendment Effective Date otherwise than by election at an annual meeting of stockholders of the Company, on the date of his or her election, such Nonemployee Director shall automatically be granted a Director Option that provides for the purchase of a number of shares of Common Stock (rounded up to the nearest whole number) equal to the product of (i) 1,500 and (ii) a fraction the numerator of which is the number of days between the election of such Nonemployee Director and the next scheduled Annual Director Award Date (or, if no such date has been scheduled, the first anniversary of the immediately preceding Annual Director Award Date) and the denominator of which is 365. Each Director Option shall have a term of ten years from the date of grant, notwithstanding any earlier termination of the status of the holder as a Nonemployee Director. The purchase price of each share D-6 of Common Stock subject to a Director Option shall be equal to the Fair Market Value of the Common Stock on the date of grant. All Director Options shall vest and become exercisable in increments of one-third of the total number of shares of Common Stock that are subject thereto (rounded up to the nearest whole number) on the first and second anniversaries of the date of grant and of all remaining shares of Common Stock that are subject thereto on the third anniversary of the date of grant. All unvested Director Options shall be forfeited if the Nonemployee Director resigns as a Director without the consent of a majority of the other Directors. In addition to the Director Options automatically awarded pursuant to the immediately preceding paragraph, a Nonemployee Director may make an annual election to receive, in lieu of all or any portion of the Director's fees he would otherwise be entitled to receive in cash during the next year (including both annual retainer and meeting fees), Director Options that provide for the purchase of a number of shares of Common Stock (rounded up to the nearest whole number) equal to the product of (x) three times (y) a fraction the numerator of which is equal to the dollar amount of fees the Nonemployee Director elects to forego in the next year in exchange for Director Options and the denominator of which is equal to the Fair Market Value of the Common Stock on the date of the election. Each annual election made by a Nonemployee Director pursuant to this paragraph 9(a)(i) shall take the form of a written document signed by such Nonemployee Director and filed with the Secretary of the Company, (ii) shall designate the dollar amount of the fees the Nonemployee Director elects to forego in the next year in exchange for Director Options and (iii) to extent provided by the Committee in order to ensure that the Award of the Director Options is exempt from Section 16 by virtue of Rule 16b-3, shall be irrevocable and shall be made at least six months prior to the date as of which such Award of Director Options is to be effective. An Award of Director Options at the election of a Nonemployee Director shall be effective on the next Annual Director Award Date. Any Award of Director Options shall be embodied in a Director Award Agreement, which shall contain the terms, conditions and limitations set forth above and shall be signed by the Participant to whom the Director Options are granted and by an Authorized Officer for and on behalf of the Company. (b) Director Restricted Stock. On the Amendment Effective Date, each Nonemployee Director shall automatically be awarded 500 shares of Director Restricted Stock. In addition, on each Annual Director Award Date, each Nonemployee Director shall automatically be granted 500 shares of Director Restricted Stock. In the event that a Nonemployee Director is elected after the Amendment Effective Date otherwise than by election at an annual meeting of stockholders of the Company, on the date of his or her election, such Nonemployee Director shall automatically be granted a number of shares of Director Restricted Stock (rounded up to the nearest whole number) equal to the product of (i) 500 and (ii) a fraction the numerator of which is the number of days between the election of such Nonemployee Director and the next scheduled Annual Director Award Date (or, if no such date has been scheduled, the first anniversary of the immediately preceding Annual Director Award Date) and the denominator of which is 365. Shares of Director Restricted Stock awarded to a Nonemployee Director (i) shall vest in increments of one-third of the total number of shares of Director Restricted Stock (rounded up to the nearest whole number) that are the subject of such Award on the first and second anniversaries of the date of grant and all remaining shares of Director Restricted Stock that are the subject of such Award on the third anniversary of the date of grant and (ii) shall fully vest (to the extent not previously vested pursuant to clause (i) above) upon a failure to reelect the Nonemployee Director as Director, the death of the Director or the resignation of the Director by reason of Disability or at the request of a majority of the other Directors. All unvested shares of Director Restricted Stock granted to a Nonemployee Director shall be forfeited if the Nonemployee Director resigns as a Director without the consent of a majority of the other Directors. In addition to the Director Restricted Stock automatically awarded pursuant to the immediately preceding paragraph, a Nonemployee Director may make an annual election to receive, in lieu of all or any portion of the Director's fees he would otherwise be entitled to receive in cash during the next year (including both annual retainer and meeting fees), a number of shares of Director Restricted Stock (rounded up to the nearest whole number) having a Fair Market Value equal to 110% of a fraction the numerator of D-7 which is equal to the dollar amount of fees the Nonemployee Director elects to forego in the next year in exchange for Director Restricted Stock and the denominator of which is equal to the Fair Market Value of the Common Stock on the date of the election. Each annual election made by a Nonemployee Director pursuant to this paragraph 9(b)(i) shall take the form of a written document signed by such Nonemployee Director and filed with the Secretary of the Company, (ii) shall designate the dollar amount of the fees the Nonemployee Director elects to forego in the next year in exchange for Director Restricted Stock and (iii) to the extent provided by the Committee in order to ensure that the Award of the Director Restricted Stock is exempt from Section 16 by virtue of Rule 16b-3, shall be irrevocable and shall be made at least six months prior to the date as of which such Award of Director Restricted Stock is to be effective. An Award of Director Restricted Stock at the election of a Nonemployee Director shall be effective on the next Annual Director Award Date. Any Award of Director Restricted Stock shall be embodied in a Director Award Agreement, which shall contain the terms, conditions and limitations set forth above and shall be signed by the Participant to whom the Director Restricted Stock is granted and by an Authorized Officer for and on behalf of the Company. 10. Payment of Awards. (a) General. Payment of Employee Awards may be made in the form of cash or Common Stock, or a combination thereof, and may include such restrictions as the Committee shall determine, including, in the case of Common Stock, restrictions on transfer and forfeiture provisions. If payment of an Employee Award is made in the form of Restricted Stock, the Employee Award Agreement relating to such shares shall specify whether they are to be issued at the beginning or end of the Restriction Period. In the event that shares of Restricted Stock are to be issued at the beginning of the Restriction Period, the certificates evidencing such shares (to the extent that such shares are so evidenced) shall contain appropriate legends and restrictions that describe the terms and conditions of the restrictions applicable thereto. In the event that shares of Restricted Stock are to be issued at the end of the Restricted Period, the right to receive such shares shall be evidenced by book entry registration or in such other manner as the Committee may determine. (b) Deferral. With the approval of the Committee, payments in respect of Employee Awards may be deferred, either in the form of installments or a future lump sum payment. The Committee may permit selected Participants to elect to defer payments of some or all types of Employee Awards in accordance with procedures established by the Committee. Any deferred payment of an Employee Award, whether elected by the Participant or specified by the Employee Award Agreement or by the Committee, may be forfeited if and to the extent that the Employee Award Agreement so provides. (c) Dividends and Interest. Rights to dividends or Dividend Equivalents may be extended to and made part of any Employee Award consisting of shares of Common Stock or units denominated in shares of Common Stock, subject to such terms, conditions and restrictions as the Committee may establish. The Committee may also establish rules and procedures for the crediting of interest on deferred cash payments and Dividend Equivalents for Employee Awards consisting of shares of Common Stock or units denominated in shares of Common Stock. (d) Substitution of Awards. At the discretion of the Committee, a Participant who is an Employee may be offered an election to substitute an Employee Award for another Employee Award or Employee Awards of the same or different type. 11. Stock Option Exercise. The price at which shares of Common Stock may be purchased under an Option shall be paid in full at the time of exercise in cash or, if elected by the optionee, the optionee may purchase such shares by means of tendering Common Stock or surrendering another Award, including Restricted Stock or Director Restricted Stock, valued at Fair Market Value on the date of exercise, or any combination thereof. The Committee shall determine acceptable methods for Participants who are Employees to tender Common Stock or other Employee Awards; provided that any Common Stock that is or was the subject of an D-8 Employee Award may be so tendered only if it has been held by the Participant for six months. The Committee may provide for procedures to permit the exercise or purchase of such Awards by use of the proceeds to be received from the sale of Common Stock issuable pursuant to an Employee Award. Unless otherwise provided in the applicable Award Agreement, in the event shares of Restricted Stock are tendered as consideration for the exercise of an Option, a number of the shares issued upon the exercise of the Option, equal to the number of shares of Restricted Stock or Director Restricted Stock used as consideration therefor, shall be subject to the same restrictions as the Restricted Stock or Director Restricted Stock so submitted as well as any additional restrictions that may be imposed by the Committee. 12. Tax Withholding. The Company shall have the right to deduct applicable taxes from any Employee Award payment and withhold, at the time of delivery or vesting of cash or shares of Common Stock under this Plan, an appropriate amount of cash or number of shares of Common Stock or a combination thereof for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Committee may also permit withholding to be satisfied by the transfer to the Company of shares of Common Stock theretofore owned by the holder of the Employee Award with respect to which withholding is required. If shares of Common Stock are used to satisfy tax withholding, such shares shall be valued based on the Fair Market Value when the tax withholding is required to be made. The Committee may provide for loans, on either a short term or demand basis, from the Company to a Participant who is an Employee to permit the payment of taxes required by law. 13. Amendment, Modification, Suspension or Termination. The Board may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would adversely affect the rights of any Participant under any Award previously granted to such Participant shall be made without the consent of such Participant and (ii) no amendment or alteration shall be effective prior to approval by the stockholders of the Company to the extent such approval is then required pursuant to Rule 16b-3 in order to preserve the applicability of any exemption provided by such rule to any Award then outstanding (unless the holder of such Award consents) or to the extent stockholder approval is otherwise required by applicable legal requirements. 14. Assignability. Unless otherwise determined by the Committee and provided in the Award Agreement, no Award or any other benefit under this Plan constituting a derivative security within the meaning of Rule 16a-1(c) under the Exchange Act shall be assignable or otherwise transferable except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder. The Committee may prescribe and include in applicable Award Agreements other restrictions on transfer. Any attempted assignment of an Award or any other benefit under this Plan in violation of this paragraph 14 shall be null and void. 15. Adjustments. (a) The existence of outstanding Awards shall not affect in any manner the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the Common Stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above. (b) In the event of any subdivision or consolidation of outstanding shares of Common Stock, declaration of a dividend payable in shares of Common Stock or other stock split, then (i) the number of shares of Common Stock reserved under this Plan, (ii) the number of shares of Common Stock covered by outstanding Awards in the form of Common Stock or units denominated in Common Stock, (iii) the exercise or other price in respect of such Awards, (iv) the appropriate Fair Market Value and other price determinations for such Awards, (v) the number of shares of Common Stock covered by Director Options automatically granted pursuant to paragraph 9(a) hereof, (vi) the number of shares of Director Restricted D-9 Stock automatically granted pursuant to paragraph 9(b) hereof and (vii) the Stock Based Awards Limitations shall each be proportionately adjusted by the Board to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Board shall make appropriate adjustments to (i) the number of shares of Common Stock covered by Awards in the form of Common Stock or units denominated in Common Stock, (ii) the exercise or other price in respect of such Awards, (iii) the appropriate Fair Market Value and other price determinations for such Awards, (iv) the number of shares of Common Stock covered by Director Options automatically granted pursuant to paragraph 9(a) hereof, (v) the number of shares of Director Restricted Stock automatically granted pursuant to paragraph 9(b) hereof and (vi) the Stock Based Awards Limitations to give effect to such transaction shall each be proportionately adjusted by the Board to reflect such transaction.; provided that such adjustments shall only be such as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without exceeding, the value of such Awards. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board shall be authorized to issue or assume Awards by means of substitution of new Awards, as appropriate, for previously issued Awards or an assumption of previously issued Awards as part of such adjustment. 16. Restrictions. No Common Stock or other form of payment shall be issued with respect to any Award unless the Company shall be satisfied based on the advice of its counsel that such issuance will be in compliance with applicable federal and state securities laws. It is the intent of the Company that this Plan comply with Rule 16b-3 with respect to persons subject to Section 16 of the Exchange Act unless otherwise provided herein or in an Award Agreement, that any ambiguities or inconsistencies in the construction of this Plan be interpreted to give effect to such intention, and that if any provision of this Plan is found not to be in compliance with Rule 16b-3, such provision shall be null and void to the extent required to permit this Plan to comply with Rule 16b-3. Certificates evidencing shares of Common Stock certificates delivered under this Plan (to the extent that such shares are so evidenced) may be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or transaction reporting system upon which the Common Stock is then listed or to which it is admitted for quotation and any applicable federal or state securities law. The Committee may cause a legend or legends to be placed upon such certificates (if any) to make appropriate reference to such restrictions. 17. Unfunded Plan. Insofar as it provides for Awards of cash, Common Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash, Common Stock or rights thereto under this Plan, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash, Common Stock or rights thereto, nor shall this Plan be construed as providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash, Common Stock or rights thereto to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to an Award of cash, Common Stock or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan. 18. Governing Law. This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Delaware. 19. Effectiveness. The Existing Plan shall be amended and restated in its entirety as set forth herein as of the earliest date (the "Amendment Effective Date") upon which both the Reincorporation and the Split-Off (collectively, the "Transactions") have been consummated; provided, however, that (i) the amendment and D-10 restatement of the Existing Plan and the assumption of the Existing Plan by the Company as contemplated hereby are expressly conditioned upon the approval of this Plan by the Board of Directors and the Executive Compensation Committee of General Motors and the ratification and approval of this Plan by the Board (the "Corporate Approvals Condition") and (ii) insofar as this Plan relates to Employees and Employee Awards, the amendment and restatement of the Existing Plan and the assumption of the Existing Plan by the Company as contemplated hereby are expressly conditioned upon the ratification and approval of this Plan by (a) a majority of the voting power of the holders of common stock of General Motors of all classes, voting together as a single class in accordance with their respective voting rights and (b) a majority of the holders of Class E Common Stock, voting together as a separate class (the "Stockholder Approval Condition"). If the Transactions are not consummated prior to December 31, 1996 or if at the date upon which the Transactions are consummated the Corporate Approvals Condition shall not have been satisfied, the Existing Plan shall not be amended and restated as set forth herein and the awards granted under the Existing Plan as then in effect shall not be affected and shall continue in full force and effect in accordance with the Existing Plan as then in effect and any award agreements hereunder. If the Transactions are consummated prior to December 31, 1996 but at the date upon which the Transactions are consummated the Stockholder Approval Condition shall not have been satisfied, (a) the Existing Plan shall not be amended and restated as set forth herein and all awards granted under the Existing Plan as then in effect shall not be affected and shall continue in full force and effect in accordance with the Existing Plan as then in effect (or as the same may be amended from time to time) and any award agreements hereunder and (b) a new plan (the "Separate Director Stock Incentive Plan") shall be deemed to have been adopted by the Company and approved by General Motors as the sole stockholder of the Company, which plan shall be referred to as the "1996 Nonemployee Director Stock Incentive Plan" and shall include all of the terms and conditions set forth herein that relate to Directors and Director Awards but not the terms and conditions that relate to Employees and Employee Awards (it being understood that the Board shall be authorized to cause the Separate Director Stock Incentive Plan to be embodied in a separate document by eliminating all references to Employees and Employee Awards contained herein and making other appropriate changes to the text hereof, none of which shall result in any alteration or enlargement of the rights granted to Directors hereunder). D-11 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS OF EDS. Delaware General Corporation Law Section 145(a) of the DGCL provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 145(b) of the DGCL provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Section 145(c) of the DGCL provides that to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 145(a) and (b), or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Section 145(d) of the DGCL provides that any indemnification under Section 145(a) and (b) (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 145(a) and (b). Such determination shall be made (1) a majority vote of the directors who were not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders. Section 145(e) of the DGCL provides that expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in Section 145. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. II-1 Section 145(f) of the DGCL provides that the indemnification and advancement of expenses provided by, or granted pursuant to, Section 145 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. Section 145(g) of the DGCL provides that a corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his capacity as such, whether or not the corporation would have the power to indemnify him against such liability under Section 145. Restated Certificate of Incorporation Article Seventh of the Restated Certificate of Incorporation of EDS, a copy of which is filed as Exhibit 3(a) to this Registration Statement, provides that no director of EDS shall be personally liable to EDS or any of its stockholders for monetary damages for breach of fiduciary duty as a director involving any act or omission of any such director; provided, however, that such Article Seventh does not eliminate or limit the liability of a director (1) for any breach of such director's duty of loyalty to EDS or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the DGCL (which relates to certain unlawful dividend payments or stock purchases or redemptions), as the same exists or may hereafter be amended, supplemented or replaced, or (4) for a transaction from which the director derived an improper personal benefit. If the DGCL is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of EDS, in addition to the limitation on personal liability described above, shall be limited to the fullest extent permitted by the DGCL, as so amended. Furthermore, any repeal or modification of Article Seventh of the Restated Certificate of Incorporation by the stockholders of EDS shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of EDS existing at the time of such repeal or modification. Bylaws Article VI of the Amended and Restated Bylaws of EDS, a copy of which is filed as Exhibit 3(b) to this Registration Statement, provides that each person who at any time shall serve or shall have served as a director, officer, employee or agent of EDS, or any person who, while a director, officer, employee or agent of EDS, is or was serving at the written request of EDS (in accordance with written procedures adopted from time to time by the Board of Directors of EDS) as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, shall be entitled to (a) indemnification and (b) the advancement of expenses incurred by such person from EDS as, and to the fullest extent, permitted by Section 145 of the DGCL or any successor statutory provision, as from time to time amended. Indemnification Agreements EDS has entered into Indemnification Agreements (the "Indemnification Agreements") with its directors, nominees for director and certain of its officers (the "Indemnitees"), a form of which is attached as Exhibit 10(f) to this Registration Statement. Under the terms of the Indemnification Agreements, EDS has generally agreed to indemnify, and advance expenses to, each Indemnitee to the fullest extent permitted by applicable law on the date of such agreements and to such greater extent as applicable law may thereafter permit. In addition, the Indemnification Agreements contain specific provisions pursuant to which EDS has agreed to indemnify each Indemnitee (i) if such person is, by reason of his or her status as a director, nominee for director, officer, agent or fiduciary of EDS or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise with which such person was serving at the request of EDS (any such status being hereinafter referred to as a "Corporate Status"), made or threatened to be made a party to any threatened, pending or completed II-2 action, suit, arbitration, alternative dispute resolution mechanism, investigation or other proceeding (each, a "Proceeding"), other than a Proceeding by or in the right of EDS, (ii) if such person is, by reason of his or her Corporate Status, made or threatened to be made a party to any Proceeding brought by or in the right of EDS to procure a judgment in its favor, except that no indemnification shall be made in respect of any claim, issue or matter in such Proceeding as to which such Indemnitee shall have been adjudged to be liable to EDS if applicable law prohibits such indemnification (unless and only to the extent that a court shall otherwise determine), (iii) against expenses actually and reasonably incurred by such person or on his or her behalf in connection with any Proceeding to which such Indemnitee was or is a party by reason of his or her Corporate Status and in which such Indemnitee is successful, on the merits or otherwise, (iv) against expenses actually and reasonably incurred by such person or on his or her behalf in connection with a Proceeding to the extent that such Indemnitee is, by reason of his or her Corporate Status, a witness or otherwise participates in any Proceeding at a time when such person is not a party in the Proceeding and (v) against expenses actually and reasonably incurred by such person in any judicial adjudication of or any award in arbitration to enforce his or her rights under the Indemnification Agreements. Furthermore, under the terms of the Indemnification Agreements, EDS has agreed to pay all reasonable expenses incurred by or on behalf of an Indemnitee in connection with any Proceeding, whether brought by or in the right of EDS or otherwise, in advance of any determination with respect to entitlement to indemnification and within 15 days after the receipt by EDS of a written request from such Indemnitee for such payment. In the Indemnification Agreements, each Indemnitee has agreed that he or she will reimburse and repay EDS for any expenses so advanced to the extent that it shall ultimately be determined that he or she is not entitled to be indemnified by EDS against such expenses. The Indemnification Agreements also include provisions that specify the procedures and presumptions which are to be employed to determine whether an Indemnitee is entitled to indemnification thereunder. In some cases, the nature of the procedures specified in the Indemnification Agreements varies depending on whether there has occurred a "Change in Control" (as defined in the Indemnification Agreements) of EDS. Separation Agreement In the Separation Agreement, GM has agreed to indemnify the members of the EDS Team, the officers and employees of EDS providing assistance to the EDS Team, and the directors of EDS who granted any approval or authorization for EDS in connection with the Split-Off, in each case, in their capacity as such, against losses arising from the Split-Off in accordance with the GM Bylaws, to the same extent as if such person were a director or officer of GM; provided that such indemnification does not apply to losses relating to (i) the EDS Certificate of Incorporation, the EDS Bylaws or the EDS Rights Agreement, (ii) EDS employee and director compensation and indemnification arrangements or (iii) EDS plans, proposals, intentions or policies applicable after the Effective Time, including EDS' dividend policy. In addition, the Separation Agreement requires GM to indemnify, in accordance with the GM Bylaws, to the same extent as if such person were a director or officer of GM, each EDS non- employee board nominee against losses arising from the expression of any views prior to the Effective Time at the request of GM or the GM Board with respect to EDS' proposed charter, bylaws, stockholders rights plan or employee benefit plans. EDS will reimburse GM for all amounts paid to or on behalf of such persons pursuant to such indemnification. Insurance EDS has obtained and intends to maintain in effect directors' and officers' liability insurance policies providing customary coverage for its directors and officers against losses resulting from wrongful acts committed by them in their capacities as directors and officers of EDS. II-3 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE. The following documents are exhibits to the Registration Statement.
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT ------- ----------------------- 2(a) Merger Agreement dated as of April , 1996 between Gen- eral Motors and Mergeco (included as Appendix A). 2(b) Form of Separation Agreement between General Motors and EDS. 2(c) Amended and Restated Agreement for the Allocation of United States Federal, State and Local Income Taxes dated as of April 2, 1996 between General Motors and EDS. 3(a) Restated Certificate of Incorporation of EDS. 3(b) Amended and Restated Bylaws of EDS. 4(a) Restated Certificate of Incorporation of EDS (filed as Ex- hibit 3(a) above). 4(b) Amended and Restated Bylaws of EDS (filed as Exhibit 3(b) above). 4(c) Rights Agreement, dated as of March 12, 1996, by and be- tween EDS and The Bank of New York, as Rights Agent. 5 Opinion of Baker & Botts, L.L.P. 8 Opinion of Kirkland & Ellis. 10(a) Form of Master Services Agreement between General Motors and EDS (portions of which are subject to a request for confidential treatment filed with the Commission). 10(b) 1996 Incentive Plan of EDS (included as Appendix D). 10(c) 1996 Electronic Data Systems Corporation Stock Purchase Plan. 10(d) EDS Supplemental Executive Retirement Plan. 10(e) Electronic Data Systems Corporation Deferred Compensation Plan for Non-Employee Directors 10(f) Form of Indemnification Agreement entered into by EDS and each of its executive officers and director nominees. 10(g) Indenture dated as of May 15, 1995 between EDS, a Texas corporation, and Texas Commerce Bank National Association, as trustee. 10(h) Revolving Credit and Term Loan Agreement dated as of Octo- ber 4, 1995 among EDS, Citibank, N.A., as Administrative Agent, and the other financial institutions identified therein as Arrangers, Managers and Lenders. 10(i) Multi-Currency Revolving Credit Agreement dated as of Oc- tober 4, 1995 among EDS, Citibank, N.A., as Administrative Agent, and the other financial institutions identified therein as Arrangers, Managers and Lenders. 10(j) Registration Rights Agreement dated March 12, 1995 between General Motors and United States Trust Company of New York, as trustee of the General Motors Hourly-Rate Pension Plan. 10(k) Form of Succession Agreement among General Motors, United States Trust Company of New York and EDS. 10(l) 1984 EDS Stock Incentive Plan. 11 Statement of Computation of Earnings Per General Motors Class E Common Share. 21 Subsidiaries of EDS. 23(a) Consent of Deloitte & Touche LLP, independent auditors. 23(b) Consent of KPMG Peat Marwick LLP, independent auditors. 23(c) Consent of Baker & Botts, L.L.P. (included in Exhibit 5 above). 23(d) Consent of Kirkland & Ellis (included in Exhibit 8 above). 23(e) Consent of Merrill Lynch. 23(f) Consent of Lehman Brothers. 23(g) Consent of Morgan Stanley. 99 Consents of Persons About to Become Directors.
II-4 FINANCIAL STATEMENT SCHEDULE Independent Auditors' Report; Schedule II--Allowances FAIRNESS OPINIONS Incorporated as Appendix B to the Solicitation Statement/Prospectus which forms a part of this Registration Statement. ITEM 22. UNDERTAKINGS. The undersigned Registrant hereby undertakes: 1. That, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 2. That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this Registration Statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form. 3. That every prospectus (i) that is filed pursuant to the paragraph immediately preceding, or (ii) that purports to meet the requirements of section 10(a)(3) of the Securities Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to this Registration Statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof. 4. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is assessed by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 5. To respond to requests for information that is incorporated by reference into this Solicitation Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of this Registration Statement through the date of responding to the request. 6. To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in this Registration Statement when it became effective. II-5 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PLANO, STATE OF TEXAS, ON APRIL 15, 1996. Electronic Data Systems Holding Corporation /s/ Lester M. Alberthal, Jr. By: _________________________________ Lester M. Alberthal, Jr. Chairman of the Board, President andChief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON APRIL 15, 1996 IN THE CAPACITIES INDICATED.
SIGNATURE TITLE --------- ----- /s/ Lester M. Alberthal, Jr. Chairman of the Board, ____________________________________ President, Chief Executive Lester M. Alberthal, Jr. Officer and Director (Principal Executive Officer) /s/ John R. Castle, Jr. Senior Vice President and ____________________________________ Director John R. Castle, Jr. /s/ Paul J. Chiapparone Senior Vice President and ____________________________________ Director Paul J. Chiapparone /s/ Gary J. Fernandes Senior Vice President and ____________________________________ Director Gary J. Fernandes /s/ Joseph M. Grant Senior Vice President, Chief ____________________________________ Financial Officer and Joseph M. Grant Director (Principal Financial Officer) /s/ H. Paulett Eberhart Vice President and ____________________________________ Controller (Principal H. Paulett Eberhart Accounting Officer)
II-6 INDEPENDENT AUDITORS' REPORT The Board of Directors Electronic Data Systems Corporation: Under date of January 24, 1996, we reported on the consolidated balance sheets of Electronic Data Systems Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income and cash flows for each of the years in the three-year period ended December 31, 1995, which are included and incorporated by reference in the registration statement. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule included in the registration statement. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ KPMG Peat Marwick LLP Dallas, Texas January 24, 1996 SCHEDULE II ELECTRONIC DATA SYSTEMS CORPORATION AND SUBSIDIARIES SCHEDULE II--ALLOWANCES (IN MILLIONS)
ADDITIONS ADDITIONS BALANCE AT CHARGED TO CHARGED TO BEGINNING COSTS TO OTHER BALANCE AT DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS END OF YEAR - ----------- ---------- ---------- ---------- ---------- ----------- FOR THE YEAR ENDED DECEMBER 31, 1995 Allowances Deducted from Assets Lease contracts receivable.......... $288.7 $ 0.3 $31.3 $ 44.2(a) $276.1 Accounts and notes receivable.......... 57.9 124.6 -- 83.0(b) 99.5 Inventories.......... 13.7 19.1 -- 13.3(c) 19.5 Valuation allowance for deferred taxes.. 111.1 20.8 -- 5.6 126.3 ------ ------ ----- ------ ------ Total Allowances Deducted from Assets............ $471.4 $164.8 $31.3 $146.1 $521.4 ====== ====== ===== ====== ====== FOR THE YEAR ENDED DECEMBER 31, 1994 Allowances Deducted from Assets Lease contracts receivable.......... $301.8 $ -- $21.4 $ 34.5(a) $288.7 Accounts and notes receivable.......... 53.0 50.6 -- 45.7(b) 57.9 Inventories.......... 15.0 28.2 -- 29.5(c) 13.7 Valuation allowance for deferred taxes.. 92.3 18.8 -- -- 111.1 ------ ------ ----- ------ ------ Total Allowances Deducted from Assets............ $462.1 $ 97.6 $21.4 $109.7 $471.4 ====== ====== ===== ====== ====== FOR THE YEAR ENDED DECEMBER 31, 1993 Allowances Deducted from Assets Lease contracts receivable.......... $331.6 $ -- $15.1 $ 44.9(a) $301.8 Accounts and notes receivable.......... 51.9 74.7 -- 73.6(b) 53.0 Inventories.......... 9.7 20.0 -- 14.7(c) 15.0 Valuation allowance for deferred taxes.. 48.6 50.2 -- 6.5 92.3 ------ ------ ----- ------ ------ Total Allowances Deducted from Assets............ $441.8 $144.9 $15.1 $139.7 $462.1 ====== ====== ===== ====== ======
- -------- (a) Recognition of lease income (b) Accounts written off (c) Obsolete parts disposed of, etc. Detach Consent Card Here - ------------------------------------------------------------------------------- C O N S E N T CONSENT TO ACTION OF STOCKHOLDERS WITHOUT A MEETING REVOCABLE CONSENT SOLICITED ON BEHALF OF GENERAL MOTORS CORPORATION The undersigned, a common stockholder of General Motors Corporation ("General Motors"), acting with respect to all of the shares of Common Stock, par value $1 2/3 per share ("$1 2/3 Common Stock"), Class H Common Stock, par value $.10 per share ("Class H Common Stock"), and/or Class E Common Stock, par value $.10 per share ("Class E Common Stock" and, together with the Class H Common Stock and $1 2/3 Common Stock, the "Common Stock"), as applicable, held by the undersigned on April 10, 1996 (the "Record Date"), hereby consents, withholds consent or abstains as specified on the reverse side with respect to the taking of corporate actions without a meeting pursuant to Section 228 of the Delaware General Corporation Law. All capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Solicitation Statement/Prospectus furnished herewith to all stockholders of General Motors who hold shares of Common Stock. FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE CORPORATE ACTIONS DESCRIBED ON THE REVERSE SIDE OF THIS CARD. Stockholders wishing to approve any or all of the actions set forth herein should mark the appropriate "Consent" box on the reverse side of this consent card. Those opposing any such action should register their position by marking the appropriate "Withhold Consent" or "Abstain" box on the reverse side of this consent card or by not returning this consent card. Unless you otherwise indicate on this consent card, this consent card will be voted as set forth on the reverse side with respect to all shares of all classes of Common Stock held by the undersigned on the Record Date, and if no choice is indicated but this consent card is otherwise completed, you will be deemed to have consented to each of the actions set forth on the reverse side of this consent card. By executing this card the undersigned hereby revokes any and all prior consents and hereby affirms that, as of the Record Date, the undersigned had the power to deliver a consent for the number of shares represented by this consent. SIGNED BUT UNMARKED CARDS WILL BE DEEMED TO GIVE CONSENT TO EACH OF THE ACTIONS SET FORTH ON THE REVERSE SIDE OF THIS CARD. Consummation of the Transactions is conditioned upon receiving the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors Common Stock, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. Approval of the Amended EDS Incentive Plan will require the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors Common Stock, voting together as a single class based on their respective voting rights, and (ii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. Unless previously revoked, this consent will be effective when and if delivered along with consents representing the percentages of shares indicated in the two immediately preceding sentences to General Motors. PLEASE SIGN AND DATE ON REVERSE SIDE Detach Consent Card Here - ------------------------------------------------------------------------------- [x] PLEASE MARK VOTES AS IN THIS EXAMPLE. FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE CORPORATE ACTIONS DESCRIBED BELOW. - ------------------------------------------------------------------------------- THE BOARD OF DIRECTORS OF GENERAL MOTORS CORPORATION RECOMMENDS STOCKHOLDERS CONSENT TO PROPOSALS 1 AND 2 BELOW. - ------------------------------------------------------------------------------- Abstain 1. APPROVAL OF THE SPLIT-OFF AND RELATED TRANSACTIONS, INCLUDING ADOPTION OF THE MERGER AGREEMENT The approval of the Split-Off and related transactions, including the consummation of the Merger, the making of the Special Inter-Company Payment, the execution and delivery of the Master Services Agreement (and certain related agreements) and the Separation Agreement and the consummation of the other transactions and events contemplated by the Merger Agreement, including the adoption of the Merger Agreement. [_] Consent [_]Withhold Consent [_] Abstain 2. APPROVAL OF THE AMENDED EDS INCENTIVE PLAN The approval of the 1996 Incentive Plan of EDS, which amends and restates the existing 1984 EDS Stock Incentive Plan. [_] Consent [_]Withhold Consent [_] Abstain When shares are held by joint tenants, both must sign. When signing as attorney-in-fact, executor, administrator, trustee, guardian, corporate officer or partner, please give full title as such. If a corporation, please sign in corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. Signature ____________________ Signature, if held jointly _____________________ Title ________________________ Dated: __________ IN ORDER FOR THIS CONSENT CARD TO BE VALID, IT MUST BE DATED. PLEASE DATE AND SIGN THIS CARD EXACTLY AS YOUR NAME APPEARS HEREON, AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. CONSENT TO ACTION OF STOCKHOLDERS WITHOUT A MEETING REVOCABLE CONSENT SOLICITED ON BEHALF OF GENERAL MOTORS CORPORATION COMMON The undersigned, a common stockholder of General Motors Corporation ("General Motors"), acting with respect to all of the shares of Common Stock, par value $1 2/3 per share ("$1 2/3 Common Stock") held by the undersigned on April 10, 1996 (the "Record Date"), hereby consents, withholds consent or abstains as specified on the reverse side with respect to the taking of corporate actions without a meeting pursuant to Section 228 of the Delaware General Corporation Law. All capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Solicitation Statement/Prospectus furnished herewith to all stockholders of General Motors who hold shares of General Motors common stock. FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE CORPORATE ACTIONS DESCRIBED ON THE REVERSE SIDE OF THIS CARD. Stockholders wishing to approve any or all of the actions set forth herein should mark the appropriate "Consent" box on the reverse side of this consent card. Those opposing any such action should register their position by marking the appropriate "Withhold Consent" or "Abstain" box on the reverse side of this consent card or by not returning this consent card. Unless you otherwise indicate on this consent card, this consent card will be voted as set forth on the reverse side with respect to all shares of $1 2/3 Common Stock held by the undersigned on the Record Date, and if no choice is indicated but this consent card is otherwise completed, you will be deemed to have consented to each of the actions set forth on the reverse side of this consent card. By executing this card the undersigned hereby revokes any and all prior consents and hereby affirms that, as of the Record Date, the undersigned had the power to deliver a consent for the number of shares represented by this consent. SIGNED BUT UNMARKED CARDS WILL BE DEEMED TO GIVE CONSENT TO EACH OF THE ACTIONS SET FORTH ON THE REVERSE SIDE OF THIS CARD. Consummation of the Transactions is conditioned upon receiving the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of General Motors Class E Common Stock, voting as a separate class. Approval of the Amended EDS Incentive Plan will require the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, and (ii) a majority of the outstanding shares of General Motors Class E Common Stock, voting as a separate class. Unless previously revoked, this consent will be effective when and if delivered along with consents representing the percentages of shares indicated in the two immediately preceding sentences to General Motors. PLEASE SIGN AND DATE ON REVERSE SIDE - -------------------------------------------------------------------------------- [X] PLEASE MARK VOTES AS IN THIS EXAMPLE. COMMON FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE CORPORATE ACTIONS DESCRIBED BELOW. - -------------------------------------------------------------------------------- THE BOARD OF DIRECTORS OF GENERAL MOTORS CORPORATION RECOMMENDS STOCKHOLDERS CONSENT TO PROPOSALS 1 AND 2 BELOW. - -------------------------------------------------------------------------------- 1. APPROVAL OF THE SPLIT-OFF AND RELATED TRANSACTIONS, INCLUDING ADOPTION OF THE MERGER AGREEMENT The approval of the Split-Off and related transactions, including the consummation of the Merger, the making of the Special Inter-Company Payment, the execution and delivery of the Master Services Agreement (and certain related agreements) and the Separation Agreement and the consummation of the other transactions and events contemplated by the Merger Agreement, including the adoption of the Merger Agreement. [_] CONSENT [_] WITHHOLD CONSENT [_]ABSTAIN 2. APPROVAL OF THE AMENDED EDS INCENTIVE PLAN The approval of the 1996 Incentive Plan of EDS, which amends and restates the existing 1984 EDS Stock Incentive Plan. [_] CONSENT [_] WITHHOLD CONSENT [_]ABSTAIN When shares are held by joint tenants, both must sign. When signing as attorney-in-fact, executor, administrator, trustee, guardian, corporate officer or partner, please give full title as such. If a corporation, please sign in corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. Signature __________________ Dated: __________________________ Signature __________________ Dated: __________________________ CONSENT TO ACTION OF STOCKHOLDERS WITHOUT A MEETING REVOCABLE CONSENT SOLICITED ON BEHALF OF GENERAL MOTORS CORPORATION CLASS E The undersigned, a common stockholder of General Motors Corporation ("General Motors"), acting with respect to all of the shares of Class E Common Stock, par value $.10 per share ("Class E Common Stock") held by the undersigned on April 10, 1996 (the "Record Date"), hereby consents, withholds consent or abstains as specified on the reverse side with respect to the taking of corporate actions without a meeting pursuant to Section 228 of the Delaware General Corporation Law. All capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Solicitation Statement/Prospectus furnished herewith to all stockholders of General Motors who hold shares of General Motors common stock. FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE CORPORATE ACTIONS DESCRIBED ON THE REVERSE SIDE OF THIS CARD. Stockholders wishing to approve any or all of the actions set forth herein should mark the appropriate "Consent" box on the reverse side of this consent card. Those opposing any such action should register their position by marking the appropriate "Withhold Consent" or "Abstain" box on the reverse side of this consent card or by not returning this consent card. Unless you otherwise indicate on this consent card, this consent card will be voted as set forth on the reverse side with respect to all shares of Class E Common Stock held by the undersigned on the Record Date, and if no choice is indicated but this consent card is otherwise completed, you will be deemed to have consented to each of the actions set forth on the reverse side of this consent card. By executing this card the undersigned hereby revokes any and all prior consents and hereby affirms that, as of the Record Date, the undersigned had the power to deliver a consent for the number of shares represented by this consent. SIGNED BUT UNMARKED CARDS WILL BE DEEMED TO GIVE CONSENT TO EACH OF THE ACTIONS SET FORTH ON THE REVERSE SIDE OF THIS CARD. Consummation of the Transactions is conditioned upon receiving the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of General Motors $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. Approval of the Amended EDS Incentive Plan will require the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, and (ii) a majority of the outstanding shares of Class E Common Stock, voting as a separate class. Unless previously revoked, this consent will be effective when and if delivered along with consents representing the percentages of shares indicated in the two immediately preceding sentences to General Motors. PLEASE SIGN AND DATE ON REVERSE SIDE - -------------------------------------------------------------------------------- [x] PLEASE MARK VOTES AS IN THIS EXAMPLE. CLASS E FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE CORPORATE ACTIONS DESCRIBED BELOW. - -------------------------------------------------------------------------------- THE BOARD OF DIRECTORS OF GENERAL MOTORS CORPORATION RECOMMENDS STOCKHOLDERS CONSENT TO PROPOSALS 1 AND 2 BELOW. - -------------------------------------------------------------------------------- 1. APPROVAL OF THE SPLIT-OFF AND RELATED TRANSACTIONS, INCLUDING ADOPTION OF THE MERGER AGREEMENT The approval of the Split-Off and related transactions, including the consummation of the Merger, the making of the Special Inter-Company Payment, the execution and delivery of the Master Services Agreement (and certain related agreements) and the Separation Agreement and the consummation of the other transactions and events contemplated by the Merger Agreement, including the adoption of the Merger Agreement. [_] CONSENT [_] WITHHOLD CONSENT [_]ABSTAIN 2. APPROVAL OF THE AMENDED EDS INCENTIVE PLAN The approval of the 1996 Incentive Plan of EDS, which amends and restates the existing 1984 EDS Stock Incentive Plan. [_] CONSENT [_] WITHHOLD CONSENT [_]ABSTAIN When shares are held by joint tenants, both must sign. When signing as attorney-in-fact, executor, administrator, trustee, guardian, corporate officer or partner, please give full title as such. If a corporation, please sign in corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. Signature __________________ Dated: ________________________ Signature __________________ Dated: ________________________ CONSENT TO ACTION OF STOCKHOLDERS WITHOUT A MEETING REVOCABLE CONSENT SOLICITED ON BEHALF OF GENERAL MOTORS CORPORATION CLASS H The undersigned, a common stockholder of General Motors Corporation ("General Motors"), acting with respect to all of the shares of Class H Common Stock, par value $.10 per share ("Class H Common Stock") held by the undersigned on April 10, 1996 (the "Record Date"), hereby consents, withholds consent or abstains as specified on the reverse side with respect to the taking of corporate actions without a meeting pursuant to Section 228 of the Delaware General Corporation Law. All capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Solicitation Statement/Prospectus furnished herewith to all stockholders of General Motors who hold shares of General Motors common stock. FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE CORPORATE ACTIONS DESCRIBED ON THE REVERSE SIDE OF THIS CARD. Stockholders wishing to approve any or all of the actions set forth herein should mark the appropriate "Consent" box on the reverse side of this consent card. Those opposing any such action should register their position by marking the appropriate "Withhold Consent" or "Abstain" box on the reverse side of this consent card or by not returning this consent card. Unless you otherwise indicate on this consent card, this consent card will be voted as set forth on the reverse side with respect to all shares of Class H Common Stock held by the undersigned on the Record Date, and if no choice is indicated but this consent card is otherwise completed, you will be deemed to have consented to each of the actions set forth on the reverse side of this consent card. By executing this card the undersigned hereby revokes any and all prior consents and hereby affirms that, as of the Record Date, the undersigned had the power to deliver a consent for the number of shares represented by this consent. SIGNED BUT UNMARKED CARDS WILL BE DEEMED TO GIVE CONSENT TO EACH OF THE ACTIONS SET FORTH ON THE REVERSE SIDE OF THIS CARD. Consummation of the Transactions is conditioned upon receiving the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, (ii) a majority of the outstanding shares of General Motors $1 2/3 Common Stock, voting as a separate class, and (iii) a majority of the outstanding shares of General Motors Class E Common Stock, voting as a separate class. Approval of the Amended EDS Incentive Plan will require the consent of the holders of (i) a majority of the voting power of all outstanding shares of all three classes of General Motors common stock, voting together as a single class based on their respective voting rights, and (ii) a majority of the outstanding shares of General Motors Class E Common Stock, voting as a separate class. Unless previously revoked, this consent will be effective when and if delivered along with consents representing the percentages of shares indicated in the two immediately preceding sentences to General Motors. PLEASE SIGN AND DATE ON REVERSE SIDE - -------------------------------------------------------------------------------- [x] PLEASE MARK VOTES AS IN THIS EXAMPLE. CLASS H FAILURE TO EXECUTE AND RETURN THIS CONSENT CARD WILL BE DEEMED TO BE A VOTE TO ABSTAIN, AND A VOTE TO ABSTAIN WILL HAVE THE EFFECT OF A VOTE AGAINST THE CORPORATE ACTIONS DESCRIBED BELOW. - -------------------------------------------------------------------------------- THE BOARD OF DIRECTORS OF GENERAL MOTORS CORPORATION RECOMMENDS STOCKHOLDERS CONSENT TO PROPOSALS 1 AND 2 BELOW. - -------------------------------------------------------------------------------- 1. APPROVAL OF THE SPLIT-OFF AND RELATED TRANSACTIONS, INCLUDING ADOPTION OF THE MERGER AGREEMENT The approval of the Split-Off and related transactions, including the consummation of the Merger, the making of the Special Inter-Company Payment, the execution and delivery of the Master Services Agreement (and certain related agreements) and the Separation Agreement and the consummation of the other transactions and events contemplated by the Merger Agreement, including the adoption of the Merger Agreement. [_] CONSENT [_] WITHHOLD CONSENT [_] ABSTAIN 2. APPROVAL OF THE AMENDED EDS INCENTIVE PLAN The approval of the 1996 Incentive Plan of EDS, which amends and restates the existing 1984 EDS Stock Incentive Plan. [_] CONSENT [_] WITHHOLD CONSENT [_] ABSTAIN When shares are held by joint tenants, both must sign. When signing as attorney-in-fact, executor, administrator, trustee, guardian, corporate officer or partner, please give full title as such. If a corporation, please sign in corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. Signature __________________ Dated: ___________________ Signature __________________ Dated: ___________________ EXHIBIT 2(B) DRAFT OF APRIL 11, 1996 SEPARATION AGREEMENT, DATED AS OF ___________ ____, 1996, BETWEEN ELECTRONIC DATA SYSTEMS CORPORATION AND GENERAL MOTORS CORPORATION TABLE OF CONTENTS
PAGE 1. Definitions........................................................................ 1 ----------- 2. Certain Intercompany Matters....................................................... 11 ---------------------------- 2.1 Capital Stock Matters........................................................ 11 2.2 Insurance Matters............................................................ 12 2.3 Indemnification of EDS Indemnified Parties................................... 17 2.4 Leases of Real Property...................................................... 19 2.5 Employee Benefit Matters..................................................... 19 2.6 Registration Rights Agreement................................................ 22 2.7 Transfer Agreement........................................................... 23 2.8 Publicity.................................................................... 23 2.9 Further Assurances........................................................... 23 3. GM-PBGC Agreement Matters.......................................................... 23 ------------------------- 3.1 GM Representations and Warranties............................................ 23 3.2 GM Covenants................................................................. 24 4. Confidentiality.................................................................... 26 --------------- 4.1 Treatment of Confidential Information........................................ 26 4.2 Legally Required Disclosure of Confidential Information...................... 27 5. Continuing Information Support..................................................... 28 ------------------------------ 5.1 Access to Information........................................................ 28 5.2 Production of Witnesses...................................................... 28 5.3 Reimbursement................................................................ 28 5.4 Retention of Records......................................................... 29 6. Expenses........................................................................... 29 -------- 6.1 General...................................................................... 29 6.2 Fees of Professional Advisors................................................ 29 6.3 Costs of Preparation and Distribution of Consent Solicitation and Form S-4... 29 6.4 Certain Costs Relating to EDS Common Stock................................... 30 6.5 Annual Fee for Listing of Stock.............................................. 30 6.6 Allowance.................................................................... 30 7. Covenant To Preserve Tax-Free Status Of Split-Off.................................. 30 ------------------------------------------------- 7.1 Representations and Warranties............................................... 30 7.2 Restrictions on EDS.......................................................... 31
i
PAGE 7.3 Cooperation and Other Covenants.............................................. 34 7.4 Indemnification for Tax Liabilities.......................................... 35 7.5 Procedure for Indemnification for Tax Liabilities............................ 35 7.6 Arbitration.................................................................. 36 7.7 Exclusive Remedies........................................................... 37 8. Indemnification.................................................................... 37 --------------- 8.1 Indemnification by EDS....................................................... 37 8.2 Indemnification by GM........................................................ 39 8.3 Other Liabilities............................................................ 40 8.4 Tax Effects of Indemnification............................................... 41 8.5 Effect of Insurance Upon Indemnification..................................... 41 8.6 Procedure for Indemnification Involving Third-Party Claims................... 42 8.7 Procedure for Indemnification Not Involving Third-Party Claims............... 43 8.8 Exclusive Remedies........................................................... 43 9. Miscellaneous...................................................................... 44 ------------- 9.1 Dispute Resolution........................................................... 44 9.2 Survival..................................................................... 44 9.3 Complete Agreement........................................................... 44 9.4 Authority.................................................................... 44 9.5 Governing Law................................................................ 44 9.6 Consent to Jurisdiction...................................................... 44 9.7 Notices...................................................................... 45 9.8 Amendment and Modification................................................... 46 9.9 Binding Effect; Assignment................................................... 46 9.10 Third Party Beneficiaries.................................................... 46 9.11 Counterparts................................................................. 46 9.12 Waiver....................................................................... 46 9.13 Severability................................................................. 47 9.14 Remedies..................................................................... 47 9.15 Performance.................................................................. 47 9.16 References; Construction..................................................... 47
ii Exhibits - -------- Exhibit A Form of Canadian Transfer Agreement Exhibit B CPR Rules Exhibit C GM Indemnification Bylaw Exhibit D Form of Release and Covenant Not to Sue (R2) Exhibit E Form of Release and Covenant Not to Sue (R3) Exhibit F Professional Advisor Fees to be Paid by EDS Exhibit G Professional Advisor Fees to be Paid by GM iii SEPARATION AGREEMENT -------------------- THIS SEPARATION AGREEMENT, dated as of ___________ ____, 1996, is between Electronic Data Systems Corporation, a Delaware corporation, and General Motors Corporation, a Delaware corporation. Capitalized terms used and not otherwise defined herein are defined in Section 1 below. RECITALS -------- WHEREAS, as part of the Split-Off of EDS from GM, each outstanding share of Class E Stock will be converted into one share of EDS Common Stock; WHEREAS, the conversion of all outstanding shares of Class E Stock into EDS Common Stock on a one-for-one basis will be accomplished through a merger of GM with its indirect wholly owned subsidiary, GM Mergeco Corporation, and it is expected that such merger will be consummated immediately after the execution and delivery of this Separation Agreement; WHEREAS, immediately prior to the execution and delivery of this Separation Agreement, (i) Electronic Data Systems Intermediate Corporation, a Delaware corporation, was merged with and into Electronic Data Systems Holding Corporation, (ii) Electronic Data Systems Corporation, a Texas corporation, was merged with and into Electronic Data Systems Holding Corporation, and (iii) Electronic Data Systems Holding Corporation was renamed "Electronic Data Systems Corporation"; WHEREAS, GM has received from the IRS a ruling, dated December 27, 1995, to the effect that the Split-Off would be tax-free to GM and its stockholders for United States federal income tax purposes and the parties hereto wish to preserve the tax-free status of the Split-Off; and WHEREAS, the parties hereto have determined that in order to accomplish the objectives of the Split-Off and to facilitate the consummation thereof, it is necessary and desirable to restructure certain intercompany relationships, allocate certain liabilities and provide mutual indemnification, all as set forth herein; NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements, and upon the terms and subject to the conditions, hereinafter set forth, the parties do hereby agree as follows: 1. DEFINITIONS. ----------- ADR: Center for Public Resources, Alternative Dispute Resolution section. AFFILIATE: an EDS Affiliate or a GM Affiliate, as the case may be. 1 BUSINESS: the EDS Business or the GM Business, as the case may be. BUSINESS DAY: any day other than a Saturday, a Sunday, or a day on which banking institutions located in the State of New York are authorized or obligated by law or executive order to close. CANADIAN TRANSFER AGREEMENT: the Transfer Agreement, dated as of the date hereof, by and between GM-Canada and EDS-Canada. CLASS E STOCK: the Class E Common Stock, par value $0.10 per share, of GM. CODE: the Internal Revenue Code of 1986, as amended. CONFIDENTIAL INFORMATION: as to EDS, (a) any information concerning GM, the GM Business or any GM Affiliate that was obtained by EDS or an EDS Affiliate prior to the Effective Time, (b) any information concerning GM, the GM Business or any GM Affiliate that is obtained by EDS under Section 5.1, or (c) any other information obtained by, or furnished to, EDS or any EDS Affiliate that (i) is marked "Confidential" or "Secret" by GM or any GM Affiliate or (ii) GM or any GM Affiliate has notified EDS or any EDS Affiliate in writing is confidential or secret; provided, however, that "Confidential Information" as to EDS shall not include any information furnished to EDS or any EDS Affiliate by GM or any GM Affiliate, pursuant to or in connection with any Service Agreement; as to GM, (a) any information concerning EDS, the EDS Business or any EDS Affiliate that was obtained by GM or a GM Affiliate prior to the Effective Time, (b) any information concerning EDS, the EDS Business or any EDS Affiliate that is obtained by GM under Section 5.1, or (c) any other information obtained by, or furnished to, GM or any GM Affiliate that (i) is marked "Confidential" or "Secret" by EDS or any EDS Affiliate or (ii) EDS or any EDS Affiliate has notified GM or any GM Affiliate in writing is confidential or secret; provided, however, that "Confidential Information" as to GM shall not include any information furnished to GM or any GM Affiliate by EDS or any EDS Affiliate, pursuant to or in connection with any Service Agreement. CONTROL: the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. COOPERATION AGREEMENT: that certain Agreement made March 12, 1995 by and among United States Trust Company of New York, as trustee and investment manager of a trust established under the GM Hourly Pension Plan, Bankers Trust Company, as trustee and investment manager of a trust established under the General Motors Retirement Program for Salaried Employees, and GM. CPR RULES: the Rules for Non-Administered Arbitration of Business Disputes promulgated by the Center for Public Resources attached hereto as Exhibit B. 2 D & O INSURANCE: directors' and officers' liability insurance. DGCL: the General Corporation Law of the State of Delaware, as in effect on the date hereof and as the same may hereafter be amended from time to time. DELAWARE SUPERIOR COURT: the Superior Court of the State of Delaware. DISPUTE NOTICE: written notice of any dispute between GM and EDS arising out of or relating to this Separation Agreement, which shall set forth, in reasonable detail, the nature of the dispute. E TEAM: the team consisting of three officers of EDS (i.e., Lester M. Alberthal, Jr., Gary J. Fernandes and Joseph M. Grant) that was appointed by the Board of Directors of GM for the purpose of negotiating the terms of the Split- Off from the perspective of the holders of Class E Common Stock pursuant to the Negotiation Process. E TEAM PARTY: the members of the E Team and all officers and employees of EDS or any EDS Affiliate who provided substantial assistance to the E Team in discharging its responsibilities in connection with the Negotiation Process. EDS: Electronic Data Systems Corporation, a Delaware corporation. EDS AFFILIATE: a Person that, after giving effect to the Split-Off, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with EDS; provided, however, that for purposes of this Separation Agreement none of the GM Hourly Pension Plan, any trust thereunder, or any trustee or other fiduciary thereof shall be deemed an EDS Affiliate. EDS BOARD NOMINEE: the individuals who are not employees of EDS and who have been elected as directors of EDS, effective as of immediately following the Effective Time, as identified in the Form S-4. EDS BUSINESS: any business or operations of EDS or any EDS Affiliate. EDS-CANADA: E.D.S. of Canada, Ltd., an Ontario corporation and a wholly owned subsidiary of EDS. EDS CAPITAL STOCK: all classes or series of capital stock of EDS. EDS COMMON STOCK: the Common Stock, par value $0.01 per share, of EDS. EDS CONTROLLED GROUP: a group of corporations or other entities including EDS treated as if they were a single employer pursuant to section 414(b) or (c) of the Code. 3 EDS COVERED PERSON: EDS, any EDS Affiliate, any corporation to which EDS is a successor and each individual who served at any time within the six-year period prior to the Effective Time as a director, director nominee, officer or other covered employee of EDS, any EDS Affiliate or any corporation to which EDS is a successor, in each case to the extent covered by a particular Insurance Policy. EDS DIRECTOR: all directors of EDS from and after the reconstitution of the EDS board of directors on March 11, 1996 and through the Effective Time. EDS DISCLOSURE PORTIONS: the material set forth in the Form S-4 under the following captions: "Risk Factors Regarding EDS after the Split-Off," "Special Factors -- Background of the Split-Off" (only with respect to discussion of actions taken by the E Team, the management of EDS or EDS), "Special Factors -- Fairness Opinions" (only with respect to discussion of actions taken, consent to actions taken, and information provided to the financial advisors, by the E Team, the management of EDS or EDS), "The Split-Off - -- Stock Exchange Listings for EDS Common Stock," "Plans and Proposals of EDS," "EDS Unaudited Pro Forma Consolidated Capitalization," "EDS Unaudited Pro Forma Condensed Consolidated Financial Statements," "EDS Selected Consolidated Financial Information," "EDS Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business of EDS," "EDS Management and Executive Compensation," "EDS Capital Stock," any summaries in the Form S-4 of the information set forth in such sections, and Part II - Information Not Required in Prospectus (provided, that with respect to Item 21, "EDS Disclosure Portions" includes the list of exhibits and financial statement schedules contained in the Form S-4, but not the exhibits, financial statement schedules or appendices furnished to the SEC pursuant to Item 21). EDS INDEMNIFIED PARTIES: the following persons, to the extent that they took, or omitted to take, any action in the respective capacities indicated herein: (i) an E Team Party, (ii) an EDS Director, or (iii) an EDS Board Nominee. EDS QUALIFIED PLAN: the EDS Retirement Plan. EDS RELEASEE: as defined in the GM-PBGC Agreement. EDS TRANSFER AGENT: The Bank of New York, as the transfer agent for the EDS Common Stock. EDS TRANSFEREE: as defined in the GM-PBGC Agreement. EFFECTIVE TIME: the date and time at which the Split-Off becomes effective. ENVIRONMENTAL LAWS: all federal, state, local and foreign laws and regulations relating to pollution or protection of human health, safety or the environment, including, without limitation, laws and regulations relating to emissions, discharges, releases, or threatened releases of Materials 4 of Environmental Concern, or otherwise to the generation, storage, disposal, transport, or handling of Materials of Environmental Concern. ERISA: the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. (S) 1001, et seq., and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder. EXCHANGE AGENT: The Bank of New York, as exchange agent for the exchange of certificates representing shares of EDS Common Stock for certificates representing shares of Class E Stock following consummation of the Split-Off. FORM S-4: the Registration Statement on Form S-4 filed with the SEC by EDS on __________ _____, 1996 (Registration No. 333-___________). GM: General Motors Corporation, a Delaware corporation. GM AFFILIATE: a Person that, after giving effect to the Split-Off, directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with GM; provided, however, that for purposes of this Separation Agreement none of the GM Hourly Pension Plan, any trust thereunder, or any trustee or other fiduciary thereof shall be deemed a GM Affiliate. GMAC MORTGAGE: GMAC Mortgage Corporation, a Michigan corporation. GMAC MORTGAGE QUALIFIED PLANS: the GMAC Mortgage Corporation Savings Incentive Plan and the Employees Retirement Plan for GMAC Mortgage Corporation. GM BUSINESS: any business or operations of GM or any GM Affiliates. GM-CANADA: General Motors of Canada Limited, a Canada corporation. GM CONTROLLED GROUP: a group of corporations or other entities including GM treated as if they were a single employer pursuant to section 414(b) or (c) of the Code. GM DISCLOSURE PORTIONS: the material set forth in the Form S-4 under the following captions: "Incorporation of Certain Documents by Reference," "Risk Factors Regarding General Motors After the Split-Off," "Risk Factors Regarding Non-Consummation of the Split-Off," "Special Factors -- Alternatives to the Split-Off," "Special Factors -- Background of the Split-Off" (except for discussion of actions taken by the E Team, the Board of Directors of EDS or EDS), "Special Factors -- Fairness Opinions" (only with respect to discussion of actions taken, consent to actions taken, or information provided to the financial advisors, by the GM Team, the Board of Directors 5 of GM (or any committee thereof), the management of GM or GM), "Special Factors - --Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions," "Special Factors -- Requisite Vote for the Transactions," "Special Factors -- Certain U.S. Federal Income Tax Considerations," "Special Factors -- GM-PBGC Agreement," "Special Factors -- Certain Litigation," "The Split-Off -- General," "The Split-Off -- Merger Agreement," "The Split-Off -- No Appraisal Rights," "The Split-Off -- Certain U.S. Federal Income Tax Considerations," "General Motors Unaudited Pro Forma Condensed Consolidated Financial Statements," "Class E Common Stock," "Solicitation of Written Consent of General Motors Common Stockholders," "Security Ownership of Certain Beneficial Owners and Management of General Motors and EDS," and any summaries in the Form S-4 of the information set forth in such sections. GM-EDS CONTRACT: any written contract, agreement or understanding between GM or any GM Affiliate and EDS or any EDS Affiliate, including without limitation the Service Agreements, but excluding this Separation Agreement. GM HOURLY PENSION PLAN: the General Motors Corporation Hourly-Rate Employees Pension Plan. GM INDEMNIFICATION BYLAW: Article V of the By-Laws of GM, as in effect on the date hereof, a true and correct copy of which is attached hereto as Exhibit C. GM-PBGC AGREEMENT: the Agreement made as of March 3, 1995 by and between GM and the PBGC, as amended by the GM-PBGC Agreement Amendment. GM-PBGC AGREEMENT AMENDMENT: the First Amendments to Agreement Made as of March 3, 1995, By and Between General Motors Corporation and the Pension Benefit Guaranty Corporation. GM-PBGC ESCROW AGENT: Bankers Trust Company, a New York banking corporation, as the escrow agent under the GM-PBGC Escrow Agreement, selected by GM and the PBGC pursuant to section 9(d)(v) of the GM-PBGC Agreement. GM-PBGC ESCROW AGREEMENT: the Escrow Agreement made as of March 5, 1996 by and among GM, the PBGC and the GM-PBGC Escrow Agent. GM PENSION LIABILITY: as defined in the GM-PBGC Agreement. GM PENSION PLANS: as defined in the GM-PBGC Agreement. GM QUALIFIED PLANS: the GM Retirement Program for Salaried Employees and the Saturn Personal Choices Retirement Plan. GM TRANSFER AGENT: Boston EquiServe, L.P., as the transfer agent for the Class E Stock. 6 HUGHES: Hughes Electronics Corporation, a Delaware corporation. HOURLY PLAN TRUSTEE: either United States Trust Company of New York or U.S. Trust Company of California, N.A., in either of their capacities as trustee of a trust established under the GM Hourly Pension Plan. HUGHES QUALIFIED PLANS: the Hughes Non-Bargaining Retirement Plan, the Hughes Subsidiary Retirement Plan, the Hughes Salaried Employees Thrift and Savings Plan and the Hughes Thrift and Savings Plan. INDEMNIFYING PARTY: a Person that is obligated to provide indemnification under this Separation Agreement (other than pursuant to Section 2.3). INDEMNITEE: a Person that is entitled to seek indemnification under this Separation Agreement (other than pursuant to Section 2.3). INDEMNITY PAYMENT: an amount that an Indemnifying Party is required to pay to an Indemnitee under this Separation Agreement. INSURANCE POLICIES: collectively, each insurance policy or other form of insurance coverage maintained or provided by GM or any of its Affiliates for the benefit of EDS, any corporation to which EDS is a successor, or any of EDS' or such predecessor corporation's Affiliates, directors, director nominees, officers or employees prior to or at the Effective Time, together with all amendments, endorsements and waivers thereto or additional insurance policies or other forms of insurance required by Section 2.2 to be maintained or provided by GM. INSURANCE PROCEEDS: the payment received by an insured from an insurance carrier or paid by an insurance carrier on behalf of the insured, net of any applicable premium adjustment and tax effect. IRS: Internal Revenue Service of the U.S. Department of Treasury or any successor agency. JOINT DISCLOSURE PORTION: any material set forth in the Form S-4 that does not constitute a part of an EDS Disclosure Portion or a GM Disclosure Portion. LOSSES: all losses, liabilities, claims, obligations, demands, judgments, damages, dues, penalties, assessments, fines (civil or criminal), costs, liens, expenses, forfeitures, settlements, or fees, reasonable attorneys' fees and court costs, of any nature or kind, and whether or not the same would properly be reflected on a balance sheet, including, without limitation, such losses relating to or arising in respect of Materials of Environmental Concern and violations or purported violations of Environmental Laws. 7 MASTER SERVICE AGREEMENT: the Master Service Agreement dated as of the date hereof by and between GM and EDS relating to the information technology services to be provided to GM by EDS after the Effective Time. MATERIALS OF ENVIRONMENTAL CONCERN: any pollutants, contaminants or wastes, any toxic or hazardous substances or materials, or any petroleum or petroleum products. NEGOTIATION PERIOD: the period of 20 Business Days following the initial meeting of the representatives of GM and EDS following the receipt of a Dispute Notice. NEGOTIATION PROCESS: the process by which the financial and other essential terms of the Split-Off were negotiated, as approved by the Board of Directors of GM on August 7, 1995. NOTICE: any notice, request, claim, demand, or other communication under this Separation Agreement. PBGC: Pension Benefit Guaranty Corporation, a U.S. government corporation established under section 4002 of ERISA. PERSON: an individual, partnership, joint venture, corporation, trust, unincorporated association, any other entity, or a government or any department or agency or other unit thereof. PROCEEDING: any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, in which an EDS Indemnified Party was or is made or is threatened to be made a party or is otherwise involved. PROPOSED ACQUISITION TRANSACTION: a transaction or series of transactions after the Effective Time as a result of which any Person or any group of related Persons would acquire, or have the right to acquire, from one or more holders of outstanding shares of EDS Capital Stock a number of shares of EDS Capital Stock that would comprise more than 15% of (i) the value of all outstanding shares of EDS Capital Stock as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (ii) the number of the issued and outstanding shares of EDS Common Stock as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series. REGISTRATION RIGHTS AGREEMENT: the Registration Rights Agreement, entered into on March 12, 1995, by and between GM and the Hourly Plan Trustee. RELEASES AND COVENANTS NOT TO SUE: the Releases and Covenants Not to Sue executed by the PBGC and deposited with the GM-PBGC Escrow Agent pursuant to the GM-PBGC Agreement and in the forms attached hereto as Exhibits D and E. 8 REPRESENTATION DATE: any date on which EDS makes any representation (i) to the IRS for the purpose of obtaining a Subsequent Split-Off Ruling or to counsel selected by GM for the purpose of obtaining an opinion of counsel described in the definition of Subsequent Split-Off Ruling, or (ii) to GM for the purpose of any determination required to be made by GM pursuant to Section 7.2. REPRESENTATIVE: with respect to any Person, any of such Person's directors, officers, employees, agents, consultants, advisors, accountants or attorneys. RULING: the ruling dated December 27, 1995, issued by the IRS to GM in connection with the Split-Off. RULING REQUEST: the written request (including exhibits) submitted by GM to the IRS dated August 30, 1995 seeking a ruling that the Split-Off would be tax-free to GM and its stockholders, and all additional documents subsequently submitted to the IRS in connection therewith. SECURITIES ACT: the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. SEPARATE COUNSEL: as defined in Section 8.6(b). SERVICE AGENT: for GM, The Corporation Trust Company, with offices on the date hereof at 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801; and for EDS, The Prentice-Hall Corporation System, Inc., with offices on the date hereof at 1013 Centre Road, Wilmington, County of New Castle, Delaware 19805. SERVICE AGREEMENTS: the Master Agreement, effective as of September 1, 1985 (the "Master Agreement"), by and between GM and EDS, the Master Service Agreement, all service agreements and other vendor-customer agreements entered pursuant to or in connection with either the Master Agreement or the Master Service Agreement, and all other GM-EDS Contracts pursuant to which EDS has provided or provides information technology or other services to GM. SPECIAL INTER-COMPANY PAYMENT: as described in the Form S-4. SPLIT-OFF: the proposed split-off of EDS from GM described in the Form S-4. SPLIT-OFF LOSSES: as defined in Section 2.3(g). SUBSEQUENT EDS RULING REQUEST: a request by EDS after the Effective Time for a private letter ruling from the IRS. SUBSEQUENT SPLIT-OFF RULING: either (i) a ruling from the IRS or (ii) an opinion of counsel selected by GM in its sole and absolute discretion, in either case confirming, in form and substance satisfactory to GM, that no income, gain or loss for United States federal income tax purposes will 9 be recognized by GM, the stockholders or former stockholders of GM, or any GM Affiliate with respect to the Split-Off as a consequence of the consummation of a subsequent transaction. SUBSIDIARY: with respect to any specified Person, any corporation or other legal entity of which such Person or any of its Subsidiaries Controls or owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote on the election of members to the board of directors or similar governing body; provided, however, that for the purposes of this Separation Agreement, neither EDS nor any of the Subsidiaries of EDS shall be deemed to be Subsidiaries of GM or of any of the Subsidiaries of GM. SUBTRUST LETTER AGREEMENT: that certain letter agreement, dated June 7, 1995, among the Hourly Plan Trustees and GM. TAX: (i) any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on, minimum, estimated, or other tax, assessment, or governmental charge of any kind whatsoever imposed by any governmental authority, including any interest, penalty, or addition thereto, whether disputed or not; (ii) liability for the payment of any amounts of the type described in clause (i) above arising as a result of being (or having been) a member of any group or being (or having been) included or required to be included in any Tax Return related thereto; and (iii) liability for the payment of any amounts of the type described in clause (i) above as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person. TAX ALLOCATION AGREEMENTS: collectively, the Agreement for the Allocation of United States Federal Income Taxes entered into effective as of December 31, 1984, and the Agreement for the Allocation of United States Federal, State and Local Income Taxes, both as amended and restated in the Amended and Restated Agreement for the Allocation of United States Federal, State and Local Income Taxes, dated as of April 2, 1996, by and between GM and EDS. TAX-FREE REORGANIZATION: a Proposed Acquisition Transaction that would constitute a tax-free reorganization under the Code with respect to EDS, its Subsidiaries and its stockholders, with respect to which at least 50% of the consideration to be received in exchange for the acquired corporation constitutes property described in Section 354(a)(1) of the Code. TAX-FREE STATUS OF THE SPLIT-OFF: the nonrecognition of taxable gain or loss for United States federal income tax purposes to GM or GM's stockholders, including holders of Class E Stock, in connection with the Split-Off. TAX-RELATED LOSSES: (i) all federal, state and local taxes (including interest and penalties thereon) imposed pursuant to any settlement, final determination, judgment or otherwise; (ii) all 10 accounting, legal and other professional fees, and court costs incurred in connection with such taxes; and (iii) all costs and expenses that may result from adverse tax consequences to GM (including all costs, expenses and damages associated with stockholder litigation or controversies) payable by GM or GM Affiliates. THIRD-PARTY CLAIM: any claim, suit, arbitration, inquiry, proceeding or investigation by or before any court, governmental or other regulatory or administrative agency or commission or any arbitration tribunal asserted by a Person other than GM or any GM Affiliate or EDS or any EDS Affiliate which gives rise to a right of indemnification hereunder. TRANSFER AGREEMENT: the Transfer Agreement, dated March 12, 1995, by and between GM and the Hourly Plan Trustee. VOTING STOCK: with respect to any Person, all classes and series of the capital stock of such Person entitled to vote generally in the election of directors. 2. CERTAIN INTERCOMPANY MATTERS. ---------------------------- 2.1 CAPITAL STOCK MATTERS. (a) Recognition of Stockholders. Immediately after the Effective Time, EDS shall regard the Persons who were record holders of Class E Stock immediately prior to the Effective Time as the record holders of EDS Common Stock without requiring any action on the part of such Persons. EDS agrees that (i) subject to any transfers of such stock, each such holder shall be entitled to receive all dividends payable on, and exercise voting rights and all other rights and privileges with respect to, EDS Common Stock and (ii) each such holder shall be entitled, upon proper surrender (in accordance with the requirements of the letter of transmittal and other instructions provided by the Exchange Agent) of the certificate or certificates representing the shares of Class E Stock formerly held by it, to receive one or more certificates representing the shares of EDS Common Stock then held by it. (b) GM Representations and Warranties. GM hereby represents and warrants that, as of immediately prior to the Effective Time (i) 487,555,556 shares of Class E Stock will be issued and outstanding, (ii) all of such shares will be validly issued, fully paid and nonassessable, (iii) none of such shares will be subject to any preemptive rights, and (iv) there will be (x) no outstanding securities of GM or any of its Subsidiaries convertible into or exchangeable for shares of Class E Stock and (y) no outstanding subscriptions, options, warrants, rights or other arrangements or commitments to which GM is a party obligating GM to issue any shares of Class E Stock. (c) EDS Representations and Warranties. EDS hereby represents and warrants that, as of immediately prior to the Effective Time (i) 487,555,556 shares of EDS Common 11 Stock will be issued and outstanding, (ii) all of such shares will be validly issued, fully paid and nonassessable, and (iii) all of such shares will be held of record by GM. (d) Cooperation of Transfer Agents; Stockholder Records. GM shall cause the GM Transfer Agent to cooperate with the EDS Transfer Agent, and EDS shall cause the EDS Transfer Agent to cooperate with the GM Transfer Agent, in connection with the Split-Off and all other matters relating to the exchange of certificates evidencing the conversion of all outstanding shares of Class E Stock into EDS Common Stock. As soon as practicable after the Effective Time, GM shall cause the GM Transfer Agent to deliver to the EDS Transfer Agent the transfer records reflecting the record holders of Class E Stock as of the Effective Time. As soon as practicable after receipt by the EDS Transfer Agent of such transfer records, EDS shall cause the EDS Transfer Agent, in its capacity as the Exchange Agent, to distribute letters of transmittal, in form reasonably satisfactory to GM, for such exchange of certificates by such record holders. EDS shall cause the EDS Transfer Agent to issue the certificates representing the shares of EDS Common Stock promptly after proper surrender (in accordance with the requirements of the letter of transmittal and other instructions provided by the Exchange Agent) of the certificates representing the corresponding shares of Class E Stock. Upon the reasonable request of EDS from time to time after the Effective Time, GM shall, or shall cause the GM Transfer Agent to, cooperate in providing EDS with reasonable access to all historical share, transfer and dividend payment records with respect to former holders of Class E Stock. 2.2 INSURANCE MATTERS. (a) Cooperation in Insurance Matters. GM has historically provided insurance coverage to EDS and certain EDS Affiliates through various insurance policies (and other forms of insurance coverage) maintained by GM for the benefit of itself and its subsidiaries for general liability, products liability, directors and officers liability, automobile liability and other types of losses. EDS has made payments to GM to reimburse GM for its allocable share of certain premiums and costs for the provision of such insurance. From and after the Effective Time, except as set forth herein, EDS and the EDS Affiliates shall be responsible for obtaining and maintaining insurance coverage separately from the GM insurance programs. Notwithstanding the foregoing, from and after the Effective Time, (i) upon request by EDS, GM shall use commercially reasonable efforts to assist EDS in the transition to separate, initial insurance coverage for EDS and the EDS Affiliates, effective from and after the Effective Time, and shall provide EDS with information that is reasonably necessary to prevent gaps in EDS' insurance coverages, (ii) each of GM and EDS shall cooperate with and use commercially reasonable efforts to assist the other in the collection of proceeds from insurance claims made under any Insurance Policy and the EDS Covered Persons shall be entitled to the benefit of any proceeds from insurance claims made by or for the benefit of any EDS Covered Person with respect to the Insurance Policies, and (iii) GM shall not take any action that would jeopardize or otherwise interfere with any EDS Covered 12 Person's ability to collect any proceeds payable by any Person pursuant to such Insurance Policies. (b) Claims-Made Coverage. Until the six-year anniversary of the Effective Time, or until such earlier time as EDS requests, GM shall provide EDS with general liability and products liability insurance coverage and D&O Insurance for all applicable incidents, acts or omissions occurring prior to or at the Effective Time, regardless of when, prior to the six-year anniversary of the Effective Time (or EDS' earlier termination of coverage), any claims relating to such incidents, acts or omissions are presented. GM shall provide such coverage at no cost to EDS. Such insurance coverage shall be no less favorable to any EDS Covered Person in coverage or amount than the lesser of (i) the coverage in effect at the Effective Time or (ii) any applicable insurance coverage in effect for GM at the time of the claim; provided, however, that if GM determines that (x) the amount or scope of such coverage will be reduced to a level materially inferior to the level of coverage in existence immediately prior to the Effective Time or (y) the retention or deductible levels applicable to such coverage, if any, will be increased to a level materially greater than the levels in existence immediately prior to the Effective Time, GM shall give EDS notice of such determination as promptly as practicable, but in no event less than 30 days prior to the effectiveness of such reduction in coverage or increase in retention or deductible levels. Upon notice of such determination, EDS shall be entitled to no less than 90 days to evaluate its options regarding continuance of coverage hereunder and may cancel all or any portion of such coverage as of any day within such 90 day period, regardless of whether such date coincides with any anniversary of the Effective Time. At any time during the period that GM is obligated to provide coverage pursuant to this Section 2.2(b), upon at least 30 days prior written notice, EDS may request GM to cancel all or any portion of such coverage as of the next anniversary of the Effective Time. In the event of any cancellation of coverage by EDS pursuant to this Section 2.2(b), GM shall have no obligation to provide such canceled coverage with respect to any periods from and after the effective date of such termination. The term "coverage" as used in this Section 2.2 shall be deemed to include all applicable excess coverage. (c) Occurrence Coverage for Prior Acts. GM shall take no action to remove any EDS Covered Person from insurance coverage under any Insurance Policy effective at, or at any time prior to, the Effective Time that is written on an occurrence basis. (d) Claims. GM agrees that after the Effective Time, EDS shall be entitled to furnish notice of insurance claims directly to the insurers under the Insurance Policies and otherwise to communicate directly with such insurers, in a manner consistent with past practice. EDS shall provide GM with copies of all such written notices of insurance claims contemporaneously with the provision of such written notices to such insurers. EDS shall provide GM with such other written communications between EDS and the insurers related to such claims as reasonably requested by GM. 13 (e) Treatment of Certain Retentions and Deductibles. Responsibility for deductible or self-insured amounts with respect to any Insurance Policy provided or maintained after the Effective Time pursuant to Section 2.2(b) or 2.2(c) as it relates to coverage for any EDS Covered Person shall be borne 100% by (i) GM, in the case of automobile liability claims and (ii) EDS, in all other cases. Notwithstanding the foregoing, if GM and EDS are involved in the same claim, GM and EDS shall negotiate in good faith the fair allocation of any self-insurance retention or other deductible payable under the Insurance Policies. Such allocation shall be based upon all relevant factors, including, without limitation and as appropriate, the relative number of Persons affiliated with EDS or GM that are involved in such claim and the nature of the allegations with respect to each such Person. (f) Adjustment of Premiums Applicable to Periods Prior to the Effective Time. Any premiums that have been paid or are payable by EDS to GM with respect to coverage under any of the Insurance Policies maintained or provided prior to the Effective Time shall be pro-rated, and as soon as practicable after the Effective Time shall be either refunded by GM to EDS or paid by EDS to GM, as appropriate, so that EDS is responsible for only those premiums relating to (i) any full policy year ending prior to the Effective Time and (ii) the partial policy year ending at the Effective Time. (g) Pending and Prior Acts Claims. GM shall not charge EDS, and EDS shall not be obligated to pay, any amounts (other than any applicable deductible or self-insurance retention amounts or any premium amounts with respect to periods prior to the Effective Time that are payable by EDS pursuant to Section 2.2(f)) with respect to (i) pending claims under the Insurance Policies or (ii) any other claims under the Insurance Policies relating to occurrences before the Effective Time that are reported after the Effective Time ; provided, however, that if (i) a third party insurance provider has paid insurance proceeds for a pending claim under an Insurance Policy, (ii) such insurance provider has reserved its right to reimbursement in the event of a later determination that such proceeds were not payable under the Insurance Policy, (iii) GM, EDS and the insurance provider later agree that such proceeds are reimbursable to the insurance provider, and (iv) GM actually repays any such amounts to such insurance provider, then EDS shall promptly reimburse GM for such amounts actually repaid to the third party insurance provider by GM. Notwithstanding the first sentence of Section 2.2(e), the amounts of any deductibles or self- insurance retentions payable by EDS that are applicable to claims pending at the Effective Time shall be determined in accordance with past practice. Without limiting the generality of the foregoing, EDS shall not be required to pay any amounts in respect of adjusting services after the Effective Time. (h) Management of Covered Litigation. Except as otherwise provided in Section 2.3 or 8, the management, defense and settlement of any claim covered by any Insurance Policy that is brought by a third party shall be handled as follows: 14 (i) Unless Section 2.2(h)(ii) or 2.2(h)(iii) is applicable, GM shall have the right to manage the defense of such claim, to settle such claim in its sole discretion and to charge EDS, pursuant to Section 2.2(e) or 2.2(g), for that portion of the settlement that is within any applicable deductible or retention. EDS shall use commercially reasonable efforts to cooperate with GM in its defense of such claim. GM shall provide EDS with all information reasonably requested by EDS regarding the defense of such claim. GM shall consult with EDS prior to the settlement of such claim for an amount in excess of $100,000 and shall consider in good faith any recommendations or objections of EDS as to the amount or form of such settlement. GM shall not, without the prior written consent of EDS, (x) settle or compromise such claim or consent to the entry of any judgment which does not include as an unconditional term thereof the delivery by the claimant or plaintiff to each applicable EDS Covered Person of a written release from all liability in respect of such claim or (y) settle or compromise such claim in any manner that would be reasonably likely to have a material adverse effect on any EDS Covered Person. (ii) Notwithstanding Section 2.2(h)(i), if (x) such claim involves both GM or any GM Affiliate and EDS or any EDS Affiliate and is covered by any Insurance Policy providing D&O Insurance coverage or (y) EDS reasonably and in good faith determines that such claim is significant to a material business interest of EDS, GM and EDS shall jointly control the defense of, and cooperate with each other with respect to defending, such claim. If either GM or EDS fails to jointly defend any such claim, the party that does not so fail shall solely defend such claim and the party failing to jointly defend shall use commercially reasonable efforts to cooperate with the other party in its defense of such claim. GM and EDS shall consult with each other prior to the settlement of such claim, and shall consider in good faith any recommendations or objections of the other as to the amount or form of such settlement. GM shall have the right to settle such claim, but GM shall not settle such claim without the prior written consent of EDS, which consent shall not be unreasonably withheld. EDS shall be responsible, and GM shall have the right to charge EDS, pursuant to Section 2.2(e) or 2.2(g), for that portion of the settlement that is within any applicable deductible or retention. Notwithstanding the foregoing, if EDS reasonably and in good faith determines that either a conflict of interest between any EDS Covered Person and GM exists in respect of such claim (other than a conflict with respect to whether such claim is in an amount within or in excess of any applicable deductible or self-insurance retention), or there may be defenses available to any EDS Covered Person that are different from or in addition to those available to GM, EDS shall have the right to manage the defense of such EDS Covered Person in respect of such claim; however, EDS shall not settle such claim with respect to such EDS Covered Person without the prior written consent of GM, which consent shall not be unreasonably withheld. 15 (iii) Notwithstanding Section 2.2(h)(i) or 2.2(h)(ii), if such claim does not involve GM or any GM Affiliate and is covered by any Insurance Policy providing D&O Insurance coverage, EDS shall have the right to manage the defense of, including, without limitation, the selection of counsel with respect to, such claim. EDS shall provide GM with all information reasonably requested by GM regarding the defense of such claim. EDS shall be entitled to settle such claim in an amount below any applicable deductible or self-insurance retention. EDS shall consult with GM prior to the settlement of such claim and shall consider in good faith any recommendations or objections of GM as to the amount or form of such settlement. Any settlement of such a claim in excess of any applicable deductible or self-insurance retention amount shall require the prior written consent of GM, which consent shall not be unreasonably withheld. (iv) Nothing in this Separation Agreement shall be construed to allocate between a party and its directors, director nominees, officers or employees responsibility for the defense of any action or suit brought by or in the right of such party. (i) Access to Insurance Information. Upon the reasonable request of EDS from time to time during the period in which claims are open or can be made under any Insurance Policy, (i) GM shall provide EDS with a true and complete copy of each Insurance Policy and (ii) subject to Section 4, GM shall provide EDS with reasonable access to all applicable risk management data for the purpose of obtaining information with respect to any insurance claim relating to any EDS Covered Person. GM shall provide EDS with reasonable access to all litigation pleadings and other documents and correspondence relating to any EDS Covered Person, and copies thereof as reasonably requested by EDS. GM shall cause to be delivered to EDS all updates of the EDS claims histories as reasonably requested by EDS until all claims are closed, or until earlier notified by EDS. Notwithstanding Section 6.1, all reasonable out-of-pocket costs and expenses (excluding allocated compensation, salary and overhead expense) reasonably incurred by GM in complying with this Section 2.2(i) shall be reimbursed by EDS upon presentation of invoices therefor. (j) Certain Workers' Compensation Insurance Premiums. GM acknowledges that neither EDS nor any EDS Affiliate owes any amount in respect of workers' compensation insurance coverage provided or maintained by or through GM for the benefit of EDS or the EDS Affiliates during the 1992/93 policy year. GM hereby fully and unconditionally releases EDS and the EDS Affiliates from any and all liability or obligation for the payment of any premium allocation or other amount with respect to the provision of such coverage. GM and EDS acknowledge that as of the Effective Time, no amounts are payable by EDS to GM for workers' compensation insurance premiums. 16 2.3 INDEMNIFICATION OF EDS INDEMNIFIED PARTIES. (a) Indemnification of EDS Indemnified Parties. GM shall indemnify and hold harmless each EDS Indemnified Party, in its capacity as such, in accordance with section 5.1 of the GM Bylaws, as fully and to the same extent as if such EDS Indemnified Party were a director or officer of GM, from and against all amounts (including judgments, fines, payments in settlement, costs and expenses of enforcing this Section 2.3, attorneys' fees and other expenses) reasonably incurred by or on behalf of such EDS Indemnified Party in connection with any Proceeding that is based upon, or arises out of, any actual or alleged acts or omissions relating to: (i) in the case of an E Team Party, the Split-Off or the formulation, negotiation, approval, ratification, implementation or consummation thereof; (ii) in the case of an EDS Director, the approval, ratification, implementation or consummation of the Split-Off or any of the elements thereof, including the Special Inter-Company Payment, the Master Service Agreement (and the other Service Agreements to be entered into in connection therewith), this Separation Agreement and the Tax Allocation Agreement; provided, however, that such indemnification shall not apply to acts or omissions relating to (i) EDS' charter, bylaws or stockholder rights plan, (ii) EDS' employee and director benefits plans or compensation arrangements, (iii) EDS' management or director indemnification agreements, or (iv) EDS' plans, proposals, intentions or policies applicable after the Effective Time, including EDS' proposed dividend policy, proposed business plan or proposed restructuring activities; and (iii) in the case of an EDS Board Nominee, the expression of any views prior to the Effective Time at the request of GM or the Board of Directors of GM with respect to EDS' proposed charter, bylaws, stockholder rights plans or employee benefits plans. GM agrees that, if and to the extent that a determination on the part of the Board of Directors of GM is required under the DGCL or any other mandatory provision of applicable law in order to authorize the payment of any amounts pursuant to this Section 2.3(a), the Board of Directors of GM shall make such determination at least as promptly as is its customary practice with respect to similar determinations as to the indemnification of directors and officers of GM. (b) Other Bylaw Provisions. With respect to each matter for which any EDS Indemnified Party is entitled to indemnification pursuant to Section 2.3(a), each EDS Indemnified Party shall be entitled to the benefit of all other provisions and procedures set forth in the GM Indemnification Bylaw (including, without limitation, the advancement of expenses pursuant to Section 5.2 thereof) as fully and to the same extent as if such EDS 17 Indemnified Party were a director or officer of GM. GM agrees that it shall advance such expenses to each EDS Indemnified Party at least as promptly as is its customary practice with respect to the advancement of expenses to directors and officers of GM. (c) Inapplicability to Certain Losses. Section 2.3(a) and (b) shall not apply to any Losses incurred by any EDS Indemnified Party or EDS Board Nominee arising out of (i) any untrue statement or alleged untrue statement of a material fact contained in any section of the Form S-4 or (ii) the omission or alleged omission to state in any section of the Form S-4 a material fact required to be stated therein or necessary to make the statements therein not misleading, as indemnification for such Losses is provided for in Section 8. (d) No Amendment. The obligations of GM under this Section 2.3 shall not be terminated, modified or amended in such a manner as to adversely affect in any material respect the rights granted to any EDS Indemnified Party without the prior written consent of such EDS Indemnified Party. (e) GM Board Resolution. GM shall not rescind or modify the resolution of the GM Board of Directors adopted on August 7, 1995 authorizing certain indemnification for certain EDS Indemnified Parties. (f) EDS Reimbursement. As soon as practicable, but in any event within 10 days after presentation of an invoice therefor, EDS shall reimburse GM for all amounts (including judgments, fines, payments in settlement, costs and expenses) actually paid to, or on behalf of, an EDS Indemnified Party pursuant to this Section 2.3. Any amounts under this Section 2.3(f) that are not paid by EDS within 10 days after receipt of a written notice specifying the delinquency of any such payment shall bear interest, from the date of the original invoice therefor until paid, at the prime rate established from time to time by Citibank N.A., New York. If any reimbursement sought by GM pursuant to the first sentence of this Section 2.2(f) is judicially determined to be unenforceable, EDS shall contribute to GM the amounts for which such reimbursement is held to be unenforceable. The fact that at any time (i) EDS shall have a reimbursement or contribution obligation pursuant to this Section 2.3(f), or (ii) EDS is in breach of any reimbursement or contribution obligation pursuant to this Section 2.3(f), shall not impair or diminish, or constitute an excuse for nonperformance or delay in performance of, GM's obligations pursuant to the other provisions of this Section 2.3. (g) GM and EDS agree that all Losses relating to, arising out of, or due to, directly or indirectly, the Split-Off or the formulation, negotiation, approval, ratification, implementation or consummation thereof or any of the elements thereof (including the Special Inter-Company Payment, the Master Service Agreement (and the other Service Agreements to be entered into in connection therewith), this Separation Agreement and the Tax Allocation Agreement), including all Losses relating to, arising out of, or due to, directly or indirectly, the lawsuits disclosed in the Form S-4 under the caption "Special Factors - 18 Certain Litigation," including Solomon v. General Motors Corporation, et al., TRV Holding Company v. General Motors Corporation, et al. and Ward, et al., as Trustees for the Eisenberg Children's Irrevocable Trust II v. General Motors Corporation, et al. (collectively, "Split-Off Losses"), shall be governed by this Section 2.3 (except as set forth in Section 7, 8.1(a), 8.1(b), 8.1(c), 8.1(e), 8.2(a), 8.2(b), 8.2(c), 8.2(e) or 8.3(d)). Thus, GM shall have no liability to EDS, any EDS Affiliate or any of their respective directors, officers or employees for any Split-Off Losses and EDS shall have no liability to GM, any GM Affiliate or any of their respective directors, officers or employees for any Split-Off Losses except as provided in this Section 2.3 or Section 7, 8.1(a), 8.1(b), 8.1(c), 8.1(e), 8.2(a), 8.2(b), 8.2(c), 8.2(e) or 8.3(d). Nothing in this Section 2.3(g) shall affect any of the rights or obligations of the parties under the Tax Allocation Agreement. 2.4 LEASES OF REAL PROPERTY. GM and EDS shall jointly review all instances in which EDS maintains facilities in, or otherwise occupies, real property owned or leased by GM and shall use commercially reasonable efforts in each case to either negotiate and enter into a written lease incorporating terms and conditions which are fair to both parties or terminate the arrangement on mutually agreeable terms; provided, however, that the foregoing shall not apply in any instance (i) involving facilities maintained, or real property occupied, by EDS in connection with any Service Agreement or (ii) covered by a written lease agreement between the parties. 2.5 EMPLOYEE BENEFIT MATTERS. (a) General Rules. (i) A participant in either of the GM Qualified Plans who transferred from GM or a member of the GM Controlled Group to EDS, with the consent of, or at the direction of, GM management, at any time from September 1, 1985 to the Effective Time, will receive the following treatment from the GM Qualified Plans. The GM Qualified Plans will, for employees who remain continuously employed by EDS or a member of the EDS Controlled Group until retirement with eligibility for immediate commencement of retirement benefits from EDS or a member of the EDS Controlled Group: (1) treat the transferred employee's accrued GM service as unbroken; (2) treat base salary paid by EDS or a member of the EDS Controlled Group as compensation for purposes of calculating final average pay under the GM Qualified Plans; (3) provide benefits under the terms of the GM Qualified Plans in effect at the time of retirement from EDS; and (4) use credited service with EDS or a member of the EDS Controlled Group in determining vesting, but not accrual, under the GM Qualified Plans. (ii) A participant in the EDS Qualified Plan who transferred from EDS or a member of the EDS Controlled Group to GM or a GM Affiliate whose employees are eligible to participate in the GM Qualified Plans, with the consent of, or at the direction of, EDS management at any time during which EDS was in the 19 GM Controlled Group will receive the following treatment from the EDS Qualified Plan. The EDS Qualified Plan will, for employees who remain continuously employed by GM or a member of the GM Controlled Group until retirement with eligibility for immediate commencement of retirement benefits from GM or a member of the GM Controlled Group: (1) treat the transferred employee's accrued EDS service as unbroken; (2) consider income to the employees, as reported on Form W-2 and adjusted in accordance with the terms of the EDS Qualified Plan, from GM or a member of the GM Controlled Group for purposes of calculating final average earnings under the EDS Qualified Plan; (3) provide EDS Qualified Plan benefits under the plan terms in effect at the time of retirement from GM; and (4) use credited service with GM or a member of the GM Controlled Group in determining vesting, but not accrual, under the EDS Qualified Plan. (iii) To the extent the EDS salary history of an employee who transferred from GM to EDS is used to calculate a GM Qualified Plan benefit, EDS agrees to take no salary action for the purpose of manipulating the GM Qualified Plan's obligation. To the extent the GM salary history of an employee transferred from EDS to GM is used to calculate an EDS Qualified Plan benefit, GM agrees to take no salary action for the purpose of manipulating the EDS Qualified Plan's obligation. (iv) GM and EDS have provided and will continue to provide on a cooperative basis data necessary to determine employee benefits for employees who transferred from one company to the other, and data necessary to administer their employee benefit plans in compliance with applicable law. The parties hereby represent and warrant that the above referenced data is, has been, and will be accurate and complete in all material respects. For purposes of this paragraph, "GM" shall mean GM's United States-based operations and its domestic affiliates and "EDS" shall mean EDS' United States-based operations and its domestic affiliates. (v) Except as otherwise provided in the second sentence of this Section 2.5(a)(v), employees who leave GM or a member of the GM Controlled Group or EDS or a member of the EDS Controlled Group to work for the other company after the Effective Time will be treated as having terminated employment with the company they are leaving. EDS employees who are working in the GM Marketing Division Customer Assistance Center and who are hired by a GM marketing division directly from such an EDS position will use GM credited service for determining vesting of EDS Qualified Plan benefits. (b) Issues Related to GM-Canada. Simultaneously with the execution and delivery of this Separation Agreement, GM shall cause GM-Canada, and EDS shall cause EDS-Canada, to execute and deliver the Canadian Transfer Agreement, substantially in the form attached hereto as Exhibit A. 20 (c) Issues Related to Hughes. For employees who transferred from Hughes to EDS or a member of the EDS Controlled Group at any time from September 1, 1985 to the Effective Time, no service or compensation at EDS or a member of the EDS Controlled Group after the Effective Time will be considered for any purpose under the Hughes Qualified Plans. For employees who transferred from EDS or a member of the EDS Controlled Group to Hughes at any time from September 1, 1985 to the Effective Time, no service or compensation at Hughes after the Effective Time for which the employee is given credit under any of the Hughes Qualified Plans will be considered for any purpose under the EDS Qualified Plan. (d) Issues Related to GMAC Mortgage. (i) For employees who transferred from GMAC Mortgage to EDS or a member of the EDS Controlled Group at any time from September 1, 1985 to the Effective Time, no service or compensation at EDS or a member of the EDS Controlled Group after the Effective Time will be considered for any purpose under the GMAC Mortgage Qualified Plans. GMAC Mortgage will vest such transferred employees in their accrued benefits under the GMAC Mortgage Qualified Plans as of the Effective Time. (ii) For employees who transferred from EDS or a member of the EDS Controlled Group to GMAC Mortgage at any time from September 1, 1985 to the Effective Time, no service or compensation at GMAC Mortgage after the Effective Time will be considered for any purpose under the EDS Qualified Plan. EDS will vest such transferred employees in their accrued benefits under the EDS Qualified Plan as of the Effective Time. (e) Communication with Employees. GM and EDS will cooperate in devising communications to employees regarding the effects of the Split- Off. Such cooperation will include providing each other the opportunity to review and comment on such communications prior to distribution to employees. The parties will also cooperate in devising the description or summary of these communications which is internally distributed by the parties. (f) Necessary Amendments. GM, EDS and their respective Affiliates agree to make such amendments to any plan, program, or policy which any may sponsor as necessary to effectuate the provisions of this Separation Agreement as soon as practicable following the Effective Time. (g) Compliance with Applicable Requirements of ERISA and the Code. Notwithstanding anything herein to the contrary, if compliance with any of the provisions of this Section 2.5 would result in any plan sponsored by GM, EDS or any of their Affiliates 21 violating any requirement of ERISA or the Code, then compliance with such provision shall not be required to the extent that compliance would so violate these requirements. (h) Third Party Rights. Nothing in this Section 2.5 shall give any third party, including, but not limited to, any employee of GM, EDS or any of their respective Affiliates, and any participant or beneficiary in any plan sponsored by GM, EDS or any of their respective Affiliates, any right or claim to any payment. GM, EDS and their respective Affiliates expressly reserve the right to terminate any of their employees. 2.6 REGISTRATION RIGHTS AGREEMENT. (a) GM hereby represents and warrants as follows: (i) Other than as expressly provided in the Cooperation Agreement or the Subtrust Letter Agreement, since March 12, 1995, (x) the Registration Rights Agreement has not been modified or amended and (y) GM has not waived the benefit of any term of the Registration Rights Agreement, which waiver would have any adverse effect after the Effective Time. As of the Effective Time, the Cooperation Agreement shall terminate and be of no further force or effect. (ii) Neither GM nor any GM Affiliate has entered into or agreed to enter into any contract, agreement or understanding (other than the Registration Rights Agreement) that would require registration of any EDS Common Stock under the Securities Act from or after the Effective Time. (iii) GM has heretofore delivered to EDS a true and correct copy of each of the Registration Rights Agreement, the Cooperation Agreement and the Subtrust Letter Agreement. (b) Simultaneously with the execution and delivery of this Separation Agreement, EDS shall execute and deliver a Succession Agreement (the "Succession Agreement"), substantially in the form of Exhibit D to the Registration Rights Agreement. GM hereby assigns to EDS all of GM's right, title and interest in and to the Subtrust Letter Agreement as it relates to the Registration Rights Agreement (but not the Transfer Agreement). EDS specifically does not assume any obligation of GM or any GM Affiliate with respect to (i) any contract, agreement or understanding referred to in Section 2.6(a)(ii) above (other than the Registration Rights Agreement) or (ii) the Cooperation Agreement. (c) EDS shall not modify or amend the Registration Rights Agreement in any respect that would adversely affect GM's rights or obligations referred to in section 1(c) of the Succession Agreement or any rights of GM under section 10 of the Registration Rights Agreement with respect to any registration prior to the Effective Time of shares of Class E Stock by GM pursuant to such Registration Rights Agreement. 22 2.7 TRANSFER AGREEMENT. (a) GM hereby represents and warrants as follows: (i) Since March 12, 1995, (x) the Transfer Agreement has not been modified or amended and (y) GM has not waived the benefit of any material term of the Transfer Agreement. (ii) GM has heretofore delivered to EDS a true and correct copy of the Transfer Agreement. (b) Without the prior written consent of EDS, GM shall not (i) modify or amend the Transfer Agreement in any material respect, (ii) permit or consent to any modification or amendment of the Transfer Agreement in any material respect, (iii) waive the benefit of any material term of the Transfer Agreement, or (iv) take any other action, or omit to take any action that would impair the validity of, or the material rights of GM under, the Transfer Agreement. 2.8 PUBLICITY. EDS, with respect to EDS and all of the EDS Affiliates, and GM, with respect to GM and all of the GM Affiliates, agree to take all commercially reasonable action to discontinue their respective uses as promptly after the Effective Time as is commercially reasonable of any printed material that indicates a continued parent-subsidiary relationship between GM and EDS or any of their respective Affiliates. This Section 2.8 shall not be deemed to prohibit the use of printed material containing appropriate and accurate references to the historical relationships between the parties or their Affiliates. 2.9 FURTHER ASSURANCES. In addition to the actions specifically provided for elsewhere in this Separation Agreement, each of the parties hereto shall use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things commercially reasonably necessary, proper or expeditious under applicable laws, regulations and agreements in order to consummate and make effective the Split-Off as promptly as reasonably practicable. Without limiting the generality of the foregoing, each party hereto shall cooperate with the other party, and execute and deliver, or use its best efforts to cause to have executed and delivered, all instruments, including instruments of conveyance, assignment and transfer, and to make all filings with, and to obtain all consents, approvals or authorizations of, any governmental or regulatory authority in order to make effective the Split-Off. 3. GM-PBGC AGREEMENT MATTERS. ------------------------- 3.1 GM REPRESENTATIONS AND WARRANTIES. GM hereby represents and warrants as follows: 23 (a) No Amendment. (i) Since March 3, 1995 and other than in connection with the GM- PBGC Agreement Amendment, (x) the GM-PBGC Agreement has not been modified or amended, (y) GM has not waived the benefit of any material term of the GM-PBGC Agreement and (z) GM has not taken any other action, or omitted to take any action, that would (1) impair the validity of any of the Releases and Covenants Not to Sue or (2) impair the rights of GM (to the extent related to delivering to EDS executed Releases and Covenants Not to Sue), EDS, any EDS Releasee or any EDS Transferee under the GM-PBGC Agreement or any of the Releases and Covenants Not to Sue. Without limiting the generality of the foregoing, GM has not waived the PBGC's obligation under section 9(c), 9(d) or 9(f)(ii) of the GM-PBGC Agreement to execute or deliver specific executed Releases and Covenants Not to Sue. (ii) GM has heretofore delivered to EDS a true and correct copy of the GM-PBGC Agreement, including the GM-PBGC Agreement Amendment. (b) Certification Process. (i) GM has followed and complied in all material respects with the provisions of section 9(d) of the GM-PBGC Agreement that are contemplated to be followed prior to the Effective Time. Without limiting the generality of the foregoing, GM has delivered or has caused to be delivered to the PBGC the certificates, statements and reports described in section 9(c)(2)(A) through (I) of the GM-PBGC Agreement. GM has heretofore delivered to EDS a true and correct copy of each such certificate, statement and report. (ii) The PBGC has not delivered to GM a written notice of disagreement as described in section 9(d)(iii) of the GM-PBGC Agreement. (c) Deposit of Releases in Escrow. GM has heretofore delivered to EDS a true and correct copy of the GM-PBGC Escrow Agreement. The PBGC has heretofore notified GM that the PBGC has, pursuant to the GM-PBGC Agreement and the Escrow Agreement, delivered to the Escrow Agent 15 sets of final executed Releases and Covenants Not to Sue. 3.2 GM COVENANTS. (a) Delivery of Documents and Other Information. (i) GM shall deliver or cause to be delivered to the GM-PBGC Escrow Agent at the Effective Time (or, if not possible at the Effective Time, as soon as practicable thereafter), an executed certificate in the form of Appendix E1 to the GM-PBGC Agreement. 24 (ii) GM shall deliver or cause to be delivered to the PBGC at the Effective Time (or, if not possible at the Effective Time, as soon as practicable thereafter), (x) the documents and records described in section 9(c)(3)(i)(A) or (B) of the GM-PBGC Agreement and (y) the statement described in section 9(c)(3)(ii)(A) of the GM-PBGC Agreement. (iii) At the Effective Time (or, if not possible at the Effective Time, as soon as practicable thereafter), GM shall request that the PBGC deliver or cause to be delivered to the GM-PBGC Escrow Agent, within two Business Days after the PBGC's receipt of the documents, records and statement referred to in subparagraph (ii) above, an executed certificate in the form of Appendix E2 to the GM-PBGC Agreement. (iv) GM shall promptly provide EDS with copies of all material information, certificates, statements and reports delivered by or on behalf of GM to the PBGC in connection with the actions to be taken under this Section 3.2. (b) Delivery of Releases and Covenants Not to Sue. (i) GM shall use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or expeditious pursuant to the GM-PBGC Agreement and the GM-PBGC Escrow Agreement to effect the delivery to EDS of the executed Releases and Covenants Not To Sue, including providing such information, certificates, statements and reports to the PBGC and the GM-PBGC Escrow Agent to effect the same and the institution of such legal action as may be reasonably necessary to enforce the related obligations of the PBGC under the GM-PBGC Agreement or the obligations of the GM-PBGC Escrow Agent under the GM- PBGC Escrow Agreement. (ii) GM shall keep EDS informed on a timely basis as to the status of the actions to be taken under this Section 3.2 and the delivery to EDS of the Releases and Covenants Not to Sue. (c) Additional Releases. If executed Releases and Covenants Not to Sue have theretofore been delivered to EDS, at any time and from time to time thereafter at the request of EDS (i) subject to the limitation on the number of occasions that the PBGC is obligated to provide additional Releases and Covenants Not to Sue, as set forth in section 9(i) of the GM- PBGC Agreement, GM shall request that the PBGC provide to EDS, pursuant to section 9(i) of the GM-PBGC Agreement, such additional executed Releases and Covenants Not to Sue as are reasonably requested by EDS (with EDS to bear the cost thereof as provided in section 9(i) of the GM-PBGC Agreement), and (ii) GM shall request that the PBGC certify and deliver, pursuant to section 9(j) of the GM-PBGC Agreement, such additional copies of 25 Releases and Covenants Not to Sue as are reasonably requested by EDS (with EDS to bear the PBGC's standard costs and charges for copying and production of such documents as provided in section 9(j) of the GM-PBGC Agreement). Except as may be requested by EDS pursuant to the preceding sentence, GM shall not request that the PBGC provide any additional executed Releases and Covenants Not to Sue pursuant to section 9(i) of the GM-PBGC Agreement without the prior written consent of EDS. (d) Identification of Specific EDS Transferees. At the request of EDS, GM shall identify to the PBGC any specific EDS Transferee(s) whose name(s) are to be inserted in an executed Release and Covenant Not to Sue substantially in the form of Appendix R3 to the GM-PBGC Agreement at the time of execution and delivery thereof and shall use commercially reasonable efforts to obtain such executed Release and Covenant Not to Sue from the PBGC for the benefit of such EDS Transferee(s) as set forth in the GM-PBGC Agreement. (e) Amendment or Waiver of GM-PBGC Agreement. Without the prior written consent of EDS, GM shall not (i) modify or amend the GM-PBGC Agreement, (ii) permit or consent to any modification or amendment of the GM-PBGC Agreement, (iii) waive the benefit of any material term of the GM- PBGC Agreement, or (iv) take any other action, or omit to take any action, if in each such case such modification, amendment, waiver, action or omission would (x) impair the validity of any of the Releases and Covenants Not to Sue or (y) impair the rights of GM (to the extent related to delivering to EDS executed Releases and Covenants Not to Sue), EDS, any EDS Releasee or any EDS Transferee under the GM-PBGC Agreement or any of the Releases and Covenants Not to Sue. Without limiting the generality of the foregoing, GM shall not waive the PBGC's obligation under section 9(c), 9(d) or 9(f)(ii) of the GM-PBGC Agreement to execute or deliver specific executed Releases and Covenants Not to Sue. 4. CONFIDENTIALITY. --------------- 4.1 TREATMENT OF CONFIDENTIAL INFORMATION. (a) Restrictions on Disclosure. From and after the Effective Time, each of EDS and GM agrees that it shall not, and shall not permit any of its Affiliates or Representatives to, disclose any Confidential Information to any Person. Notwithstanding the foregoing, each of EDS and GM and its respective Affiliates and Representatives may disclose such Confidential Information, and such information shall no longer be deemed Confidential Information, to the extent that such party can demonstrate that such Confidential Information is or was (i) available to such party outside the context of the parties' parent-subsidiary relationship on a nonconfidential basis prior to its disclosure by the other party, (ii) in the public domain other than by the breach of this Separation Agreement, or (iii) lawfully acquired outside the context of the parties' parent-subsidiary relationship on 26 a nonconfidential basis or independently developed by, or on behalf of, such party by Persons who do not have access to, or descriptions of, any such Confidential Information. (b) Restrictions on Use. From and after the Effective Time, each of EDS and GM agrees that it shall not, and shall not permit any of its Affiliates or Representatives to, use any Confidential Information other than for the specific purposes and within the specific relationships for which it was originally disclosed to such party, Affiliate or Representative, as the case may be. In particular, the parties acknowledge that they have disclosed to each other a significant amount of highly confidential and proprietary information during the course of the parties' parent-subsidiary relationship, and each party agrees that any such information which was provided outside the context of a Service Agreement shall not be made available to or used by any Person engaged or participating in the negotiation, implementation or review of any vendor- customer relationship between EDS or any EDS Affiliate and GM or any GM Affiliate. Without limiting the generality of the foregoing, GM shall not use, and shall not permit its Affiliates or Representatives to use, for any purpose, including without limitation in connection with the sourcing, pricing or evaluation of information technology or other services provided, or to be provided, pursuant to any Service Agreement, any information relating to EDS that has been previously provided to or obtained by GM in connection with any audit or review (including without limitation any review of the transactions and arrangements relating to or arising out of the Split-Off) conducted by or on behalf of the Board of Directors of GM, including without limitation its Capital Stock Committee; provided, however, that the Board of Directors of GM and its Capital Stock Committee may continue to use such information solely for the purposes for which it was originally provided. GM and EDS acknowledge and agree that information obtained by either party pursuant to any vendor-customer relationship (including the negotiation of any Service Agreement) and not as a result of the parties' parent-subsidiary relationship may continue to be used by such parties in connection with such vendor-customer relationship; provided, however, that such continued use shall remain subject to any applicable confidentiality provisions or restrictions on use that may be contained in an applicable GM-EDS Contract. (c) Policies and Procedures. EDS and GM shall each maintain current policies and procedures, and develop such further policies and procedures as shall from time to time become necessary or appropriate, to ensure compliance with this Section 4.1. 4.2 LEGALLY REQUIRED DISCLOSURE OF CONFIDENTIAL INFORMATION. If either party to this Separation Agreement or any of its respective Affiliates or Representatives becomes legally required to disclose any Confidential Information, such disclosing party shall promptly notify the other, owning party and use commercially reasonable efforts to cooperate with the owning party so that the owning party may seek a protective order or other appropriate remedy and/or waive compliance with this Section 4. All expenses incurred in seeking a protective order or other remedy shall be borne by the owning party. If such protective order or other remedy is not obtained, or if the owning party waives compliance with this Section 4, the disclosing party or its Affiliate or Representative, 27 as applicable, shall (a) disclose only that portion of the Confidential Information which its legal counsel advises it is compelled to disclose or else stand liable for contempt or suffer other similar significant corporate censure or penalty, (b) use commercially reasonable efforts to obtain reliable assurance requested by the owning party that confidential treatment will be accorded such Confidential Information, and (c) promptly provide the owning party with a copy of the Confidential Information so disclosed, in the same form and format so disclosed. 5. CONTINUING INFORMATION SUPPORT. ------------------------------ 5.1 ACCESS TO INFORMATION. Until the ten-year anniversary of the Effective Time, EDS and GM each shall afford to the other, and shall cause their respective Affiliates and Representatives to afford, reasonable access and duplicating rights upon reasonable advance request and during normal business hours to all information (other than information subject to the attorney-client privilege) within such party's possession relating to such other party's Business, assets or liabilities to the extent that such access is reasonably required by such other party as a result of the parties' prior parent-subsidiary relationship for audit, accounting, claims, litigation (except for litigation between the parties hereto), regulatory or tax purposes, or for purposes of fulfilling disclosure and reporting obligations. In connection therewith, EDS and GM shall upon the request of the other party make available their respective officers and employees (and those of their respective Affiliates) to the extent that they are reasonably necessary to discuss and explain such information with and to the other party. GM and EDS shall each cooperate with the other, and shall cause their respective Affiliates to cooperate, in the provision of access to information reasonably necessary for the preparation of reports required by or filed under the Exchange Act with respect to any period entirely or partially prior to the Effective Time. The access provided pursuant to this Section 5.1 shall be subject to such additional confidentiality and security provisions as the disclosing party may reasonably deem necessary. This Section 5.1 shall not supersede or be applicable in lieu of any provision governing access to information contained in any Service Agreement or any GM-EDS Contract entered into in connection with existing or potential litigation relating to Split-Off Losses. 5.2 PRODUCTION OF WITNESSES. Until the six-year anniversary of the Effective Time, each of EDS and GM shall use commercially reasonable efforts, and shall cause each of their respective Affiliates to use commercially reasonable efforts, to make available to the other, upon written request, its directors, officers, employees and other Representatives as witnesses to the extent that any such Person may reasonably be required (giving consideration to the business demands upon such Persons) in connection with any legal, administrative or other proceedings in which the requesting party may from time to time be involved. 5.3 REIMBURSEMENT. Except with respect to costs and expenses incurred in connection with any legal, administrative or other proceeding to which Section 2.3, 7 or 8 applies, each party to this Separation Agreement providing access, information or witnesses to the other party pursuant to Section 5.1 or 5.2 shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payment for all reasonable out-of-pocket costs and expenses (excluding allocated 28 compensation, salary and overhead expense) as may be reasonably incurred in providing such information or witnesses. 5.4 RETENTION OF RECORDS. Except as otherwise required by law, each of EDS and GM shall use commercially reasonable efforts to accommodate the other with respect to retention and provision of copies of any significant information in such party's possession or under its control relating to the Business, assets, or liabilities of the other party. This Section 5.4 shall not supersede or be applicable in lieu of any provision governing retention of records contained in any Service Agreement. 6. EXPENSES. -------- 6.1 GENERAL. Except as otherwise provided in this Separation Agreement or any GM-EDS Contract entered into in connection with the Split-Off, all costs and expenses of any party hereto in connection with the Split-Off shall be paid by the party that incurs such costs and expenses. 6.2 FEES OF PROFESSIONAL ADVISORS. (a) With respect to the legal, accounting, financial and other advisors listed on Exhibit F, EDS shall be responsible for (i) the payment of the fees and expenses incurred by such advisors in connection with the Split-Off and (ii) any indemnification, reimbursement or contribution obligation EDS may have to such advisors. In addition, EDS shall be responsible for any indemnification, reimbursement or contribution obligation GM may have pursuant to those two separate engagement letters, dated March 20, 1996, between GM and each of Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated. GM shall afford to EDS all of GM's rights and benefits under paragraphs 4, 5 and 6 of such engagement letters. (b) With respect to the legal, accounting, financial and other advisors listed on Exhibit G, GM shall be responsible for (i) the payment of the fees and expenses incurred by such advisors in connection with the Split-Off and (ii) any indemnification, reimbursement or contribution obligation GM may have to such advisors. 6.3 COSTS OF PREPARATION AND DISTRIBUTION OF CONSENT SOLICITATION AND FORM S-4. Subject to Section 6.2, all reasonable out-of-pocket costs and expenses of printing and distributing the Form S-4, the fees associated with filing the Form S-4 with the SEC, the fees associated with making any other federal, state, local or foreign governmental securities law filings in connection with the Split-Off, and the fees and expenses of the Exchange Agent or any consent solicitation agents, information agents or similar consultants engaged by EDS or GM in connection with effecting the Split-Off (including the expenses of printing and distributing the letter of transmittal and instructions for the exchange of stock certificates) shall be paid as follows: (i) GM shall pay all such costs, fees and expenses up to an aggregate of $3,000,000; and (ii) all such costs, fees and expenses in excess of an aggregate of $3,000,000 shall be paid 50% by GM and 50% by EDS. 29 6.4 CERTAIN COSTS RELATING TO EDS COMMON STOCK. All costs of printing and engraving and fees of any transfer agent engaged by EDS, and all fees relating to listing EDS Common Stock on any stock exchange or similar organization shall be paid by EDS. 6.5 ANNUAL FEE FOR LISTING OF STOCK GM hereby represents and warrants that it has paid in full the continuing annual fee required by the New York Stock Exchange for the listing of the Class E Stock thereon with respect to 1996. As soon as practicable after the Effective Time, EDS shall reimburse GM for the portion of such fee allocable to the period within 1996 following the Effective Time. 6.6 ALLOWANCE. In connection with the establishment of the amount of the Special Inter-Company Payment, a $50,000,000 allowance (the "Allowance") is hereby provided to EDS with respect to the resolution of various uncertain, contingent and other matters arising directly or indirectly out of the separation of GM and EDS. GM and EDS acknowledge and agree that prior to the date hereof, a portion of such Allowance has been utilized by EDS and, as of the Effective Time, $9,340,000 of such Allowance (the "Remainder") will remain. EDS shall be entitled to apply such Remainder against any amounts that are or may become payable by EDS or any EDS Affiliate to GM or any GM Affiliate in connection with any uncertain, contingent or other matter arising prior to the Effective Time directly or indirectly out of the separation of GM and EDS; provided, however, that such Remainder shall not be applied against any items specifically provided for in the Tax Allocation Agreement or this Separation Agreement (other than any amounts payable by EDS pursuant to Section 2.2(f) or, if applicable, amounts that are or become payable by EDS as a result of the application of Section 8.1(f)). If any portion of the Remainder has not been utilized by EDS or the EDS Affiliates as of the 18-month anniversary of the Effective Time, the parties shall negotiate in good faith to ensure, to the maximum extent practicable, that EDS will be able to utilize the full amount of the Remainder in accordance with the intended scope of the Remainder. Any portion of the Remainder that has not been utilized by EDS or the EDS Affiliates as of the two-year anniversary of the Effective Time (the "Expiration Date") shall be eliminated and shall be no longer available for utilization by EDS; provided, however, that if the negotiations described above have not been concluded and implemented by the Expiration Date, the Expiration Date shall be automatically extended until such negotiations are concluded and the results thereof implemented. 7. COVENANT TO PRESERVE TAX-FREE STATUS OF SPLIT-OFF. ------------------------------------------------- 7.1 REPRESENTATIONS AND WARRANTIES. EDS hereby represents and warrants that (i) it has examined the Ruling Request and the Ruling, and (ii) the facts presented and the representations made therein, to the extent descriptive of EDS or the EDS Business (including, without limitation, the business purposes for the Split-Off, the representations in the Ruling to the extent that they relate to EDS or the EDS Business, and the plans, proposals, intentions and policies of EDS), are true, correct and complete in all material respects. 30 7.2 RESTRICTIONS ON EDS. (a) Secondary Capital Stock Transactions. Until the first day after the two-year anniversary of the Effective Time, EDS shall not enter into any Proposed Acquisition Transaction or, to the extent EDS has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur (whether by (i) redeeming rights under a stockholders rights plan, (ii) finding a tender offer to be a "permitted offer" under any such plan or otherwise causing any such plan to be inapplicable or neutralized with respect to any Proposed Acquisition Transaction, or (iii) approving any Proposed Acquisition Transaction, whether for purposes of Section 203 of the DGCL or any similar corporate statute, any "fair price" or other provision of EDS' charter or bylaws or otherwise) unless prior to the consummation of such Proposed Acquisition Transaction: (x) GM has determined, in its sole and absolute discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status of the Split-Off, that such Proposed Acquisition Transaction either (1) would constitute a Tax-Free Reorganization, or (2) would not otherwise jeopardize the Tax-Free Status of the Split- Off; or (y) There has been obtained a ruling from the IRS, in form and substance reasonably satisfactory to GM, that such Proposed Acquisition Transaction would constitute a Tax-Free Reorganization. The foregoing shall not prohibit EDS from entering into a contract or agreement to consummate any Proposed Acquisition Transaction if such contract or agreement requires satisfaction of the requirements of subparagraph (x) or (y) above prior to the consummation of such Proposed Acquisition Transaction. (b) Primary Capital Stock Transactions. Until the first day after the six-month anniversary of the Effective Time, EDS shall not enter into any transaction with any Person or group of related Persons if, as a result of such transaction, such Person or group of related Persons would acquire from EDS a number of shares of EDS Capital Stock that, when aggregated with all other shares of EDS Capital Stock then owned by such Person or group of related Persons, would constitute (i) more than 20% of the total combined voting power of all outstanding shares of Voting Stock of EDS or (ii) more than 20% of the total number of outstanding shares of any class or series of EDS Capital Stock other than Voting Stock of EDS, unless prior to the consummation of such transaction GM has determined, in its sole and absolute discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status of the Split-Off, that such transaction would not jeopardize the Tax-Free Status of the Split-Off. Solely for purposes of this Section 7.2(b), any option, warrant or other security that would permit such Person or group of related Persons to acquire shares of Voting Stock of EDS or other EDS Capital Stock, or any security convertible into or 31 exchangeable for shares of Voting Stock of EDS or other EDS Capital Stock, shall be treated as if it had been fully exercised, converted or exchanged. Notwithstanding the foregoing, (i) the provisions of this Section 7.2(b) shall not prohibit EDS from implementing, or otherwise complying with the provisions of, any stockholders rights plan of EDS, and (ii) issuances of shares of EDS Capital Stock that are coupled with (x) the redemption or repurchase of outstanding shares of EDS Capital Stock and/or (y) the distribution of an extraordinary dividend (as defined in Section 1059(c) of the Code) shall be regarded as sales of outstanding shares of EDS Capital Stock and shall be subject to the restrictions of Section 7.2(a). Solely for purposes of the preceding sentence, an issuance is coupled with a redemption, repurchase or extraordinary dividend distribution if, at the time of such issuance, there exists a plan or intention on the part of EDS to use the proceeds therefrom to fund such redemption, repurchase or extraordinary dividend distribution, directly or indirectly, in whole or in part. Such a plan or intention shall be deemed to exist at the time of such issuance if such redemption, repurchase or extraordinary dividend distribution occurs within the period that begins three months before the date of such issuance and ends three months after the date of the issuance. Notwithstanding the foregoing, EDS shall not be prohibited from issuing shares of EDS Capital Stock and using the proceeds therefrom to redeem or repurchase shares of EDS Capital Stock that were issued by EDS after the Effective Time. (c) Active Trade or Business. Until the first day after the two-year anniversary of the Effective Time, EDS, either directly or through one or more Subsidiaries directly or indirectly controlled by EDS, shall continue the active conduct of the trade or business (as defined in Section 355(b)(2) of the Code) conducted at the Effective Time. EDS shall not (i) liquidate, dispose of, or otherwise discontinue the conduct of any material portion of such trade or business or (ii) dispose of any business or assets that would cause EDS to be operated in a manner inconsistent in any material respect with the business purposes for the Split-Off as set forth in the Ruling Request unless GM has determined, in its sole and absolute discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status of the Split-Off, that such liquidation, disposition, or discontinuance would not jeopardize the Tax-Free Status of the Split-Off. EDS shall not under any circumstances liquidate, dispose of, or otherwise discontinue the conduct of any portion of such trade or business if such liquidation, disposition or discontinuance would breach Section 7.2(d). EDS shall continue the active conduct of such trade or business primarily through officers and employees of EDS or its Subsidiaries (and not primarily through independent contractors) who are not officers or employees of GM or of any GM Affiliates. Notwithstanding the foregoing, (i) liquidations of any of EDS' Subsidiaries into EDS or one or more Subsidiaries directly or indirectly controlled by EDS shall not be deemed to breach this Section 7.2(c) and (ii) EDS shall not be prohibited from liquidating, disposing of or otherwise discontinuing the conduct of one or more trades or businesses, or any portion thereof, provided that, in the case of this clause (ii), the aggregate value of the trades or businesses, or portions thereof, so liquidated, disposed of or discontinued shall not exceed $1 billion (as determined as of the Effective Time). For purposes of the preceding sentence, asset retirements and discontinuances of product lines within a trade or business the active conduct of which is 32 continued shall not be deemed a liquidation, disposition or discontinuance of a trade or business or portion thereof. Solely for purposes of this Section 7.2(c), EDS shall not be treated as directly or indirectly controlling a Subsidiary unless EDS owns, directly or indirectly, shares of capital stock of such Subsidiary constituting (i) 80% or more of the total combined voting power of all outstanding shares of Voting Stock of such Subsidiary and (ii) 80% or more of the total number of outstanding shares of each class or series of capital stock of such Subsidiary other than Voting Stock. (d) Continuity of Business. Until the first day after the two-year anniversary of the Effective Time, (i) EDS shall not voluntarily dissolve or liquidate, and (ii) except in the ordinary course of business, neither EDS nor any Subsidiaries directly or indirectly controlled by EDS shall sell, transfer, or otherwise dispose of or agree to dispose of assets (including, for such purpose, any shares of capital stock of such Subsidiaries) that, in the aggregate, constitute more than (x) 60% of the gross assets of EDS or (y) 60% of the consolidated gross assets of EDS and such Subsidiaries, unless prior to the consummation of such transaction GM has determined, in its sole and absolute discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free Status of the Split-Off, that such transaction would not jeopardize the Tax-Free Status of the Split-Off. The amount of gross assets of EDS and such Subsidiaries shall be based on the fair market value of each such asset as of the Effective Time. Sales, transfers or other dispositions by EDS or any of its Subsidiaries to EDS or one or more Subsidiaries directly or indirectly controlled by EDS shall not be included in any determinations under this Section 7.2(d) of whether such 60% or more of the gross assets of EDS or 60% of the consolidated gross assets of EDS and such Subsidiaries have been sold, transferred or otherwise disposed of. Solely for purposes of this Section 7.2(d), EDS shall not be treated as directly or indirectly controlling a Subsidiary unless EDS owns, directly or indirectly, shares of capital stock of such Subsidiary constituting (i) 80% or more of the total combined voting power of all outstanding shares of Voting Stock of such Subsidiary and (ii) 80% or more of the total number of outstanding shares of each class or series of capital stock of such Subsidiary other than Voting Stock. (e) Miscellaneous. Until the first day after the two-year anniversary of the Effective Time, EDS shall not take, or permit any of its Subsidiaries to take, any other actions or enter into any transaction or series of transactions or agree to enter into any other transactions that would be reasonably likely to jeopardize the Tax-Free Status of the Split- Off, including any action or transaction that would be reasonably likely to be inconsistent with any representation made to the IRS in connection with the Ruling Request, unless prior to the consummation of such action or transaction GM has determined, in its sole and absolute discretion, which discretion shall be exercised in good faith solely to preserve the Tax-Free status of the Split-Off, that such action or transaction would not jeopardize the Tax-Free Status of the Split-Off. Notwithstanding the foregoing, if and to the extent that any action or transaction is described in and permitted pursuant to Section 7.2(a), (b), (c) or (d), such action or transaction shall not be prohibited by this Section 7.2(e). 33 7.3 COOPERATION AND OTHER COVENANTS. (a) Notice of Subsequent EDS Ruling Requests. Until the first day after the two-year anniversary of the Effective Time, EDS shall furnish GM with a copy of any Subsequent EDS Ruling Request that relates to the Split- Off or that could otherwise be reasonably expected to have an impact on the Tax-Free Status of the Split-Off. (b) Cooperation. EDS shall cooperate with GM and shall take (or refrain from taking) all such actions as GM may reasonably request in connection with obtaining (i) any GM determination referred to in Section 7.2(a), (b), (c), (d) or (e) or (ii) GM's receipt of a Subsequent Split-Off Ruling. Such cooperation shall include, without limitation, providing any information and/or representations reasonably requested by GM to enable GM (or counsel for GM) to obtain and maintain any Subsequent Split-Off Ruling. From and after any Representation Date in connection with obtaining any such determination or GM's receipt of a Subsequent Split-Off Ruling and until the first day after the two-year anniversary of the date of such determination or receipt, EDS shall not take (nor shall it refrain from taking) any action that, if EDS had intended to take (or refrain from taking) such action at the relevant Representation Date, would have caused such representation to be untrue. (c) Notice. Until all restrictions set forth in Section 7.2 have expired, EDS shall give GM written notice of any intention to effect or permit a transaction described in Section 7.2 within a period of time reasonably sufficient to enable GM to make the determination referred to in Section 7.2(a), (b), (c), (d) or (e) or to prepare and seek any Subsequent Split-Off Ruling in connection with such proposed transaction. Each such notice shall set forth the terms and conditions of the proposed transaction, including, without limitation, as applicable, the nature of any related action proposed to be taken by the board of directors of EDS, the approximate number of shares of EDS Capital Stock proposed to be transferred or issued, the approximate value of EDS' assets (or assets of any of EDS' Subsidiaries) proposed to be transferred, the proposed timetable for such transaction, and the number of shares of EDS Capital Stock otherwise then owned by the other party to the proposed transaction, all with sufficient particularity to enable GM to make any such required determination, including information required to prepare and seek a Subsequent Split-Off Ruling in connection with such proposed transaction. All information provided by EDS to GM pursuant to this Section 7 shall be deemed subject to the confidentiality obligations of Section 4. Promptly, but in any event within 15 days, after GM receives such written notice from EDS, GM shall evaluate such information and notify EDS in writing of such determination or of GM's intent to seek a Subsequent Split-Off Ruling and the proposed date for submission of the request therefor, which date shall not be more than 45 days after the date GM so notifies EDS of GM's intent to seek a Subsequent Split-Off Ruling, provided that such 45-day period shall be appropriately extended for any period of noncompliance by EDS with Section 7.3(b). GM shall notify EDS promptly, but in any event within two Business Days, after the receipt of a Subsequent Split-Off Ruling. If GM makes a determination that a transaction described in Section 7.2 would jeopardize the Tax-Free 34 Status of the Split-Off, such notice to EDS shall set forth, in reasonable detail, the reasons therefor and the reasons for not requesting a Subsequent Split-Off Ruling. 7.4 INDEMNIFICATION FOR TAX LIABILITIES. (a) General. Notwithstanding any other provision of this Agreement or any provision of any of the Tax Allocation Agreements to the contrary but subject to Section 7.4(b), EDS shall indemnify, defend and hold harmless GM and each GM Affiliate (or any successor to any of them) against any and all Tax-Related Losses incurred by GM in connection with any proposed tax assessment or tax controversy with respect to the Split-Off to the extent caused by any breach by EDS of any of its representations, warranties or covenants made pursuant to this Section 7. All interest or penalties incurred in connection with such Tax-Related Losses shall be computed for the time period up to and including the date that EDS pays its indemnification obligation in full. (b) Exceptions to EDS' Indemnification. If GM (i) makes a determination pursuant to Section 7.2(a), (b), (c), (d) or (e), by a Subsequent Split-Off Ruling or otherwise, and (ii) delivers to EDS written notice of such determination pursuant to Section 7.3(c), EDS shall have no obligation pursuant to Section 7.4(a), except to the extent that any Tax- Related Losses so incurred resulted from the inaccuracy, incorrectness or incompleteness, in any material respect, of any representation provided by EDS upon which such Subsequent Split-Off Ruling and/or determination was based. (c) Timing and Method of Tax Indemnification Payments. EDS shall pay any amount due and payable to GM pursuant to this Section 7 on or before the 90th day following the earlier of agreement or determination that such amount is due and payable to GM. All payments pursuant to this Section 7.4 shall be made by wire transfer to the bank account designated by GM for such purpose, and on the date of such wire transfer EDS shall give GM notice of the transfer. 7.5 PROCEDURE FOR INDEMNIFICATION FOR TAX LIABILITIES. (a) Notice of Claim. If GM receives notice of the assertion of any Third-Party Claim with respect to which EDS is obligated under Section 7.4 to provide indemnification, GM shall give EDS notice thereof (together with a copy of such Third-Party Claim, process or other legal pleading) promptly after becoming aware of such Third-Party Claim; provided, however, that the failure of GM to give notice as provided in this Section shall not relieve EDS of its obligations under Section 7.4, except to the extent that EDS is actually prejudiced by such failure to give notice. Such notice shall describe such Third-Party Claim in reasonable detail. (b) Obligation of Indemnifying Party. GM and EDS shall jointly control the defense of, and cooperate with each other with respect to defending, any Third-Party Claim 35 with respect to which EDS is obligated under Section 7.4 to provide indemnification, provided that EDS shall forfeit such joint control right with respect to a particular Third-Party Claim if EDS or any EDS Affiliate makes any public statement or filing, or takes any action (including, but not limited to, the filing of any submission or pleading, or the giving of a deposition or production of documents, in any administrative or court proceeding) in connection with such Third-Party Claim that could reasonably result in the shifting of liability for any Losses arising out of such Third-Party Claim from EDS to GM (or any of its Affiliates). EDS and GM shall exercise their rights to jointly control the defense of any such Third-Party Claim solely for the purpose of defeating such Third-Party Claim and neither EDS nor GM shall make any statements or take any actions that could reasonably result in the shifting of liability for any Losses arising out of such Third-Party Claim from the party making such statement or taking such action (or any of its Affiliates) to the other party (or any of its Affiliates). Statements made or actions taken by either EDS or GM in connection with the defense of any such Third-Party Claim shall not prejudice the rights of such party in any subsequent action or proceeding between the parties. If either GM or EDS fails to jointly defend any such Third-Party Claim, the other party shall solely defend such Third-Party Claim and the party failing to jointly defend shall use commercially reasonable efforts to cooperate with the other party in its defense of such Third Party Claim; provided, however, that GM may not compromise or settle any such Third-Party Claim without the prior written consent of EDS, which consent shall not be unreasonably withheld. All costs and expenses of either party in connection with, and during the course of, the joint control of the defense of any such Third-Party Claim shall be initially paid by the party that incurs such costs and expenses. Such costs and expenses shall be reallocated and reimbursed in accordance with the respective indemnification obligations of the parties at the conclusion of the defense of such Third-Party Claim. 7.6 ARBITRATION. Any dispute between the parties arising out of or relating to this Section 7, including the interpretation of this Section 7, or any actual or purported breach of this Section 7, shall be resolved only in accordance with the following provisions: (a) Negotiation. GM and EDS shall attempt in good faith to resolve any such dispute promptly through negotiations of the parties. In the event of any such dispute, either party may deliver a Dispute Notice to the other party, and within 20 Business Days of the receipt of such Dispute Notice, the appropriate representatives of GM and EDS shall meet to attempt to resolve such dispute. If such dispute has not been resolved within the Negotiation Period, or if one of the parties fails or refuses to negotiate such dispute, the issue shall be settled by arbitration pursuant to Section 7.6(b). The results of such arbitration shall be final and binding on the parties. (b) Arbitration Procedure. Either party may initiate arbitration with regard to such dispute by giving the other party written notice either (i) at any time following the end of the Negotiation Period, or (ii) if the parties do not meet within 20 Business Days of the receipt of the Dispute Notice, at any time thereafter. The arbitration shall be conducted 36 by three arbitrators in accordance with the CPR Rules, except as otherwise provided in this Section 7.6. Within 20 days following receipt of the written notice of arbitration, GM and EDS shall each appoint one arbitrator. The two arbitrators so appointed shall appoint the third arbitrator. If either GM or EDS shall fail to appoint an arbitrator within such 20-day period, the arbitration shall be by the sole arbitrator appointed by the other party. Whether jointly selected by GM and EDS or otherwise, each arbitrator selected to resolve such dispute shall be a tax attorney who is generally recognized in the tax community as a qualified and competent tax practitioner with experience in the tax area involved in the issue or issues to be resolved. Such arbitrators shall be empowered to determine whether EDS is required to indemnify GM pursuant to Section 7.4 and to determine the amount of the related indemnification payment. Each party shall bear 50% of the aggregate expenses of the arbitrators. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. (S)1-14. The place of arbitration shall be New York, New York. The final decision of the arbitrators shall be rendered no later than one year from the date of the written notice of arbitration. 7.7 EXCLUSIVE REMEDIES. Except for the right to pursue equitable remedies, the remedies provided in this Section 7 shall be deemed the sole and exclusive remedies of the parties with respect to the subject matters of the indemnification provisions of Section 7.4. 8. INDEMNIFICATION. --------------- 8.1 INDEMNIFICATION BY EDS. Subject to Section 8.3, from and after the Effective Time, EDS shall indemnify, defend and hold harmless GM, all GM Affiliates and each of their respective directors, officers and employees (in their capacities as such), from and against: (a) all Losses of GM or any GM Affiliate relating to, arising out of, or due to, directly or indirectly, any breach of any of the provisions of this Separation Agreement by EDS. (b) all Losses of GM, any GM Affiliate or any of their respective directors, officers or employees relating to, arising out of, or due to any untrue statement or alleged untrue statement of a material fact contained in the EDS Disclosure Portions or the omission or alleged omission to state in the EDS Disclosure Portions a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that EDS shall not be liable in any such case to the extent that any such Losses relate to, arise out of or are based upon any plans, proposals, intentions or policies of GM or any GM Affiliates existing at the time of the effectiveness of the Form S-4 and of which EDS did not then have knowledge. (c) all Losses of GM, any GM Affiliate or any of their respective directors, officers or employees relating to, arising out of, or due to any untrue statement or alleged untrue statement of a material fact contained in the Joint Disclosure Portions or the omission 37 or alleged omission to state in the Joint Disclosure Portions a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that EDS shall be liable in any such case only to the extent that any such Losses arise out of or are based upon any plans, proposals, intentions or policies of EDS or any EDS Affiliate existing at the time of the effectiveness of the Form S-4 and of which GM did not then have knowledge. (d) all Losses of GM, any GM Affiliate or any of their respective directors, officers or employees relating to, arising out of, or due to any untrue statement or alleged untrue statement of a material fact relating to EDS or any EDS Affiliate contained in any report of GM with respect to any period entirely or partially prior to the Effective Time required by or filed under the Exchange Act relating to the EDS Business or the Class E Stock, or any filing made prior to the Effective Time under the Securities Act relating to the Class E Stock by GM, or the omission or alleged omission to state in any such report or filing a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that EDS shall be liable in any such case only to the extent that any such Losses arise out of or are based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in any such report or filing in reliance upon and in conformity with written information furnished to GM, any GM Affiliate or any of their respective Representatives by or on behalf of EDS, any EDS Affiliate or any of their respective Representatives specifically for use in preparing such report or filing by GM; provided, further, that EDS shall not be liable in any such case to the extent that any such Losses relate to, arise out of or are based upon any plans, proposals, intentions or policies of GM or any GM Affiliate existing at the time such report or filing was made; provided, further, that this Section 8.1(d) shall not apply to the Form S-4. (e) all Losses of GM, any GM Affiliate or any of their respective directors, officers or employees relating to or arising out of actions taken (or omitted to be taken) from and after the Effective Time by EDS, any EDS Affiliate or the EDS Transfer Agent in connection with (i) effecting the exchange of certificates representing shares of EDS Common Stock for certificates representing shares of Class E Stock, (ii) recognizing the Persons who were record holders of Class E Stock immediately prior to the Effective Time as the record holders of EDS Common Stock or (iii) affording such Persons the dividend, voting and other rights and privileges incident to the EDS Common Stock. (f) except as otherwise provided in Section 8.1(a), (b), (c), (d) or (e), all Losses of GM, any GM Affiliate or any of their respective directors, officers or employees relating to, arising out of, or due to, directly or indirectly, the EDS Business, whether relating to, arising out of, or due to occurrences or conditions prior to, on, or after the Effective Time; provided, however, that EDS shall have no obligations under this Section 8.1(f) with respect to any Losses relating to, arising out of or due to, directly or indirectly, any intentional or negligent act or omission to act by GM, any GM Affiliate or any of their respective 38 Representatives, unless such intentional or negligent act or omission was at the express direction of EDS, any EDS Affiliate or any of their respective Representatives. 8.2 INDEMNIFICATION BY GM. Subject to Section 8.3, from and after the Effective Time, GM shall indemnify, defend, and hold harmless EDS, all EDS Affiliates, and each of their respective directors, officers and employees (in their capacities as such), from and against: (a) all Losses of EDS or any EDS Affiliate relating to, arising out of, or due to, directly or indirectly, any breach of any of the provisions of this Separation Agreement by GM. (b) all Losses of EDS, any EDS Affiliate or any of their respective directors, officers or employees relating to, arising out of, or due to any untrue statement or alleged untrue statement of a material fact contained in the GM Disclosure Portions or the omission or alleged omission to state in the GM Disclosure Portions a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that GM shall not be liable in any such case to the extent that any such Losses relate to, arise out of or are based upon any plans, proposals, intentions or policies of EDS or any EDS Affiliates existing at the time of the effectiveness of the Form S-4 and of which GM did not then have knowledge. (c) all Losses of EDS, any EDS Affiliate or any of their respective directors, officers or employees relating to, arising out of, or due to any untrue statement or alleged untrue statement of a material fact contained in the Joint Disclosure Portions or the omission or alleged omission to state in the Joint Disclosure Portions a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that GM shall be liable in any such case only to the extent that any such Losses arise out of or are based upon any plans, proposals, intentions or policies of GM or any GM Affiliate existing at the time of the effectiveness of the Form S-4 and of which EDS did not then have knowledge. (d) all Losses of EDS, any EDS Affiliate or any of their respective directors, officers or employees relating to, arising out of, or due to any untrue statement or alleged untrue statement of a material fact contained in any report of GM with respect to any period entirely or partially prior to the Effective Time required by or filed under the Exchange Act, or any filing made prior to the Effective Time under the Securities Act by GM, or the omission or alleged omission to state in any such report or filing a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that GM shall not be liable in any such case to the extent that any such Losses relate to, arise out of or are based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in any such report or filing in reliance upon and in conformity with written information furnished to GM, any GM Affiliate or any of their respective Representatives by or on behalf of EDS, any EDS Affiliate or any of their 39 respective Representatives specifically for use in preparing such report or filing by GM; provided, further, that the foregoing proviso shall be deemed inapplicable to the extent that the Losses referred to in such proviso relate to, arise out of or are based upon any plans, proposals, intentions or policies of GM or any GM Affiliate existing at the time such report or filing was made; provided, further, that GM shall not be liable in any such case to the extent that any such Losses relate to, arise out of or are based upon any plans, proposals, intentions or policies of EDS or any EDS Affiliates existing at the time such report or filing was made; provided, further, that this Section 8.2(d) shall not apply to the Form S-4. (e) all Losses of EDS, any EDS Affiliate or any of their respective directors, officers or employees relating to or arising out of actions taken (or omitted to be taken) at or prior to the Effective Time by GM, any GM Affiliate or the GM Transfer Agent (or any predecessor thereof) in connection with (i) recognizing any Person who is or was at any time a record holder of Class E Stock as a record holder of Class E Stock or (ii) affording such Persons the dividend, voting and other rights and privileges incident to the Class E Stock. (f) except as otherwise provided in Section 8.2(a), (b), (c), (d) or (e), all Losses of EDS, any EDS Affiliate or any of their respective directors, officers or employees relating to, arising out of, or due to, directly or indirectly, the GM Business, whether relating to, arising out of or due to occurrences or conditions prior to, on, or after the Effective Time, including, without limitation, all Losses relating to, arising out of, or due to any GM Pension Liability; provided, however, that GM shall have no obligations under this Section 8.2(f) with respect to any Losses relating to, arising out of or due to, directly or indirectly, any intentional or negligent act or omission to act by EDS, any EDS Affiliate or any of their respective Representatives, unless such intentional or negligent act or omission was at the express direction of GM, any GM Affiliate or any of their respective Representatives. 8.3 OTHER LIABILITIES. (a) This Section 8 shall not be applicable to (i) any Tax-Related Losses, which shall be governed by Section 7 of this Separation Agreement, or (ii) except as provided in Section 8.4, any other Losses relating to, arising out of, or due to Taxes, which shall be governed by the Tax Allocation Agreements, as applicable. (b) This Section 8 shall not be applicable to any Losses relating to, arising out of, or due to any breach of the provisions of any GM-EDS Contract, which Losses shall be governed by the terms of such GM-EDS Contract. (c) This Section 8 shall not be applicable to any Split-Off Losses, except as provided in Section 2.3(g). (d) Subject to Sections 8.1(c) and 8.2(c), with respect to all Losses of GM, EDS or any of their respective Affiliates, directors, officers or employees relating to, arising 40 out of, or due to (i) any untrue statement or alleged untrue statement of a material fact contained in any Joint Disclosure Portion or (ii) the omission or alleged omission to state in any Joint Disclosure Portion a material fact required to be stated therein or necessary to make the statements therein not misleading, such Losses shall be equally divided between, and paid by, EDS and GM. 8.4 TAX EFFECTS OF INDEMNIFICATION. The amount of any Loss for which indemnification is provided under this Separation Agreement (other than pursuant to Section 7) shall be (i) increased to take account of any net Tax cost incurred by the Indemnitee arising from the receipt or accrual of an Indemnity Payment hereunder (grossed up for such increase) and (ii) reduced to take account of any net Tax benefit realized by the Indemnitee arising from incurring or paying such Loss. In computing the amount of any such Tax cost or Tax benefit, the Indemnitee shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt or accrual of any Indemnity Payment hereunder or incurring or paying any indemnified Loss. Any Indemnity Payment hereunder shall initially be made without regard to this Section 8.4 and shall be increased or reduced to reflect any such net Tax cost (including gross-up) or net Tax benefit only after the Indemnitee has actually realized such cost or benefit. For purposes of this Agreement, an Indemnitee shall he deemed to have "actually realized" a net Tax cost or a net Tax benefit to the extent that, and at such time as, the amount of Taxes payable by such Indemnitee is increased above or reduced below, as the case may be, the amount of Taxes that such Indemnitee would be required to pay but for the receipt or accrual of the Indemnity Payment or the incurrence or payment of such Loss, as the case may be. The amount of any increase or reduction hereunder shall be adjusted to reflect any final determination (which shall include the execution of Form 870-AD or successor form) with respect to the Indemnitee's liability for Taxes, and payments between GM and EDS to reflect such adjustment shall be made if necessary. 8.5 EFFECT OF INSURANCE UPON INDEMNIFICATION. The amount which an Indemnifying Party is required to pay to any Indemnitee pursuant to this Section 8 shall be reduced (including retroactively) by any Insurance Proceeds and other amounts actually recovered by such Indemnitee in reduction of the related Loss, it being understood and agreed that each of EDS and GM shall use commercially reasonable efforts to collect any such proceeds or other amounts to which it or any of its Affiliates is entitled, without regard to whether it is the Indemnifying Party hereunder. No Indemnitee shall be required, however, to collect any such proceeds or other amounts prior to being entitled to indemnification from an Indemnifying Party hereunder. If an Indemnitee receives an Indemnity Payment in respect of a Loss and subsequently receives Insurance Proceeds or other amounts in respect of such Loss, then such Indemnitee shall pay to such Indemnifying Party an amount equal to the difference between (a) the sum of the amount of such Indemnity Payment and the amount of such Insurance Proceeds or other amounts actually received and (b) the amount of such Loss, adjusted (at such time as appropriate adjustment can be determined) in each case to reflect any premium adjustment attributable to such claim. Settlements of any claims covered by any Insurance Policies shall be subject to Section 2.2(h). 41 8.6 PROCEDURE FOR INDEMNIFICATION INVOLVING THIRD-PARTY CLAIMS. (a) Notice of Claim. If any Indemnitee receives notice of the assertion of any Third-Party Claim with respect to which an Indemnifying Party is obligated under this Separation Agreement to provide indemnification, such Indemnitee shall give such Indemnifying Party notice thereof (together with a copy of such Third-Party Claim, process or other legal pleading) promptly after becoming aware of such Third-Party Claim; provided, however, that the failure of any Indemnitee to give notice as provided in this Section shall not relieve any Indemnifying Party of its obligations under this Section 8, except to the extent that such Indemnifying Party is actually prejudiced by such failure to give notice. Such notice shall describe such Third-Party Claim in reasonable detail. (b) Obligation of Indemnifying Party. An Indemnifying Party, at such Indemnifying Party's own expense and through counsel chosen by such Indemnifying Party (which counsel shall be reasonably acceptable to the Indemnitee), may elect to defend any Third-Party Claim. If an Indemnifying Party elects to defend a Third-Party Claim, then, within ten Business Days after receiving notice of such Third-Party Claim (or sooner, if the nature of such Third Party Claim so requires), such Indemnifying Party shall notify the Indemnitee of its intent to do so, and such Indemnitee shall cooperate in the defense of such Third-Party Claim. Such Indemnifying Party shall pay such Indemnitee's reasonable out-of-pocket expenses incurred in connection with such cooperation. Such Indemnifying Party shall keep the Indemnitee reasonably informed as to the status of the defense of such Third-Party Claim. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third-Party Claim, such Indemnifying Party shall not be liable to such Indemnitee under this Section 8 for any legal or other expenses subsequently incurred by such Indemnitee in connection with the defense thereof other than those expenses referred to in the preceding sentence; provided, however, that such Indemnitee shall have the right to employ one law firm as counsel, together with a separate local law firm in each applicable jurisdiction ("Separate Counsel"), to represent such Indemnitee in any action or group of related actions (which firm or firms shall be reasonably acceptable to the Indemnifying Party) if, in such Indemnitee's reasonable judgment at any time, either a conflict of interest between such Indemnitee and such Indemnifying Party exists in respect of such claim, or there may be defenses available to such Indemnitee which are different from or in addition to those available to such Indemnifying Party, and in that event (i) the reasonable fees and expenses of such Separate Counsel shall be paid by such Indemnifying Party (it being understood, however, that the Indemnifying Party shall not be liable for the expenses of more than one Separate Counsel (excluding local counsel) with respect to any Third-Party Claim (even if against multiple Indemnitees)) and (ii) each of such Indemnifying Party and such Indemnitee shall have the right to conduct its own defense in respect of such claim. If an Indemnifying Party elects not to defend against a Third-Party Claim, or fails to notify an Indemnitee of its election as provided in this Section within the period of ten Business Days described above, the Indemnitee may defend, compromise, and settle such Third Party Claim 42 and shall be entitled to indemnification hereunder (to the extent permitted hereunder); provided, however, that no such Indemnitee may compromise or settle any such Third-Party Claim without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, the Indemnifying Party shall not, without the prior written consent of the Indemnitee, (i) settle or compromise any Third-Party Claim or consent to the entry of any judgment which does not include as an unconditional term thereof the delivery by the claimant or plaintiff to the Indemnitee of a written release from all liability in respect of such Third-Party Claim or (ii) settle or compromise any Third- Party Claim in any manner that would be reasonably likely to have a material adverse effect on the Indemnitee. (c) Joint Defense of Certain Claims. Notwithstanding the provisions of Section 8.6(b), GM and EDS shall jointly control the defense of, and cooperate with each other with respect to defending, any Third-Party Claim with respect to which each party is claiming that it is entitled to indemnification under Section 8.1 or 8.2. If either GM or EDS fails to jointly defend any such Third-Party Claim, the other party shall solely defend such Third-Party Claim and the party failing to jointly defend shall use commercially reasonable efforts to cooperate with the other party in its defense of such Third Party Claim; provided, however, that neither party may compromise or settle any such Third-Party Claim without the prior written consent of the other party, which consent shall not be unreasonably withheld. All costs and expenses of either party in connection with, and during the course of, the joint control of the defense of any such Third- Party Claim shall be initially paid by the party that incurs such costs and expenses. Such costs and expenses shall be reallocated and reimbursed in accordance with the respective indemnification obligations of the parties at the conclusion of the defense of such Third-Party Claim. 8.7 PROCEDURE FOR INDEMNIFICATION NOT INVOLVING THIRD-PARTY CLAIMS. If any Indemnitee desires to assert against an Indemnifying Party any claim for indemnification under this Section 8 other than a Third-Party Claim (a "Claim"), the Indemnitee shall deliver to the Indemnifying Party notice of its demand for satisfaction of such Claim (a "Request"), specifying in reasonable detail the amount of such Claim and the basis for asserting such Claim. Within 30 days after the Indemnifying Party has been given a Request, the Indemnifying Party shall either (i) satisfy the Claim requested to be satisfied in such Request by delivering to the Indemnitee payment by wire transfer or a certified or bank cashier's check payable to the Indemnified Party in immediately available funds in an amount equal to the amount of such Claim, or (ii) notify the Indemnitee that the Indemnifying Party contests such Claim by delivering to the Indemnitee a Dispute Notice pursuant to Section 9.1, stating that the Indemnifying Party objects to such Claim and specifying in reasonable detail the basis for contesting such Claim. Thereafter, the Indemnifying Party and the Indemnitee shall resolve the Claim in accordance with Section 9.1. 8.8 EXCLUSIVE REMEDIES. Except for the right to pursue equitable remedies, the remedies provided in this Section 8 shall be deemed the sole and exclusive remedies of the parties with respect to the subject matters of the indemnification provisions of this Section 8. 43 9. MISCELLANEOUS. ------------- 9.1 DISPUTE RESOLUTION. GM and EDS shall attempt in good faith to resolve any dispute between the parties arising out of or relating to this Separation Agreement promptly through negotiations of the parties. In the event of any such dispute, either party may deliver a Dispute Notice to the other party, and within 20 Business Days of the receipt of such Dispute Notice, the appropriate representatives of GM and EDS shall meet to attempt to resolve such dispute. 9.2 SURVIVAL. The representations and warranties contained in this Separation Agreement shall survive the Effective Time until the expiration of all applicable statutes of limitations. 9.3 COMPLETE AGREEMENT. This Separation Agreement, and the exhibits and schedules hereto shall constitute the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede all prior and contemporaneous agreements and understandings, whether written or oral, between the parties with respect to such subject matter. 9.4 AUTHORITY. Each of the parties hereto represents to the other that (a) it has the corporate power and authority to execute, deliver and perform this Separation Agreement, (b) the execution, delivery and performance of this Separation Agreement by it has been duly authorized by all necessary corporate action, (c) it has duly and validly executed and delivered this Separation Agreement, and (d) this Separation Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equity principles. 9.5 GOVERNING LAW. This Separation Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (other than the laws regarding conflicts of laws) as to all matters, including matters of validity, construction, effect, performance and remedies. 9.6 CONSENT TO JURISDICTION. Any action, suit or proceeding arising out of any claim that the parties cannot settle through good faith negotiations (except any claim to which Section 7.6 applies) shall be litigated exclusively in the state courts of Delaware. Each of the parties hereto hereby irrevocably and unconditionally (a) submits to the jurisdiction of the state courts of Delaware for any such action, suit or proceeding, (b) agrees not to commence any such action, suit or proceeding except in the state courts of Delaware, (c) waives, and agrees not to plead or to make, any objection to the venue of any such action, suit or proceeding in the state courts of Delaware, (d) waives, and agrees not to plead or to make, any claim that any such action, suit or proceeding brought in the state courts of Delaware has been brought in an improper or otherwise inconvenient forum, (e) waives, and agrees not to plead or to make, any claim that the state courts of Delaware lack personal jurisdiction over it, and (f) waives its right to remove any such action, suit or proceeding to the federal courts except when such courts are vested with sole and exclusive jurisdiction by statute. GM and EDS shall cooperate with each other in connection with any such action, suit or proceeding to obtain reliable assurances that confidential treatment will be accorded 44 any information that either party shall reasonably deem to be confidential or proprietary. Each of the parties hereto irrevocably designates and appoints its respective Service Agent as its agent to receive service of process in any such action, suit or proceeding. Each of the parties hereto further covenants and agrees that, until the expiration of all applicable statutes of limitations relating to potential claims under this Separation Agreement, each such party shall maintain a duly appointed agent for the service of summonses and other legal process in the State of Delaware, and shall promptly notify the other party hereto of any change in the name or address of its Service Agent and the name and address of any replacement for its Service Agent, if such agent is no longer the Service Agent named herein. This Section 9.6 is meant to comply with 6 Del. C. (S) 2708. 9.7 NOTICES. All Notices shall be in writing and shall be deemed given upon (a) a transmitter's confirmation of a receipt of a facsimile transmission (but only if followed by confirmed delivery of a standard overnight courier the following Business Day or if delivered by hand the following Business Day), or (b) confirmed delivery of a standard overnight courier or delivered by hand, to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice): If to GM to: General Motors Corporation 3044 West Grand Boulevard Detroit, Michigan 48202 Facsimile transmission: (313) 974-4529 Attention: Chief Executive Officer With a copy (which shall not constitute effective notice) to: General Motors Corporation 3031 West Grand Boulevard Detroit, MI 48202 Facsimile transmission: (313) 974-0209 Attention: General Counsel If to EDS, to: Electronic Data Systems Corporation Mail Stop: H2-7W-40 5400 Legacy Drive Plano, Texas 75024 Facsimile transmission: (214) 605-2122 Attention: Chief Executive Officer 45 With a copy (which shall not constitute effective notice) to: Electronic Data Systems Corporation Mail Stop: H3-3D-05 5400 Legacy Drive Plano, Texas 75024 Facsimile transmission: (214) 605-5610 Attention: General Counsel or to such other address as either party hereto may have furnished to the other party by a Notice in writing in accordance with this Section. Any Notice delivered pursuant to Section 2.2 shall also be sent to EDS Risk Management. Any Notice delivered pursuant to Section 7 shall also be sent to GM's Chief Tax Officer. 9.8 AMENDMENT AND MODIFICATION. This Separation Agreement may not be amended or modified in any respect except by a written agreement signed by both of the parties hereto. 9.9 BINDING EFFECT; ASSIGNMENT. This Separation Agreement and all of the provisions hereof shall be binding upon the parties hereto and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to a merger of either party with another Person, neither this Separation Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either party hereto without the prior written consent of the other party, which consent shall not be unreasonably withheld. 9.10 THIRD PARTY BENEFICIARIES. The EDS Indemnified Parties, the Indemnitees and their respective successors, heirs, executors, administrators and other estate representatives shall be third party beneficiaries of the indemnification provisions of Sections 2.3, 7 and 8, as applicable, and shall be entitled to enforce those provisions, and in connection with such enforcement shall be subject to Section 9.6, in each such case as fully and to the same extent as if they were parties to this Separation Agreement. Except as provided in the previous sentence, nothing in this Separation Agreement, express or implied, is intended to or shall confer upon any Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Separation Agreement, and no Person (other than as provided in the previous sentence) shall be deemed a third party beneficiary under or by reason of this Separation Agreement. 9.11 COUNTERPARTS. This Separation Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.12 WAIVER. The observance of any term of this Separation Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term, but such waiver shall be effective only if it is in writing signed by the 46 party against which such waiver is to be asserted. Unless otherwise expressly provided in this Separation Agreement, no delay or omission on the part of any party in exercising any right or privilege under this Separation Agreement shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right or privilege under this Separation Agreement operate as a waiver of any other right or privilege under this Separation Agreement nor shall any single or partial exercise of any right or privilege preclude any other or further exercise thereof or the exercise of any other right or privilege under this Separation Agreement. No failure by either party to take any action or assert any right or privilege hereunder shall be deemed to be a waiver of such right or privilege in the event of the continuation or repetition of the circumstances giving rise to such right unless expressly waived in writing by the party against whom the existence of such waiver is asserted. 9.13 SEVERABILITY. Any provision of this Separation Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 9.14 REMEDIES. Each of GM and EDS shall be entitled to enforce its rights under this Separation Agreement specifically, to recover damages and costs (including reasonable attorneys' fees) caused by any breach of any provision of this Separation Agreement and to exercise all other rights existing in its favor. Each of GM and EDS acknowledges and agrees that under certain circumstances the breach by GM or any of its Subsidiaries or EDS or any of its Subsidiaries of a term or provision of this Separation Agreement will materially and irreparably harm the other party, that money damages will accordingly not be an adequate remedy for such breach and that the non- defaulting party, in its sole discretion and in addition to its rights under this Separation Agreement and any other remedies it may have at law or in equity, may apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any breach of the provisions of this Separation Agreement. 9.15 PERFORMANCE. Each of the parties hereto shall use commercially reasonable efforts to cause to be performed all actions, agreements and obligations set forth herein to be performed by any Affiliate of such party. 9.16 REFERENCES; CONSTRUCTION. The table of contents and the section and other headings and subheadings contained in this Separation Agreement and the Exhibits hereto are solely for the purpose of reference, are not part of the agreement of the parties hereto, and shall not in any way affect the meaning or interpretation of this Separation Agreement. All references to days or months shall be deemed references to calendar days or months. All references to "$" shall be deemed references to United States dollars. Unless the context otherwise requires, any reference to a "Section" or "Exhibit" shall be deemed to refer to a section of this Separation Agreement or an exhibit to this Separation Agreement. The words "hereof," "herein" and "hereunder" and words of 47 similar import referring to this Separation Agreement refer to this Separation Agreement as a whole and not to any particular provision of this Separation Agreement. Whenever the words "include," "includes" or "including" are used in this Separation Agreement, unless otherwise specifically provided, they shall be deemed to be followed by the words "without limitation." 48 IN WITNESS WHEREOF, the parties hereto have caused this Separation Agreement to be duly executed and delivered as of the date and year first written above. ELECTRONIC DATA SYSTEMS CORPORATION By:_________________________________ Name:_________________________ Title:________________________ GENERAL MOTORS CORPORATION By:_________________________________ Name:_________________________ Title:________________________ 49 EXHIBIT A TRANSFER AGREEMENT DATED the ____ day of ____________, 1996 BETWEEN: GENERAL MOTORS OF CANADA LIMITED (hereinafter "GM") - and - E.D.S. OF CANADA, LTD. (hereinafter "EDS") WHEREAS GM maintains the General Motors Canada Retirement Program for Salaried Employees (hereinafter the "GM Canada Plan"); and WHEREAS some employees of EDS are participating in the GM Canadian Plan; and WHEREAS pursuant to a Separation Agreement dated ____________________ between Electronic Data Systems Corporation and General Motors Corporation (the "Separation Agreement") in connection with the split-off of EDS from GM, GM and EDS have agreed to enter into an agreement whereby EDS will establish a successor pension plan which will recognize the benefits and service which eligible members have accrued under the GM Canada Plan to the Effective Time and GM will arrange to transfer assets to that successor plan in respect of the transferred liabilities; IN CONSIDERATION OF THE MUTUAL COVENANTS HEREIN THE PARTIES HERETO AGREE AS FOLLOWS: 1. DEFINITIONS. 1.1 "EDS ACTUARY" means the actuary or firm of actuaries appointed by EDS for the purposes of the EDS Canada Plan. This actuary shall be (or the firm of actuaries shall include) a Fellow of the Canadian Institute of Actuaries. 1.2 "EDS CANADA PLAN" means the plan of EDS described in Section 2 of this Agreement. 1.3 "EFFECTIVE TIME" means the Effective Time as defined in the Separation Agreement. A-1 1.4 "GM ACTUARY" means the actuary or firm of actuaries appointed by GM for the purposes of the GM Canada Plan. This actuary shall be (or the firm of actuaries shall include) a Fellow of the Canadian Institute of Actuaries. 1.5 "GM CANADA PLAN CREDITED SERVICE" of a Transferring Member means the years and fractions of years prior to the Effective Time which are recognized as Credited Service (Contributory Credited Service and Non- Contributory Credited Service as applicable) of the Transferring Member under the terms of the GM Canada Plan. 1.6 "GRANTED SERVICE" means service credited pursuant to Section 6.01 of this Agreement. 1.7 "TRANSFER AMOUNT" means the amount determined pursuant to Section 4 of this Agreement to be transferred in cash or (if agreed to by GM and EDS) assets in kind or in some combination thereof from the pension fund of the GM Canada Plan to the pension fund of the EDS Canada Plan in accordance with Section 5 hereof. 1.8 "TRANSFER DATE" means the date that the transfer of the Transfer Amount contemplated by this Agreement occurs after approval by relevant authorities as set out in paragraph 5 of this Agreement. 1.9 "TRANSFERRING MEMBER" means a person who is employed by EDS, Electronic Data Systems Corporation, or a subsidiary thereof and participating in the GM Canada Plan on the day preceding the Effective Time, who becomes a member of the EDS Canada Plan as of the Effective Time, and who has not received a return of member contributions or a lump sum transfer, and who is not receiving periodic payment of a pension from the GM Canada Plan in respect of GM Canada Plan Credited Service. 2. SUCCESSOR PLAN. EDS shall adopt a pension plan (or amend an existing plan) to provide pension benefits for the Transferring Members and shall register such plan (or amendment) with the appropriate regulatory authorities. This successor plan shall contain provisions regarding service prior to the Effective Time which provide benefits that are identical to the relevant provisions of the GM Canada Plan in effect immediately prior to the Effective Time (other than plant closure and permanent layoff benefits, which, subject to regulatory approval obtained by EDS, need not be included in the EDS Canada Plan). The EDS Canada Plan shall remain in effect, with identifical benefits to those of the GM Canada Plan in effect immediately prior to the Effective Time (other than plant closure and permanent layoff benefits if EDS obtains regulatory approval with respect to the exclusion of such benefits), for a minimum of two years following the Effective Time. The Transferring Members shall cease accruing benefits under the GM Canada Plan as of the Effective Time. A-2 3. TRANSFER REPORT. The GM Actuary shall calculate the Transfer Amount pursuant to Section 4 of this Agreement and prepare a draft transfer report. The draft transfer report shall contain the information required by Policy Statement No. 2 "Transfer of Assets Resulting from Sale of Business" as issued by the Pension Commission of Ontario on July 28, 1988 (hereinafter the "Policy Statement"). GM shall deliver the draft transfer report to EDS for review and approval by the EDS Actuary. Such approval shall not be unreasonably withheld. Once the EDS Actuary has approved the draft transfer report, the GM Actuary shall finalize the report and file it with the Ontario Superintendent of Pensions (the "Superintendent"), along with a request for the Superintendent's approval to transfer assets pursuant to the terms of this Agreement. 4. DETERMINATION OF TRANSFER AMOUNT. The Transfer Amount shall be determined as of the Effective Time in respect of the benefits which Transferring Members have accrued under the GM Canada Plan based on their earnings and GM Canada Plan Credited Service to the Effective Time (as recorded by GM) and shall be equal to the lesser of: (a) the "solvency liabilities" (as that term is defined in section 1 of Regulation 909 under the Pension Benefits Act, R.S.O. 1990, Chapter P.8 (the "PBA") and excluding "plant closure benefits" and "permanent layoff benefits" as permitted where an employer makes an election under section 5(18) of the Regulation); (b) the "asset transfer value" (as that term is defined in the Policy Statement); and (c) the "going concern liabilities" (as that term is defined in section 1 of Regulation 909 under the PBA); in respect of the Transferring Members' benefits. The GM Actuary shall calculate these liabilities and values using the methods and assumptions specified in the attached Schedule A. Notwithstanding the preceding paragraphs of this Section, if the Superintendent will not approve the transfer unless the EDS Canada Plan receives an amount greater than the Transfer Amount determined pursuant to the preceding paragraphs of this Section, then EDS shall pay into the EDS Canada Plan the amount of excess (the "Excess"), on such terms as are acceptable to the Superintendent in order for the Superintendent to approve the transfer of the Transfer Amount into the EDS Canada Plan in conjunction with the contribution of the Excess by EDS. EDS shall, at is discretion, be entitled to request the Superintendent to approve a lower Excess contribution, and, if approved by the Superintendent, such lower excess amount shall be contributed by EDS. A-3 5. TRANSFER OF ASSETS. GM shall arrange to have the Transfer Amount (adjusted as set out below) paid by the custodian of the GM Canada Plan pension fund to the custodian of the pension fund of the EDS Canada Plan within sixty days of receiving approval for the transfer from the Superintendent. Such amount shall be paid by cheque, by bank draft, by assets in kind or by some combination thereof (as agreed to by GM and EDS). The Transfer Amount as determined under Section 4 of this Agreement shall be adjusted forward to the Transfer Date as follows: 5.1 The Transfer Amount calculated pursuant to Section 4 shall be credited with: (a) the rate of return earned by the pension fund of the GM Canada Plan for the period from the Effective Time to the end of the month preceding the Transfer Date, determined net of general plan and fund administration expenses attributable to all members allocated on a pro-rata basis as a percentage of total assets; plus (b) interest at the rate given on thirty day Government of Canada T- bills from the first day of the month containing the Transfer Date to the Transfer Date. 5.2 The Transfer Amount calculated pursuant to Section 5.01 shall be reduced by the amount of any benefits paid from the GM Canada Plan to or in respect of Transferring Members after the Effective Time and prior to the Transfer Date (adjusted to reflect the applicable net rate of returns and interest determined under Section 5.01 above). 6. TRANSFER OF BENEFITS. EDS shall cause the EDS Canada Plan to grant past service benefits to Transferring Members on the basis described below: 6.1 Each Transferring Member shall be granted "pensionable service" under the terms of the EDS Canada Plan for service prior to the Effective Time equal to the Transferring Member's GM Canada Plan Credited Service. 6.2 Each Transferring Member's period of membership under the EDS Canada Plan shall be deemed to include the period of participation recognized in respect of the Transferring Member under the terms of the GM Canada Plan as of the day prior to the Effective Time. 6.3 Each Transferring Member shall be credited under the EDS Canada Plan with the total of the Transferring Member's required contributions plus interest as of the Effective Time, as reported by GM pursuant to Section 9.01 of this Agreement. 6.4 The record of earnings under the EDS Canada Plan for each Transferring Member shall be deemed to include the record of earnings reported in respect of the Transferring Member by GM pursuant to Section 9.01 of this Agreement. A-4 6.5 The benefits of each Transferring Member in respect of Granted Service shall not be less than the benefits which the Transferring Member would have received for such service under the terms of the GM Canada Plan as it existed at the Effective Time, determined after taking account of the Transferring Member's earnings and participation in the EDS Canada Plan to the date that is the earlier of (1) two years following the Effective Time, or (2) the date the Transferring Member terminates participation in the EDS Canada Plan. In the event an amendment to the EDS Canada Plan results in an actuarial surplus attributable to the Transfer Amount and earnings thereon, such surplus shall be used solely for the benefit of Transferring Members, and shall not (i) be applied against employer contribution obligations (attributable to employees other than Transferring Members) under the EDS Canada Plan or a successor plan or (ii) be used to create a contribution holiday for the EDS Canada Plan or a successor plan. 7. ASSUMPTION OF LIABILITIES. When the custodian of the pension fund for the EDS Canada Plan receives the Transfer Amount as adjusted pursuant to Section 5 of this Agreement the EDS Canada Plan shall grant the benefits described in Section 6 of this Agreement as at the Effective Time. Upon the completion of such transfer, the benefits of the Transferred Members in respect of the service credited under the EDS Canada Plan pursuant to Section 6.01 shall be determined solely in accordance with the terms of the EDS Canada Plan as if the Transferring Members had been members of the EDS Canada Plan during such period of service and the GM Canada Plan shall be relieved of any further obligation to the Transferring members. 8. STATEMENT OF BENEFITS. Within one year of the Transfer Date, EDS shall provide each Transferring Member with a statement regarding the Transferring Member's benefits, rights and obligations granted by the EDS Canada Plan pursuant to Section 6 of this Agreement. 9. COOPERATION BETWEEN THE PARTIES. EDS and GM shall cooperate fully and take the steps necessary to complete the transaction contemplated by this Agreement. Without limiting the generality of the foregoing: 9.1 GM shall arrange to provide EDS with such data and records regarding the Transferring Members as EDS (and the EDS Actuary) may require to: (a) verify the draft transfer report; (b) establish a record of earnings and service for each Transferring Member; and (c) establish a record of required contributions plus interest for each Transferring Member; plus such other data and records as EDS may reasonably require to implement this Agreement. A-5 9.2 EDS shall arrange to distribute to the Transferring Members a notice prepared by GM to satisfy the requirements of the Policy Statement. 10. THIRD PARTY RIGHTS. Nothing in this Agreement shall give any third party, including, but not limited to, any employee of GM, EDS, and any participant or beneficiary in the GM Canada Plan or the EDS Canada Plan, any right or claim to any payment, except to the extent of benefits provided under a plan sponsored by GM or EDS, or any right or claim to continued employment with GM or EDS. GM and EDS expressly reserve the right to terminate any of their employees. 11. GOVERNING LAW. This Agreement shall be governed by the laws of the Province of Ontario and the laws of Canada applicable therein. IN WITNESS WHEREOF the parties hereto execute this Agreement as of the date indicated above. GENERAL MOTORS OF CANADA LIMITED ___________________________________ ___________________________________ E.D.S. OF CANADA, LTD ___________________________________ ___________________________________ A-6 SCHEDULE A GENERAL MOTORS CANADIAN RETIREMENT PROGRAM FOR SALARIED EMPLOYEES ACTUARIAL BASIS - GOING CONCERN GOING CONCERN ACTUARIAL ASSUMPTIONS The following assumptions will be used in conducting the going concern funding valuation at the Effective Time. Economic Assumptions - -------------------- Investment Yield/Discount Rate - ------------------------------ An underlying long-term investment yield rate of 7% per annum net after payment of investment and routine administration expenses will be used. This rate was adjusted for current conditions in effect at the valuation date by assuming a higher rate to be applicable for the period between the valuation date and November 30, 2006. For this valuation at the Effective Time, the initial yield rate was assumed to be 9%. These rates will be used to discount the expected benefit payments to determine the actuarial liabilities. Expenses - -------- Costs of administering the Plan in excess of the investment and routine administration expenses are assumed to be paid directly by the Employer as incurred, and no provision was made for these. Salary Increase - --------------- A long term salary increase assumption of 5% per annum will be assumed. Employee Contributions - ---------------------- Employee contributions will be assumed to be credited with interest at a rate of 8% per annum. Year's Maximum Pensionable Earnings (YMPE) - ------------------------------------------ The YMPE was projected to increase by 5% per annum. The 1996 YMPE of $35,400 was used as a starting point for the projected values. Maximum Pension - --------------- A-7 The current dollar limit on lifetime pensions under the Income Tax Act of $1,722.22 applicable to each year of service (with a 35-year cap placed on pre- January 1, 1992 service) will be assumed to remain unchanged until 2004 and to increase by 5% per annum thereafter. Inflation and Future Benefit Increases - -------------------------------------- The benefits reflected in the going concern valuation will be those in effect at the valuation date. No further benefit increases are provided under the plan beyond the Effective Time. Demographic Assumptions - ----------------------- Retirement - ---------- Under the Plan, different levels of benefits are available on retirement depending upon the member's age and service and type of retirement. To reflect these differences, we adopted retirement assumptions in accordance with the following table. A-8
AGE RETIREMENT RATES PER 1,000 MEMBERS - ------------------------------------------ Voluntary Early Attained Retirement Other Early Age With 30 Years Retirement* - ------------------------------------------ 46 333.333 47 38.462 48 95.238 49 91.603 50 70.381 51 85.627 52 72.072 53 17.391 54 76.555 55 187.990 97.854 56 183.544 62.632 57 233.962 37.391 58 244.138 82.569 59 157.676 92.784 60 351.020 218.905 61 389.474 138.889 62 409.091 285.714 63 342.857 250.000 64 470.588 390.244 65 1,000.000 1,000.000 - ----------------------------------------
* All other early retirements prior to age 60 are assumed to be mutually satisfactory early retirements. Layoffs (potential retirements) were assumed to retire immediately or at age 55 if later. Terminated vested members were assumed to retire at age 65. Termination Rates - ----------------- Moderate rates of termination of employment prior to death or retirement were used. Sample values are given below. Mortality - --------- A-9 Mortality rates for non-disabled lives will be assumed to be equal to rates from the 1983 Group Annuity Mortality Table with margins added for males and females. Sample rates of mortality are given below. Disability - ---------- Disability incidence rates were based on 150% of the rates shown for Class 1 in the Wyatt 1985 Disability Study. Sample values are given below. Mortality rates after disability will be assumed to be equal to rates from the 1983 Group Annuity Mortality Table with margins for males and females.
---------------------------------------------------------------- Mortality, Disability Incidence and Termination Rates Per 1,000 Members --------------------------------------------------------- Mortality ----------------------- Disability Age Male Female Incidence Termination - ------------------------------------------------------------------ 20 0.377 0.189 0.450 99.176 25 0.464 0.253 0.645 65.947 30 0.607 0.342 0.960 45.949 35 0.860 0.476 1.470 32.418 40 1.238 0.665 2.370 18.593 45 2.183 1.010 3.885 11.066 50 3.909 1.647 6.720 2.924 55 6.131 2.541 12.675 60 9.158 4.241 18.060 65 15.592 7.064 70 27.530 12.385 75 44.597 23.992 80 74.070 42.945 85 114.836 69.918 - -----------------------------------------------------------------
Survivor Option/Automatic Survivor Benefit - ------------------------------------------ The cost of providing the survivor option/automatic survivor benefit will be calculated assuming 90% of the members would be eligible for the benefits at retirement, 88.89% of the eligible members would not reject the automatic survivor benefit and husbands would be three years older than their wives. GOING CONCERN ACTUARIAL METHODS A-10 Liabilities - ----------- The going concern valuation of the liabilities will be conducted using the Projected Unit Credit actuarial cost method. This method is designed to accumulate assets systematically to provide security for the benefits provided under the terms of the plan in respect of service that has already been rendered, without further recourse to the assets of the plan sponsor. Under this method, for each member, the normal actuarial cost rate for benefits for one year of service is determined as the present value of all benefits accrued to the projected date of retirement or earlier termination divided by the projected total service of the member at retirement or such earlier termination of service. The accrual actuarial liabilities for active members are determined as the normal actuarial costs rate multiplied by the credited service of the member at the date of the valuation. For inactive members, the accrued actuarial liabilities are determined as the actuarial present value of benefits accrued in respect of service up to the date of valuation. The accrued actuarial liabilities are then compared with the actuarial value of the assets in the pension fund to determine the funded position of the plan at the valuation date. If any unfunded actuarial liability exists, it may be funded in one sum or over a period of years, subject to any legislative restrictions. Benefits Valued - --------------- The benefits valued will be those in effect at the Effective Time. We assume that the supplementary benefits available to members on disability retirement would be fully offset by disability pensions payable under the Canada/Quebec Pension Plan. A-11 GENERAL MOTORS CANADIAN RETIREMENT PROGRAM FOR SALARIED EMPLOYEES ACTUARIAL BASIS - SOLVENCY SOLVENCY VALUATION ACTUARIAL ASSUMPTIONS The following assumptions will be used to determine the funded position on a solvency basis as at the Effective Time. Economic Assumptions - -------------------- Interest Rates - -------------- The interest rate assumption used will be in accordance with the September, 1993 Canadian Institute of Actuaries Transfer Value Recommendations and will be those rates in effect on the Effective Time. Expenses - -------- All expenses associated with terminating the Plan will be assumed to be payable by the Employer. No provision was made for any further expenses. Salary Increase - --------------- No allowance will be made for salary increases beyond the valuation date. Year's Maximum Pensionable Earnings (YMPE) - ------------------------------------------ No allowance will be made for increases in the YMPE beyond the valuation date. Maximum Pension - --------------- The current dollar limit on lifetime pensions under the Income Tax Act of $1,722.22 applicable to each year of service (with a 35-year cap placed on January 1, 1992 service) is assumed. Demographic Assumptions - ----------------------- Disability - ---------- No allowance will be made for the possibility of becoming disabled after the valuation date. A-12 Termination - ----------- All employees will be assumed to terminate employment at the valuation date with full vesting of accrued benefits. Survivor Option/Automatic Survivor Benefit - ------------------------------------------ It is assumed that 90% of the employee group were males and 10% were females. It is assumed that 82% of employees (85% of males and 55% of females) would not reject the automatic survivor benefit election at retirement and that on average an employee is 29 months older than a non-employee spouse. Mortality - --------- Mortality rates after retirement will be taken from the 1983 Group Annuity Mortality Table with margins. A unisex table was derived by using 90% of the male rates and 10% of the female rates. These rates were then applied to all plan members regardless of sex. Sample values are given below.
Mortality Rates Age Per 1,000 Members - ------------------------ 20 0.361 25 0.439 30 0.583 35 0.822 40 1.182 45 2.027 50 3.684 55 5.771 60 8.668 65 14.737 70 26.015 75 42.539 80 70.958 85 110.348 - ------------------------
A-13 SOLVENCY VALUATION ACTUARIAL METHODS Liabilities - ----------- The traditional unit credit actuarial cost method will be used. Under this method, for each member, the accrued actuarial liabilities are determined as the present value of all benefits accrued to the valuation date. Benefits Valued - --------------- Under the Plan, different levels of benefits are available on retirement depending on the member's age and service and type of retirement. For each employee, we determined when, if ever, the employee would be eligible for retirement under each of the retirement provisions and the amounts of benefits payable based on the employee's credited service at the valuation date. Employees with age plus Plan membership totaling at least 50 years were assumed to grow into the benefits provided under the Plan for layoffs due to remote plan closure. Employees with at least 10 years of service and age plus continuous employment or plan membership totaling at least 55 years will be also assumed to grow into a pro-rata special allowance if they would have completed 30 years of service prior to age 60. In valuing the special allowance, we assumed no offset for earnings from subsequent employment. For each member, we determine the commuted value at the valuation date of all benefits payable under each of the retirement possibilities and established the solvency liability for such employee to be the commuted value for the retirement possibility which produces the largest commuted value, but excluding the additional liabilities for benefits in respect of future plant closures and future permanent layoffs and for special allowances for employees who had not completed 30 years of service at the valuation date. Basic Benefit Rate and Special Allowance - ---------------------------------------- For members still in service, the Basic Benefit Rate used in calculating the Minimum Basic Benefit and Non-Contributory Pension and the monthly special allowance rate will be the rates in effect at the valuation date (i.e., $44.30 and $2,260 respectively, at the Effective Time). Inflation and Future Benefit Increases - -------------------------------------- The benefits reflected in the valuation will be those in effect at the valuation date. No allowance was made for subsequent benefit increases provided under the Plan beyond the valuation date. Pre-Retirement Death Benefits - ----------------------------- A-14 We make allowance for the pre-retirement death benefit related to the basic lifetime pension by assuming no discount for mortality prior to retirement when determining the commuted values of these benefits. A-15 EXHIBIT F PROFESSIONAL ADVISOR FEES TO BE PAID BY EDS Lehman Brothers Inc. Morgan Stanley & Co. Incorporated KPMG Peat Marwick LLP (with respect to any services provided to EDS or any EDS Affiliate and not to include services provided to GM or any GM Affiliate) Baker & Botts, L.L.P. Prickett, Jones, Elliott, Kristol & Schnee Hughes & Luce, L.L.P. F-1 EXHIBIT G PROFESSIONAL ADVISOR FEES TO BE PAID BY GM Merrill Lynch & Co. Deloitte & Touche LLP Kirkland & Ellis Richards, Layton & Finger Milbank, Tweed, Hadley & McCloy Weil, Gotshal & Manges McKinsey & Co., Inc. KPMG Peat Marwick LLP (with respect to any services provided to GM or any GM Affiliate and not to include services provided to EDS or any EDS Affiliate) Groom & Nordberg G-1 EXHIBIT 2(C) AMENDED AND RESTATED AGREEMENT FOR THE ALLOCATION OF UNITED STATES FEDERAL, STATE AND LOCAL INCOME TAXES This Amended and Restated Agreement for the Allocation of United States Federal, State and Local Income Taxes (the "Agreement") is entered into by and between General Motors Corporation, a Delaware corporation ("GM") and Electronic Data Systems Corporation, a Delaware corporation ("EDS") for the purpose of amending and restating the Agreement for the Allocation of United States Federal Income Taxes that was entered into by and between GM and Electronic Data Systems Corporation, a Texas corporation (the predecessor to EDS, which is referred to as "EDS Texas") effective as of December 31, 1984 (the "Federal Agreement"), and for the purpose of amending and restating the Agreement for the Allocation of United States State and Local Income Taxes that was entered into by and between GM and EDS Texas effective as of December 31, 1984 (the "State and Local Agreement"). WITNESSETH: Whereas, GM and EDS intend that capitalized terms shall have the meaning set forth in Section 1.04 of this Agreement; Whereas, GM is the common parent corporation of the GM Group within the meaning of Section 1504 of the Code, which includes the EDS Group; Whereas, the GM Group files a consolidated Federal income tax return; Whereas, the GM Group files Consolidated State or Local Income Tax Returns in various jurisdictions, Whereas, GM and EDS entered into the Federal Agreement to provide a fair and equitable method for the allocation of the consolidated Federal income tax liability to each of them; Whereas, GM and EDS entered into the State and Local Agreement to provide a fair and equitable method for the allocation of State Tax Liabilities to each of them; Whereas, the effective date of this Agreement is intended to be concurrent with the Split-Off; Whereas, except as otherwise provided, GM and EDS agree and acknowledge that the Split-Off has no effect on the relationship between them for any of the Consolidated Tax Periods, and GM and EDS intend to restate the Federal Agreement and to restate the State and Local Agreement to confirm and clarify their understandings with respect to matters relating to the determination, allocation and payment of Federal income tax liability, and state and local income tax liabilities with respect to all Consolidated Tax Periods; and Whereas, GM and EDS intend to amend the Federal Agreement and to amend the State and Local Agreement to provide for, among other things, (i) the allocation between GM and EDS of tax attributes available to be carried forward to the Separate Return Tax Periods, (ii) the rights, duties and responsibilities of the parties in connection with audits, protests, appeals, litigation and other proceedings with respect to the Consolidated Tax Periods, (iii) the treatment of any carryback item from a Separate Return Tax Period to a Consolidated Tax Period, and (iv) the relationship of the parties as it relates to income tax matters from the effective date of the Split-Off until the date of the Final Determination of the last of the income tax liabilities to be so finally determined. Now, Therefore, in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, GM and EDS agree as follows: Section l: Definitions and General Provisions. 1.01 Recitals Incorporated. The above recitals are incorporated herein by reference and made a part of this Agreement. 1 1.02 Effective Date. This Agreement shall be effective on the effective date of the Split-Off; provided, however, that if this Agreement has not become effective prior to September 15, 1996, it shall not become effective thereafter in the absence of the written consent of both parties to extend the effective date. This Agreement shall apply to Consolidated Tax Periods as specifically set forth herein, or where this Agreement addresses issues not contemplated by the Federal Agreement or the State and Local Agreement. This Agreement, which incorporates the Federal Agreement and the State and Local Agreement, shall continue in full force and effect until the Final Determination of the tax liability has been made for each tax jurisdiction for all Consolidated Tax Periods. 1.03 Application of the Code. Unless otherwise indicated, the words and concepts used in this Agreement shall be given the same definitions and meanings ascribed to them by the Code, the Regulations, State Law or State Regulations. Any alteration, modification, addition, deletion, or other change in the applicable provisions of the Code, the Regulations, State Law or State Regulations shall automatically be applicable to this Agreement mutatis mutandis. Unless otherwise indicated, all references herein to a particular section of the Code, the Regulations, State Law or State Regulations shall include any successor provision designated by a different or additional section reference. 1.04 Definitions. For purposes of this Agreement, the terms set forth below shall have the following meanings: (a) "Actual Separate EDS Group Tax Liability" means the Federal income tax liability of the EDS Group determined in the same manner as the Separate EDS Group tax liability, except that the items of income, gain, deduction, loss and credit of the EDS Group as reported in the GM Group consolidated Federal income tax returns as actually filed or as adjusted pursuant to a Final Determination, are taken into account; provided however, that applicable limitations on deductions or credits shall be determined on the basis of the actual items of income, gain, deduction or credit of the EDS Group without regard to such items of other members of the GM Group. (b) "Agreement" means this Amended and Restated Agreement for the Allocation of United States Federal, State and Local Income Taxes. (c) "Business Day" means any day other than a Saturday, a Sunday, or a day on which banking institutions located in the State of Michigan are authorized or obligated by law or executive order to close. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Consolidated Return Item" means an item of income, gain, deduction or credit that is computed or subject to a limitation only on a Federal tax consolidated basis, including but not limited to, charitable contributions, capital losses, foreign tax credit, research and experimentation credit and Code Section 1231 gains and losses. (f) "Consolidated State or Local Income Tax Returns" means consolidated, unitary, or combined state or local income, franchise, single business, gross receipts, or other state or local tax returns, based or measured in whole or in part by reference to gross receipts, gross income, or net income, and means consolidated, unitary or combined capital or net worth tax returns. Tax returns with respect to telecommunications, gross receipts transactional taxes, and sales and use taxes, or other similar types of transactional taxes shall not be considered "Consolidated State or Local Income Tax Returns" for purposes of this Agreement. (g) "Consolidated Tax Period" means any tax period of the GM Group ending before, with, or which includes the effective date of the Split-Off during which any member of the EDS Group was a member of the GM Group. (h) "CPR Rules" means the Rules for Non-Administered Arbitration of Business Disputes promulgated by the Center for Public Resources attached hereto as Exhibit A. (i) "Dispute Notice" means written notice of a dispute between GM and EDS subject to arbitration under Section 6.05 of this Agreement, which shall set forth generally the nature of the dispute. 2 (j) "EDS" means Electronic Data Systems Corporation, a Delaware corporation, and all predecessor and successor corporations, including without limitation EDS Texas. (k) "EDS Group" means EDS (and all predecessor and successor corporations, including without limitation EDS Texas) and all corporations which from time to time would be entitled to join with EDS in filing a consolidated Federal, or a Consolidated State or Local Income Tax Return with EDS as the common parent of such group if EDS were not a member of the GM Group. (l) "Federal Agreement" means that certain Agreement for the Allocation of United States Federal Income Taxes that was entered into by and between GM and EDS Texas effective as of December 31, 1984. (m) "Final Determination" has the same meaning as the definition of "determination" set forth in Section 1313(a) of the Code or similar provisions of State Law. (n) "GM" means General Motors Corporation, a Delaware corporation. (o) "GM Group" means GM and all corporations which from time to time join with GM in filing a consolidated Federal, or a Consolidated State or Local Income Tax Return with GM as the common parent of such group. (p) "GM Group Tax Liability" means the consolidated Federal income tax liability, or the State Tax Liability, of the GM Group, determined as of the end of the applicable Consolidated Tax Period, determined in accordance with Section 1.1502-1, et seq. of the Regulations or in accordance with State Law and State Regulations. (q) "IRS" means the Internal Revenue Service. (r) "Negotiation Period" means the period of twenty (20) Business Days following the initial meeting of the representatives of GM and EDS following the receipt of a Dispute Notice. (s) "Regulations" means the regulations promulgated under the Code, in effect from time to time. (t) "Separate EDS Group Tax Liability" means the hypothetical consolidated Federal income tax liability or the hypothetical State Tax Liability, determined as of the end of the applicable Consolidated Tax Period in accordance with Section 1.1502-1, et seq. of the Regulations or in accordance with State Law and State Regulations as if the EDS Group were a separate affiliated group of corporations filing a consolidated Federal income tax return, or a Consolidated State or Local Income Tax Return, including any elections which have been or could be made by EDS pursuant to the Code, Regulations, State Law or State Regulations with the following modifications: (i) Any item of income, loss, expense or credit resulting from an election by GM under Section 338 of the Code with respect to GM's acquisition of EDS in 1984 shall not be taken into account. (ii) Carryovers of losses or credits from the Separate EDS Group Tax Liability for taxable years ending on or after October 18, 1984, shall be taken into account, for purposes of computing Separate EDS Group Tax Liability, in accordance with the applicable provisions of the Code, the Regulations, State Law and State Regulations, regardless of whether such carryovers were taken into account in computing the GM Group Tax Liability for some preceding taxable year. (u) "Separate Return Tax Period" means any tax period of EDS or any member of the EDS Group not included in a Consolidated Tax Period, or any tax period of the GM Group subsequent to the final Consolidated Tax Period. (v) "Split-Off" means the anticipated transaction pursuant to which the EDS Group will be split-off from the GM Group in a tax-free transaction under Section 355 of the Code. (w) "State and Local Agreement" means that certain Agreement for the Allocation of United States State and Local Income Taxes that was entered into by and between GM and EDS Texas effective December 31, 1984. (x) "State Law" means provisions of state or local law that are similar to provisions of the Code, determined on a jurisdiction by jurisdiction basis, as amended from time to time. 3 (y) "State Regulations" means regulations promulgated under State Law, in effect from time to time. (z) "State Tax Liability" means the liability in connection with consolidated, unitary, or combined state or local income, franchise, single business, gross receipts, or other state or local tax returns, based or measured in whole or in part by reference to gross receipts, gross income, or net income, and means the liability in connection with consolidated, unitary or combined capital or net worth taxes. Liability for telecommunications, gross receipts transactional taxes, and sales and use taxes, or other similar types of transactional taxes shall not be considered a "State Tax Liability" for purposes of this Agreement. Section 2: Agreement To File Consolidated Returns and Pay Tax 2.01 Agreement To File. As long as EDS is a member of the GM Group, GM and EDS (and all members of the EDS Group) agree to file consolidated Federal income tax returns, and Consolidated State or Local Income Tax Returns in the United States, wherever required by local taxing authorities or wherever the option is elected by GM and agree to execute such documents and take such action as is necessary or appropriate in connection therewith. 2.02 Elections. With respect to all Consolidated Tax Periods, all elections that are available to the GM Group under the Regulations relating to the filing of consolidated Federal income tax returns or Consolidated State or Local Income Tax Returns shall be made by GM in its sole discretion. All tax return filing positions for all Consolidated Tax Periods shall be made by GM in its sole discretion. 2.03 Payment of Tax. For each Consolidated Tax Period GM shall pay to the IRS or to the state or local jurisdiction, or to such other payee as may be required by the Code or by State Law, the GM Group Tax Liability as shown on the consolidated Federal income tax returns, or on the Consolidated State or Local Income Tax Return filed with the IRS or with the state or local jurisdiction. Section 3: Tax Payments and Allocation of Tax Attributes 3.01 Estimated Tax Payments. (a) General. Not less than fifteen (15) Business Days prior to the date on which GM is required to make payments of estimated tax (as defined in Section 6154 of the Code and as defined in applicable State Law) on behalf of the GM Group, for any quarter of any Consolidated Tax Period, EDS shall submit to GM a calculation of the separate EDS Group estimated tax, determined on the basis of the estimated Separate EDS Group Tax Liability. The separate EDS Group estimated tax calculations for the final quarter of the final Consolidated Tax Period shall be equal to the estimated Separate EDS Group Tax Liability for the entire final Consolidated Tax Period reduced by the estimated tax payments previously made by EDS with respect to the relevant tax liability for the final Consolidated Tax Period. The amount of estimated Federal, state (other than Michigan Single Business Tax) or local tax, if any, shown in such calculation shall be paid by EDS to GM on or before the due date of GM's payment of the estimated consolidated Federal income taxes. The amount of estimated Michigan Single Business Tax, if any, shown in such calculation shall be paid by EDS to GM on or before the due date of GM's payment of estimated Michigan Single Business Tax. (b) Underpayments. If the GM Group Tax Liability is increased under Section 6655 of the Code or a similar provision of State Law because of an underpayment of estimated tax, EDS shall pay to GM, on the due date thereof, such additional tax, if any, which would have been imposed on the EDS Group had that Group paid the calculated separate EDS Group estimated tax and incurred the Separate EDS Group Tax Liability. If the GM Group Tax Liability is not increased under Section 6655 or a similar provision of State Law, but if an additional tax would have been imposed on the EDS Group had that Group paid the calculated separate EDS Group estimated tax and incurred the Separate EDS Group Tax Liability, EDS shall pay to GM such additional tax on the date it would have been due. 3.02 Payment of Separate EDS Group Tax Liability. (a) Consolidated Returns. (i) General. Not later than the due date (including extensions) for filing the GM Group consolidated Federal income tax return, or Consolidated State or Local Income Tax Returns for any Consolidated Tax 4 Period, EDS shall pay to GM or GM shall pay to EDS as the circumstances warrant, the difference between the Separate EDS Group Tax Liability and the estimated tax payments previously made by EDS with respect to the relevant tax liability. (ii) Final Consolidated Tax Period. Notwithstanding anything in this Agreement to the contrary, the Separate EDS Group Tax Liability for the Consolidated Tax Period that EDS ceases to be a member of the GM Group shall be determined pursuant to Reg. (S)1.1502-76 (and similar provisions of State Law or State Regulations) by including only that portion of the taxable year ending on the date EDS ceases to be a member of the GM Group, based on a closing of the books for income tax purposes and, immediately before the Split-Off, items of income, gain, loss, deduction, and credit will be taken into account (to the extent not previously taken into account in the computation of the Separate EDS Group Tax Liability) as required by the applicable intercompany transaction regulations (Reg. (S)(S)1.1502-13 and -14 as in effect before the publication of T.D. 8597, 1995-32 I.R.B. 6, and as currently in effect; (S)1.1502-13 as published by T.D. 8597.). (b) Separate State or Local Income Tax Returns During Consolidated Tax Periods. (i) Computation of Tax Liability. In any taxing jurisdiction in which EDS (or any member of the EDS Group) is required to file (or does file) a separate state or local tax return reflecting its separate state tax liability for a period which includes a Consolidated Tax Period, and the taxing jurisdiction follows, or there is reason to believe that such jurisdiction will follow, the Code Section 338 election made by GM in connection with its acquisition of EDS in 1984, EDS (or the relevant member of the EDS Group) shall claim the benefits of such election in the computation of its separate state tax liability. (ii) Payments to GM. With respect to any period for which EDS' separate state tax liability (or the separate state tax liability of the relevant member of the EDS Group) is required to be computed according to clause (i) above, EDS shall pay to GM the difference, if any, between the EDS separate state tax liability computed without the benefits of the Code Section 338 election and the EDS separate state tax liability computed with the benefits of such election; provided, however, that such payment for the period in which the Split-Off occurs shall reflect only the portion of such period preceding the Split-Off. 3.03 Method of Payment. All payments required by this Agreement shall be made by (i) wire transfer to the appropriate bank account as may from time to time be designated by the parties for such purpose, provided that on the date of such wire transfer notice of the transfer is given to the recipient thereof in accordance Section 8.06 of this Agreement or (ii) any other method agreed to by the parties. All payments due under this Agreement shall be deemed to be paid when available funds are actually received by the payee. 3.04 Setoff. Notwithstanding anything to the contrary in any agreement between EDS and GM, but subject to the following sentence, each party has the right to collect payments under this Agreement that are more than sixty (60) calendar days past due by setoff against payments due to the other party under this Agreement or any other agreement between them. Notwithstanding the preceding sentence, in the event and to the extent that any payment to be made under this Agreement is in dispute between the parties and the disputed matter is subject to the dispute resolution procedure set forth in Section 6.05 of this Agreement, the setoff provision of this Section 3.04 shall not apply to the extent of the disputed amount. 3.05 Interest. If any payment required by this Agreement is not timely made, interest shall be payable on the unpaid amount at a rate per annum equal to the base rate established from time to time by Citibank, N.A., or a comparable financial institution mutually selected by GM and EDS, but in no event to exceed the maximum rate of interest allowed by applicable law. For this purpose, a payment will be deemed to be paid only when available funds are actually received by the payee. 3.06 Allocation of Consolidated Tax Attributes. (a) Federal Reg. Section 1.1502-79 Tax Attributes. If the GM Group has a consolidated net operating loss or a consolidated net capital loss that can be carried to a Separate Return Tax Period, or a consolidated unused investment credit, a consolidated unused foreign tax credit, 5 or a consolidated excess charitable contribution (as such terms are defined in the Regulations) that can be carried to a Separate Return Tax Period the portion, if any, which is attributable to EDS or any member of the EDS Group shall be determined in accordance with Section 1.1502-79 of the Regulations, based upon the computation of the Actual Separate EDS Group Tax Liability for the applicable Consolidated Tax Periods. The portion, if any, of any GM Group consolidated unused foreign tax credit which is attributable to EDS shall be determined separately with respect to each of the items of income listed in Section 904(d) of the Code. (b) Other Federal Tax Attributes. If the GM Group has deductible or creditable consolidated Federal tax attributes (other than adjustments to the basis of certain of EDS' assets resulting from the 1990 and 1992 depreciation method election and the election under (S)338 of the Code by GM with respect to GM's acquisition of EDS in 1984) other than those described in Section 3.06(a) above, including, but not limited to, the minimum tax credit, the research and experimentation credit or other general business credits, that can be carried to a Separate Return Tax Period (the "carryforward attribute"), the portion of the carryforward attribute, if any, attributable to EDS or any member of the EDS Group shall be based upon the relevant tax attribute carryover of the EDS Group determined consistently with the computation of the Separate EDS Group Tax Liability for the final Consolidated Tax Period, which computation shall be done on a basis consistent with past practice. (c) State and Local Tax Attributes. Notwithstanding anything in this Section 3.06 to the contrary, no tax attributes (other than adjustments to the basis of certain of EDS' assets resulting from the 1990 and 1992 depreciation method election and the election under (S)338 of the Code by GM with respect to GM's acquisition of EDS in 1984) arising from Consolidated State or Local Income Tax Returns shall be attributable to EDS, unless under the provisions of applicable State Law or State Regulations such tax attributes are to be attributed to EDS. (d) Calculations. Calculation of the portion of any consolidated tax attribute available to carry forward to a Separate Return Tax Period attributable to EDS or to any member of the EDS Group shall be made by GM in accordance with Sections 3.06(a)-(c) above, and provided to EDS as soon as practicable but not later than a date that permits EDS sufficient time to prepare and to timely file its tax returns for the first Separate Return Tax Period, taking all extensions of time to file tax returns into consideration. (e) Tax Attributes to be Claimed for Separate Return Tax Periods. EDS shall prepare and file all of its income tax returns for all Separate Return Tax Periods taking into account the amount of the tax attributes carried forward from the final Consolidated Tax Period provided to EDS by GM pursuant to Section 3.06(d), or such tax attributes as finally determined. (f) Earnings and Profits. As provided by (S)312(h) of the Code, earnings and profits shall be allocated between GM and EDS under Reg. (S)1.312-10(b). The allocation of earnings and profits shall be determined by GM and shall be provided to EDS as soon as practicable but not later than a date that permits EDS sufficient time to prepare and to timely file its tax returns for the first Separate Return Tax Period, taking all extensions of time to file tax returns into consideration. 3.07 Payments Related to Allocation of Consolidated Tax Attributes. (a) General Provisions. GM and EDS hereby acknowledge that the consolidated tax liabilities and related tax attributes of the GM Group for the Consolidated Tax Periods have been allocated between the GM Group and the EDS Group based upon the Separate EDS Group Tax Liability and payments by the EDS Group to GM with regard to the EDS Group's share of the GM Group Tax Liability for the Consolidated Tax Periods have been and will be made on that basis. Payments required by this Section 3.07 and Section 3.08 are intended to compensate for the difference, if any, between the actual allocation of tax attributes for income tax return filing purposes and the historic economic allocation of consolidated tax liabilities and related tax attributes between the GM Group and the EDS Group. If any consolidated tax attribute attributable to the EDS Group under Section 3.06(a)-(c) as calculated under Section 3.06(d) is greater than the amount of such tax attribute that would have been attributable to the EDS Group determined on the basis of the Separate EDS Group Tax Liability (an "excess tax attribute" of EDS), EDS shall make one or more payments to GM as provided in this Section 3.07. If any consolidated tax attribute attributable 6 to the EDS Group under Section 3.06(a)-(c) as calculated under Section 3.06(d) is less than the amount of such tax attribute that would have been attributable to the EDS Group determined on the basis of the Separate EDS Group Tax Liability (an "excess tax attribute" of GM), GM shall make one or more payments to EDS as provided in this Section 3.07. For the purposes of this Section 3.07 and Section 3.08, the amount of any tax attribute that would have been attributable to the EDS Group if the tax attribute attributable to the EDS Group were determined on the basis of the Separate EDS Group Tax Liability, shall include the amount of such tax attribute that was generated by the EDS Group to the extent that it was not fully utilized during Consolidated Tax Periods for purposes of determining the Separate EDS Group Tax Liability. Notwithstanding anything herein to the contrary, adjustments to the basis of certain of EDS' assets resulting from the 1990 and 1992 depreciation method election and the election under Section 338 of the Code by GM with respect to GM's acquisition of EDS in 1984 shall not be treated as tax attributes or excess tax attributes for which payments are required to be made pursuant to Sections 3.06-3.08 of this Agreement. (b) Amount of Payments. The amount of the payments referred to in Section 3.07(a) above shall be equal to the amount of the tax benefit derived by a party's utilization of its excess tax attribute. The amount of the tax benefit derived shall be equal to the excess of (i) the hypothetical tax liability that would have been reflected on the relevant tax return had the excess tax attribute not been utilized over (ii) the actual tax liability on the tax return on which the excess tax attribute is or has been utilized. (c) Time for Making Payments. Payments pursuant to this Section 3.07 shall be made within ten (10) Business Days after the due date, including extensions of time to file returns, for filing the tax return that reflects the utilization of the excess tax attribute, or if the excess tax attribute already has been utilized as of the effective date of this Agreement, within ten (10) Business Days after GM provides EDS with the calculation pursuant to Section 3.06(d). (d) Verification. GM shall have the right to engage the law firm Fulbright & Jaworski to review all of the tax returns on which of any excess tax attribute could be utilized for all EDS tax years subsequent to the Split-Off until the excess tax attributes are fully utilized, expire, or the parties agree to a single payment under Section 3.08. Any disclosure of EDS information by GM to Fulbright & Jaworski for this purpose shall not constitute a breach of confidentiality under this Agreement. (e) Alternative Payment Arrangements. GM and EDS may, at any time after GM provides EDS with the calculation of the portion of the consolidated tax attributes attributable to EDS pursuant to Section 3.06(d), negotiate a single payment to be made in lieu of the payments contemplated in Section 3.07(b). The parties may consider, among other factors, the time value of the future tax benefits, anticipated future tax rates, and the likelihood that the excess tax attributes will be utilized. If the parties negotiate a single payment, they must also agree upon the manner in which the amount of the payment contemplated by Section 3.08 would be determined. 3.08 Redetermination of Tax Attribute Allocation. If there is a Final Determination that results in any change to or adjustment of the portion of any consolidated tax attribute attributable to EDS or to any member of the EDS Group on any income tax return of the GM Group by the IRS, any court of competent jurisdiction, or by any other taxing authority, then GM shall make a payment to EDS, or EDS shall make a payment to GM as may be necessary to adjust the payments between EDS and GM to reflect the payments that would have been made under Section 3.07 had the adjusted amount of the tax attribute been taken into account in computing the payments due under Section 3.07. Payments due under this Section 3.08 shall be due and payable ten (10) Business Days following the date that one party gives notice to the other party that a payment is due, and such notice shall include a copy of the notice of deficiency or other written communication from a taxing authority describing the Final Determination and, if appropriate or necessary, detailed calculations supporting the adjustment of the portion of the tax attribute attributable to EDS. Section 4: Adjustments of Tax Liabilities. 4.01 Adjustment of GM Group Tax Liability. If any item of income, gain, loss, expense, deduction or credit that enters into the computation of the GM Group Tax Liability is changed or adjusted by the IRS or by a state 7 or locality and such change or adjustment is part of a Final Determination, GM shall make such payments to EDS, or EDS shall make such payments to GM (including interest and penalties imposed on the GM Group (or any member of the GM Group) in connection with the adjustment or change) as may be necessary to adjust the payments between EDS and GM to reflect payments that would have been made under Sections 3.01 and 3.02 of this Agreement had the adjustments as finally determined been taken into account in determining the amount of the payments under Sections 3.01 and 3.02. A payment required under this Section 4.01 shall be due and payable ten (10) calendar days following the date that one party gives notice to the other party that a payment is due. Notice under this Section 4.01 shall include a copy of the notice of deficiency or other written communication from an authority describing the Final Determination and, if appropriate or necessary, detailed calculations supporting the amount due. 4.02 Carryback Items from Separate Return Tax Periods. With respect to carrybacks by EDS of net operating losses, net capital losses, unused tax credits and other deductible or creditable tax attributes to a Consolidated Tax Period from a Separate Return Tax Period which would be permitted under the Code and the Regulations (or State Law or State Regulations) based on the Consolidated Tax Period income tax returns actually filed, and taking into consideration the separate return limitation year rules, whenever permitted to do so by the Code, the Regulations, State Law or State Regulations, EDS shall elect to relinquish any carryback period which would include any Consolidated Tax Period. In cases where EDS cannot relinquish the carryback period, or if the parties otherwise agree, GM shall cooperate with EDS in seeking tax refunds from the appropriate taxing authority, at EDS' expense, and EDS shall be entitled to such refund, including interest paid by the taxing authority in connection with such refund; provided, however, that EDS shall indemnify and hold GM harmless from and against any and all collateral tax consequences resulting from or caused by the carryback of deductible or creditable tax attributes by EDS from a Separate Return Tax Period to a Consolidated Tax Period, including, but not limited to, tax attributes of GM that expire unused (including tax attributes that expire during a tax period subsequent to the tax period during which the EDS tax attribute carried back was generated) and which would have been used but for EDS' carryback. The amount of such indemnity shall be limited to the actual tax benefit to which the GM Group would have been entitled in the absence of the carryback of the deductible or creditable tax attribute of EDS. GM shall only be entitled to indemnification under this Section 4.02 if GM has used its reasonable best efforts to avoid the collateral tax consequence being indemnified. In the event that (i) EDS or a member of the EDS Group has filed a refund claim with a taxing authority for a Consolidated Tax Period as contemplated by this Section 4.02, (ii) the refund claim has been allowed, and (iii) the taxing authority has applied the refund to an amount owed by GM, then GM shall pay EDS the amount of the refund, including the amount of interest that would otherwise have been paid by the taxing authority to EDS or such member of the EDS Group. 4.03 Other Adjustments. (a) If there is any change of or adjustment to any item relating to the computation of payments under this Agreement that are not otherwise provided for herein (such as a correction of a previous erroneous calculation), GM shall make such payments to EDS, or EDS shall make such payments to GM in such manner and at such time as may be necessary or appropriate to reflect the intent of this Agreement. (b) GM and EDS agree that all claims and causes of action that could have been asserted under and pursuant to this Agreement and its predecessors on December 31, 1995, with respect to all Consolidated Tax Periods for which returns were required to be filed on or before such date, had been asserted on or before the date that is forty-five (45) days after the date this Agreement is executed, and may not be asserted thereafter; provided, however, that the preceding clause shall not prohibit the assertion of claims and causes of action resulting from adjustments by taxing authorities. GM shall have the right to inspect the books and records of EDS to substantiate the Separate EDS Group Tax Liability with respect to all Consolidated Tax Periods for which returns were required to be filed on or before December 31, 1995. Claims or causes of action shall be asserted by giving written notice to the party that the claim or cause of action is asserted against and such claim or cause of action shall be deemed to have been asserted on the date that the notice is deemed given pursuant to Section 8.06 of this Agreement. 8 (c) If any tax liabilities, interest or penalties are asserted against EDS or any member of the EDS Group by any taxing authority with respect to GM Mergeco Corporation, a Delaware corporation ("Mergeco"), GM shall be responsible for and shall indemnify, defend and hold harmless EDS and each member of the EDS Group against all such liabilities, interest and penalties (including without limitation any taxes, interest or penalties relating to Mergeco's formation or operations) provided, however, that GM shall not be required to indemnify EDS or the EDS Group under this Section 4.03(c) if EDS fails to satisfy any condition that has a material adverse prejudicial effect on GM's ability to contest the issue, which shall include but not be limited to: (i) EDS or a member of the EDS Group gives GM prompt notice of any action by any taxing authority which may result in any claim by EDS against GM under this Section 4.03(c), but not later than a date that permits GM sufficient time to protest, appeal or litigate the issue, provided, however, that if prompt notice would not result in GM having sufficient time to protest, appeal or litigate the issue, the notice requirements of this clause (i) shall be deemed satisfied if EDS or any member of the EDS Group institutes the protest, appeal, or litigation; (ii) EDS or a member of the EDS Group authorizes GM to protest, appeal and litigate the issue on behalf of EDS or a member of the EDS Group and at GM's expense; and (iii) EDS or a member of the EDS Group executes any authority or power of attorney requested by GM in writing which is necessary or appropriate for GM to protest, appeal or litigate the issue; and (iv) EDS or a member of the EDS Group provides copies of supporting detail or other workpapers or calculations which are requested by GM in writing to support the calculation of items of income, gain, loss, expense, deduction or credit that enters into the calculation of tax liability. (d) Notwithstanding anything to the contrary in this Agreement, other than Section 4.03(c), if a state or local taxing authority asserts tax liabilities, interest or penalties against EDS or the EDS Group with respect to an issue that involves a reporting position, filing status, or any other determination, computation or position taken by EDS at the request of GM (referred to as the "requested reporting position"), GM shall indemnify, defend and hold harmless EDS or the EDS Group against (i) the asserted tax, but only to the extent of EDS' previous tax payments to GM in connection with the requested reporting position for the tax years in controversy, and (ii) the penalties and interest which relate to the tax for which GM is required to indemnify EDS pursuant to clause (i); provided, however, that GM shall not be required to indemnify EDS under this Section 4.03(d) if EDS fails to satisfy any condition that has a material adverse prejudicial effect on GM's ability to contest the issue, which shall include but not be limited to: (I) EDS or a member of the EDS Group gives GM prompt notice of any action by any state or local taxing authority which may result in any claim by EDS against GM under this Section 4.03(d), but not later than a date that permits GM sufficient time to protest, appeal or litigate the issue provided, however, that if prompt notice would not result in GM having sufficient time to protest, appeal or litigate the issue, the notice requirements of this clause (I) shall be deemed satisfied if EDS or any member of the EDS Group institutes the protest, appeal, or litigation; (II) EDS or a member of the EDS Group authorizes GM to protest, appeal and litigate the requested reporting position issue on behalf of EDS or a member of the EDS Group and at GM's expense; (III) EDS or a member of the EDS Group executes any authority or power of attorney requested by GM in writing which is necessary or appropriate for GM to protest, appeal or litigate the requested reporting position issue; and (IV) EDS or a member of the EDS Group provides copies of supporting detail or other workpapers or calculations which are requested by GM in writing to support the calculation of items of income, gain, loss, expense, deduction or credit that enters into the calculation of tax liability. The indemnification contemplated by this Section 4.03(d) includes, but is not limited to taxes, interest or penalties which result from a Final Determination that EDS or the EDS Group should have filed a separate tax return in any state or locality where EDS or the EDS Group joined in filing a Consolidated State or Local Income Tax Return with GM. 9 Section 5: Cooperation and Confidentiality 5.01 Cooperation. (a) General. EDS and GM shall each cooperate (and shall cause each member of the GM Group and each member of the EDS Group to cooperate) fully at such time and to the extent reasonably requested by the other party in connection with the preparation and filing of any tax return or claim for refund or the conduct of any audit, dispute, proceeding, suit or action concerning any issues or other matters addressed in this Agreement. Such cooperation shall include, to the extent relevant to the other party's liability under this Agreement, without limitation, the following: (i) forwarding promptly to the other party copies of all notices and forms or other communications (including, but not limited to any IRS information document requests, IRS revenue agents report or similar report, notice of proposed adjustment, or notice of deficiency) received from or sent to any taxing authority or any other administrative, judicial or other governmental authority that concerns a tax liability under this Agreement or an issue that may affect the other party's liability for tax or for payments under this Agreement; (ii) upon the other party's request providing the other party the opportunity to review and comment upon communications to any taxing authority, (iii) retaining and providing to the other party on demand copies of tax returns, books, records (including those concerning ownership and tax basis of property which either party may possess), documentation or other information relating to the tax returns, including accompanying schedules, related workpapers, and documents relating to rulings or other determinations by taxing authorities, until the termination of this Agreement, (iv) the provision of additional information and explanations of documents and information provided under this Agreement, (v) the execution of any document that may be necessary or reasonably helpful in connection with the filing of a tax return by GM or EDS or any member of their respective Groups, or in connection with any audit, dispute, proceeding, suit or action, including such waivers, consents or powers of attorney as may be necessary for a party to exercise its rights under this Agreement, and (vi) the use of the parties' reasonable efforts to obtain any documentation from a government authority or a third party that may be necessary or reasonably helpful in connection with any of the foregoing. GM and EDS shall each indemnify and hold the other harmless from and against all penalties and interest that may be asserted against one party by any taxing authority as a result of the other party's failure to retain records as required by Federal, state or local law. (b) Tax Controversies. Each party and the members of its respective Group shall use reasonable efforts (including, but not limited to the duties and responsibilities described in Section 6 of this Agreement) to keep the other party advised as to the status of tax audits, controversies or litigation concerning any Consolidated Tax Period liability or an issue for which such other party may be liable under this Agreement and shall cooperate in a defense with respect to such liability or an issue in any tax controversy. (c) Tax Returns. This Section 5.01(c) shall apply solely for the purpose of preparing and filing the GM Group's Consolidated Federal income tax returns and the Consolidated State or Local Income Tax Returns for the Consolidated Tax Period ending on December 31, 1995 and for the Consolidated Tax Period that includes the effective date of the Split-Off. For the Consolidated Tax Period ending on December 31, 1995, EDS shall provide GM with a draft Federal income tax return and draft state and local income tax returns for each jurisdiction in which EDS is included in the Consolidated State or Local Income Tax Return of the GM Group on or before a date that permits GM sufficient time to prepare and file the consolidated returns and that is consistent with past practice. For the Consolidated Tax Period that includes the effective date of the Split-Off, EDS shall provide GM with a draft Federal income tax return and draft state and local income tax returns for each jurisdiction in which EDS is included in the Consolidated State or Local Income Tax Return of GM as soon as practicable, but in no event later than a date that permits GM sufficient time to prepare and file the consolidated returns and that is consistent with past practice. Each draft income tax return provided to GM shall be signed by an officer of EDS in the space provided for the taxpayer's signature on the appropriate income tax return form. All such draft income tax returns shall be prepared on a basis consistent with the preparation of income tax returns for prior tax years, provided, however, that items of income, gain, deduction, loss and credit to be included in the draft income tax returns for the Consolidated Tax Period that includes the effective date of the Split-Off shall be determined by the method described in Section 3.02(a)(ii). Notwithstanding any provision of Section 5.02 of this Agreement to the contrary, GM shall have the right to engage the law firm Fulbright & Jaworski to review the draft income tax returns described in this Section 5.01(c), and any disclosure of EDS 10 information by GM to Fulbright & Jaworski for this purpose shall not constitute a breach of confidentiality under this Agreement. (d) Employees and Facilities. Each party shall make its employees and facilities available on a reasonable and mutually convenient basis in connection with any of the foregoing matters. (e) Interim Tax Information. EDS shall continue to provide GM with interim financial and tax information for all Consolidated Tax Periods on a basis that is consistent with past practice, and shall provide GM with any additional information or explanations reasonably requested by GM in connection with such interim information. 5.02 Confidentiality. Any information obtained by either party under this Agreement shall be kept confidential, except as may be necessary in connection with the filing of tax returns or claims for refund or in connection with an audit, dispute, proceeding, suit or action concerning any issues or matters addressed in this Agreement, or unless a party is compelled to disclose information by judicial or administrative process or, in the opinion of its counsel, by other requirements of law. Except as otherwise provided herein with respect to Consolidated Tax Periods, EDS shall not be required to make available to GM or its representatives any books, records, documents or other information that EDS reasonably determines to be subject to attorney-client privilege; provided, however, that EDS shall be required to make available to GM any information reasonably requested by GM in connection with the preparation of the GM Group's consolidated Federal income tax return, or Consolidated State or Local Income Tax Returns, or the audit, protest, appeals, litigation or other proceeding in connection such income tax returns. Except as otherwise provided herein, GM shall not be required to make available to EDS or its representatives any books, records, documents or other information that GM reasonably determines to be subject to attorney-client privilege; provided, however, that GM shall be required to make available to EDS any information reasonably requested by EDS in connection with the preparation of the EDS Group tax returns for any Consolidated Tax Period or any Separate Return Tax Period, or any audit, protest, appeals, litigation or other proceeding with respect to any Consolidated Tax Period. Section 6: Audits, Protests, Appeals, Litigation and Dispute Resolution. 6.01 General Contest Rights--Notice. GM shall promptly notify EDS in writing upon receipt by GM or any member of the GM Group of each written communication with respect to any pending or threatened audit, dispute, suit, action, proposed assessment or other proceeding in connection with any Consolidated Tax Period concerning a liability of EDS under this Agreement or an issue for which EDS may be liable under this Agreement. GM shall include with the notice to EDS a true, correct and complete copy of the written communication received. 6.02 Audits. (a) Control of Federal Audits. In connection with examinations by Federal taxing authorities, EDS shall separately control examination issues for which it is solely liable under this Agreement. Such control shall be limited to (i) the responsibility for communicating with agents of the Federal taxing authorities; and (ii) the authority to enter into settlements of Federal income tax liabilities, provided that such settlement does not directly result in an adjustment to any Consolidated Return Item. In the event that a proposed settlement does directly result in an adjustment to any Consolidated Return Item, EDS may nevertheless settle the issue provided that such settlement does not materially (A) increase the difference between the consolidated Federal GM Group Tax Liability and the Separate EDS Group Tax Liability for any Consolidated Tax Period, (B) increase the GM Group Tax Liability for any Separate Return Tax Period, or (C) otherwise increase the amount of any tax for which EDS is not liable under this Agreement. EDS may determine whether it has the authority described in this Section 6.02 by giving notice to GM, including the details of any proposed settlement (whether written, proposed by a taxing authority, proposed by EDS or otherwise) and requesting GM's confirmation that EDS has the authority to enter into the settlement described in the notice. If GM fails to respond within ninety (90) calendar days of its receipt of the notice, GM shall be deemed to have confirmed that EDS has the authority under Section 6.02(a)(ii) to enter into a settlement as described in such notice and that such settlement does not have one of the effects described in clauses (A)-(C) referenced in Section 6.02(a). 11 Notwithstanding anything to the contrary in this Section 6.02(a), if a taxing authority makes a written settlement offer with respect to any issue for which EDS may be liable under this Agreement and EDS notifies GM in writing that it desires to accept the settlement offer, GM may (at its sole cost and expense) continue to contest, defend, or compromise such issue and, in such event, the amount of the payment due to GM pursuant to Section 4 of this Agreement shall not exceed the amount of the settlement offer plus interest and penalties that would have been imposed pursuant to the settlement offer. If EDS is precluded from settling an issue pursuant to the provisions of this Section 6.02(a), GM and EDS agree that the fair allocation of the tax liability, including, without limitation, for purposes of Section 4 of this Agreement, with respect to such issue as finally determined shall be the subject of good faith negotiations between the parties. In the event the parties are not able to agree upon an allocation of the tax liability, the fair allocation of the tax liability shall be subject to the arbitration procedure in Section 6.05, and the arbitrator shall consider, among other factors, the amount for which the issue could have been settled by EDS with the taxing authority had EDS not been precluded from settling the issue pursuant to this Section 6.02. GM shall reasonably cooperate with EDS and its counsel in the defense against or compromise of any claim in any examination. Consistent with past practice, GM shall give EDS notice and an opportunity to participate in any meeting with Federal taxing authorities that are scheduled to address EDS issues. (b) Control of State or Local Audits. In connection with examinations or audits of any Consolidated State or Local Income Tax Return which includes EDS or a member of the EDS Group, GM shall have exclusive control of the examination issues, including, but not limited to, the responsibility for communicating with agents of the state or local taxing authority, and shall have exclusive authority to enter into settlements, and shall bear all fees, cost and expenses associated with such examinations or audit; provided, however, that GM shall, consistent with past practice, provide EDS an opportunity to review and comment upon GM's communications with state or local taxing authorities. EDS or a member of the EDS Group shall promptly execute and deliver to GM any power of attorney or other document reasonably requested in writing by GM in connection with the examination of any state or local tax return contemplated by this Section 6.02 (b). If GM proposes to accept or compromise a proposed adjustment that would result in an additional liability (or reduction of refund) of EDS or a member of the EDS Group, GM shall notify EDS in a reasonable period of time. If EDS does not consent to such acceptance or compromise, and provided that there is reasonable basis to contest the issue involved, and EDS agrees to indemnify GM for reasonable fees and costs of outside attorneys, accountants and consultants or other reasonable outside expenses, incurred by GM during the course of the audit by GM, exclusive of GM employee salaries, internal administrative expenses and overhead costs, in continuing to contest the issue at EDS' request, GM shall continue to contest the relevant issue or shall pay any such additional liability (or reduction of refund). 6.03. Protest and Appeals. (a) Federal Protests and Appeals. GM and EDS shall cooperate in the preparation and filing of any protest for any Consolidated Tax Period in which EDS received audit adjustments which it seeks to contest in the Appeals Division of the IRS. EDS shall be responsible for the preparation of its portion of the GM Group protest in the form prescribed by GM, and shall be responsible for presenting its issues in conference and negotiating settlement alternatives with the Appeals Division of the IRS. (b) State and Local Protests and Appeals. GM shall have the exclusive control of the preparation or filing of any protest or appeal involving a Consolidated State or Local Income Tax Return which includes EDS, and shall bear all fees, costs and expenses associated with such protest or appeal; provided, however, that GM shall, consistent with past practice, provide EDS an opportunity to review and comment upon GM's communications with state or local taxing authorities. If GM proposes to accept or compromise a proposed adjustment that would result in an additional liability (or reduction of refund) of EDS or a member of the EDS Group, GM shall notify EDS in a reasonable period of time. If EDS does not consent to such acceptance or compromise, and provided that there is reasonable basis to contest the issue involved, and EDS agrees to indemnify GM for the reasonable fees and costs of outside attorneys, accountants and consultants incurred by GM in continuing to contest the 12 issue, GM shall continue to contest the relevant issue or shall pay any such additional liability (or reduction of refund). EDS or a member of the EDS Group shall promptly execute and deliver to GM any power of attorney or other document reasonably requested in writing by GM in connection with the examination of any state or local tax return contemplated by this Section 6.03 (b). 6.04. Litigation. (a) General. If GM and EDS are not able to reach a satisfactory settlement of all issues through administrative procedures for any Consolidated Tax Period in any jurisdiction in which EDS or any member of the EDS Group joined in the filing of a tax return with GM, GM shall control the litigation of the issues, including choice of forum; provided, however, that both parties must consent to appeal an adverse judgment (provided that one party may prosecute the appeal of an adverse judgment without the other's consent if the appealing party indemnifies the nonconsenting party against any increase in such nonconsenting party's liability for taxes, interest, and penalties over and above such nonconsenting party's liability for taxes, interest and penalties under the judgment being appealed); provided, however, that EDS shall prepare its portion of any filings and pleadings in a form prescribed by GM, and shall be responsible for presenting its issues and negotiating settlement alternatives. If GM elects to proceed in a refund action, GM and EDS shall each pay any deficiency relating to the issues for which it is liable under this Agreement. (b) Settlement. In the event that a taxing authority has made a written settlement offer with respect to any issue for which EDS may be liable under this Agreement and EDS notifies GM in writing that it desires to accept the settlement offer, GM may (at its sole cost and expense) continue to contest, defend, or compromise such issue and, in such event, the amount of the payment due to GM pursuant to Section 4 of this Agreement shall not exceed the amount of the settlement offer plus interest and penalties that would have been imposed pursuant to the settlement offer. (c) Litigation Expense. Except as otherwise provided in this Agreement, each party shall bear its own litigation expenses (including, without limitation, attorney's fees, court costs, expenses of consultants and expert witnesses) unless EDS is forced to litigate issues that it otherwise would settle, in which event, all costs and expenses of such litigation shall be borne by GM. 6.05. Resolution of Disputed Items. The following provisions apply with respect to the resolution of any dispute arising in connection with this Agreement. (a) Negotiation. GM and EDS shall attempt in good faith to resolve any dispute promptly by negotiations of the parties. In the event of any such dispute, either party may deliver a Dispute Notice to the other party, and within twenty (20) Business Days of the receipt of such Dispute Notice, the appropriate representatives of GM and EDS shall meet to attempt to resolve the dispute. If the dispute has not been resolved within the Negotiation Period, or if one of the parties fails or refuses to negotiate the dispute, the issue shall be settled by arbitration pursuant to this Section 6.05, which shall be final and binding on the parties. (b) Arbitration Procedure. Either party may initiate arbitration by giving the other party a written notice (the "Arbitration Notice") either (i) at any time following the end of the Negotiation Period, or (ii) if the parties do not meet within twenty (20) Business Days of the receipt of the Dispute Notice, at any time thereafter. The arbitration shall be in accordance with the CPR Rules, except as otherwise provided in this Section 6.05. The arbitrators shall afford all discovery permitted by the Federal Rules of Civil Procedure. The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. (S)1-14. The place of arbitration shall be Detroit, Michigan. Any deadlines specified in this Section 6.05 may be extended by mutual agreement of the parties. (c) Selection of Arbitrators. GM and EDS shall make every reasonable effort to jointly select the arbitrator. If GM and EDS are unable to agree on the designated arbitrator within 20 Business Days after either party gives the Arbitration Notice, then the arbitration shall be by a panel of three arbitrators. GM and EDS shall each appoint one arbitrator. The two arbitrators so appointed shall appoint the third arbitrator. If either GM or EDS shall fail to appoint an arbitrator within such 20-day period, the arbitration shall be by the sole arbitrator appointed by the other party. Whether jointly selected by GM and EDS or otherwise, each arbitrator shall be a 13 tax attorney who is generally recognized in the tax community as a qualified and competent tax practitioner with experience in the tax area involved in the issue or issues to be resolved. (d) Settlement Proposal. Each party shall present an overall settlement proposal to the arbitrator which shall encompass all issues to be resolved. The two proposals shall set the outer limits of the range within which the arbitrator can make a determination as to the appropriate settlement result. All costs of the arbitration process shall be borne by the party determined by the arbitrator to have lost the arbitration. In the event the arbitrator makes a determination which reflects a 50-50 settlement, GM and EDS shall share equally the costs of the arbitration. In the event the arbitrator makes a determination which reflects a divided settlement, the arbitrator shall determine the proportion in which the parties shall share the costs of arbitration. (e) Time and Method of Making Payments Determined by Arbitration. All amounts determined by arbitration to be payable by one party to the other shall be due and payable on or before the 90th calendar day following the determination that such amount is payable. Section 7: Indemnity GM agrees to indemnify, defend and hold harmless EDS and each member of the EDS Group from and against any and all payments of Federal income tax liabilities and State Tax Liabilities and Federal estimated income tax liabilities and estimated State Tax Liabilities, including additions to tax, interest, and penalties thereon, to any tax authority with respect to any Consolidated Tax Period; provided, however, that except as otherwise specifically provided in this Agreement, such indemnification shall not extend to separate state tax liabilities or estimated separate state tax liabilities for any tax jurisdiction in which EDS (or any member of the EDS Group) is required to file (or does file) a separate state or local income tax return directly with the taxing authority and not as a part of a GM return for a period that includes a Consolidated Tax Period; provided further, however, that such indemnification shall not extend to any payment required to be made by EDS to GM pursuant to this Agreement. Section 8: Miscellaneous. 8.01 Additional Members. The parties hereto specifically recognize that from time to time other corporations may become members of the GM Group and/or the EDS Group during a Consolidated Tax Period governed by this Agreement, and they agree to use their best efforts to cause such corporations to be bound by all of the terms and conditions hereof. 8.02 Successor and Assigns. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors, predecessors and assigns, but no assignment of this Agreement shall relieve any party of its obligations without the written consent of the other party. 8.03 Entire Understanding. This Agreement contains the entire understanding of the parties hereto with respect to the subject matter contained herein and shall supersede all previous negotiations, commitments, and writings with respect to such subject matter. The Federal Agreement and the State and Local Agreement as in effect immediately prior to the effective date of this Agreement shall be of no further force and effect. This Agreement is separate from, and shall not effect or be effected by, the rights and obligations of the parties pursuant to the Separation Agreement, or any other agreement between the parties. 8.04 Amendments, No Waiver. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by GM and EDS, or in the case of a waiver, by the party benefited by the provision to be waived. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 14 8.05 Conflict of Law. Except for Section 6.05, which shall be governed by the United States Arbitration Act, the validity, interpretation and performance of this Agreement shall be controlled and construed under the laws of the State of Michigan. 8.06 Notices. Every notice, demand, claim, or other communication required or permitted to be given under this Agreement (a "Notice") shall be in writing and may be personally served, provided a receipt is obtained therefore or may be sent by certified mail, return receipt requested, postage prepaid, or may be sent by facsimile, with acknowledgment of receipt requested, to the parties at the following addresses (or at such other address as one party may specify by Notice to the other party): (a) TO: GM: (b) TO: EDS: Chief Tax Officer Corporate Tax Director GENERAL MOTORS CORPORATION ELECTRONIC DATA SYSTEMS CORPORATION 3044 W. Grand Blvd. 5400 Legacy HI-4A-66 Detroit, MI 48202 Plano, TX 75024 A Notice which is delivered personally shall be deemed given as of the date specified in the written receipt thereof. A Notice mailed as provided herein shall be deemed given on the third Business Day following the date so mailed. A Notice by facsimile shall be deemed given upon the date it is transmitted. Notification of a change of address may be given by either party to the other as provided in this Section 8.06. 8.07 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.08 Change in Law. If, due to any change in applicable law or regulation or the interpretation thereof by any court of law or other governing body having jurisdiction subsequent to the date of this Agreement, performance of any provision of or any transaction contemplated by this Agreement shall become impracticable or impossible, the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision. 8.09 Titles and Headings. Titles and headings of sections of this Agreement are inserted for the convenience of reference only and are not intended to be a part of or to effect the meaning or interpretation of this Agreement. 8.10 Construction. The parties have participated jointly in the negotiation and drafting of this Agreement. In the event that an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. 8.11 Severability. The parties agree that, if any provision of this Agreement should be determined to be invalid or unenforceable, such provision shall be deemed deleted from this Agreement with respect and only with respect, to the operation of such provision in the particular jurisdiction in which such determination was made, and only to the extend of the invalidity, and any such invalidity or unenforcability in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. All other remaining provisions of this Agreement shall remain in full force and effect for the particular jurisdiction and all other jurisdictions. In Witness Whereof, the parties hereto, by their duly authorized representatives, have executed this Agreement on the dates written below. General Motors Corporation Electronic Data Systems Corporation /s/ Roger D. Wheeler /s/ R. Randall Capps By: _________________________________ By: _________________________________ Roger D. Wheeler R. Randall Capps Chief Tax Officer Date: Corporate Tax Director April 2, 1996 April 2, 1996 Date: _______________________________ Date: _______________________________ 15 EXHIBIT 3(A) RESTATED CERTIFICATE OF INCORPORATION OF ELECTRONIC DATA SYSTEMS HOLDING CORPORATION UNDER SECTIONS 242 AND 245 OF THE DELAWARE GENERAL CORPORATION LAW ELECTRONIC DATA SYSTEMS HOLDING CORPORATION (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, hereby certifies that: 1. The current name of the Corporation is Electronic Data Systems Holding Corporation. The name under which the Corporation was originally incorporated was RGR Holdings, Inc. The original Certificate of Incorporation of the Corporation (as amended, the "Certificate of Incorporation") was filed with the Secretary of State of the State of Delaware on March 25, 1994. 2. The restatement of and amendments to the Certificate of Incorporation have been duly adopted by a resolution of the Board of Directors of the Corporation (the "Board of Directors") proposing and declaring advisable this Restated Certificate of Incorporation, and the sole holder of all shares of the Corporation's capital stock has duly approved and adopted this Restated Certificate of Incorporation, all in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware. 3. This Restated Certificate of Incorporation restates and amends the Certificate of Incorporation of the Corporation. The amendments to the Certificate of Incorporation effected by this Restated Certificate of Incorporation include, but are not limited to, amendments (i) to increase the number of authorized shares of capital stock that the Corporation shall have the authority to issue to Two Billion Two Hundred Million (2,200,000,000), divided into Two Billion (2,000,000,000) shares of common stock, par value $0.01 per share, and Two Hundred Million (200,000,000) shares of preferred stock, par value $0.01 per share, and to authorize the issuance of shares of preferred stock of the Corporation from time to time in one or more series as may be determined by the Board of Directors, (ii) to add provisions relating to dividends, liquidation and voting with respect to common stock of the Corporation, (iii) to add provisions regarding the denial of preemptive rights and cumulative voting, (iv) to provide for the classification of the Board of Directors, the procedure for removal of members of the Board of Directors and the procedure for filling vacancies on the Board of Directors, (v) to prohibit the taking of action by the stockholders of the Corporation by less than unanimous written consent without a stockholders' meeting, (vi) to limit the liability of a Director of the Corporation to the Corporation or any of its stockholders to the extent permitted by Section 102(b)(7) of the General Corporation Law of the State of Delaware, (vii) to require, for certain mergers and other transactions, the affirmative vote of (a) holders of at least 80% of the outstanding voting stock of the Corporation and (b) holders of at least 66- 2/3% of the outstanding voting stock of the Corporation, exclusive of voting stock beneficially owned by the party whose interest in the transaction gives rise to the requirement of the 80% vote, (viii) to provide for the amendment of the Bylaws of the Corporation by the Board of Directors and by the stockholders of the Corporation and to establish the required vote for such amendment, and (ix) to require, for certain amendments to the Certificate of Incorporation, the affirmative vote of holders of at least 80% of the outstanding voting stock of the Corporation. 4. The capital of the Corporation shall not be reduced under or by reason of the foregoing amendments to the Certificate of Incorporation. 5. The Certificate of Incorporation is hereby superseded by this Restated Certificate of Incorporation, which shall henceforth be the Certificate of Incorporation of the Corporation. 6. The text of the Certificate of Incorporation is hereby restated and amended to read in its entirety as follows (hereinafter, this Restated Certificate of Incorporation, as it may be further amended or restated from time to time, is referred to the "Restated Certificate of Incorporation"). RESTATED CERTIFICATE OF INCORPORATION FIRST: The name of the Corporation is Electronic Data Systems Holding Corporation. SECOND: The address of the registered office of the Corporation in the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Prentice- Hall Corporation System, Inc. THIRD: The purpose of the Corporation is to engage in any lawful business, act or activity for which corporations may be organized under the provisions of the General Corporation Law of the State of Delaware, or any successor statute (the "DGCL"). FOURTH: The aggregate number of shares of capital stock that the Corporation shall have authority to issue is Two Billion Two Hundred Million (2,200,000,000), divided into classes as follows: (1) Two Billion (2,000,000,000) shares of common stock, par value $0.01 per share ("Common Stock"), and (2) Two Hundred Million (200,000,000) shares of preferred stock, par value $0.01 per share ("Preferred Stock"). Shares of any class or series of capital stock of the Corporation may be issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine. The following is a statement of the powers, preferences and rights, and the qualifications, limitations or restrictions, of the Preferred Stock and Common Stock. SECTION I. PREFERRED STOCK Shares of Preferred Stock shall be issuable from time to time in one or more series as may be determined by the Board of Directors. Each series shall be distinctly designated. The Board of Directors is hereby expressly granted the authority to fix, by resolution or resolutions adopted prior to and providing for the issuance of any shares of each particular series of Preferred Stock and incorporated in a certificate of designations filed with the Secretary of State of the State of Delaware, the designation, powers (including voting powers and voting rights, full or limited, or no voting powers) and preferences, and the relative, participating, optional or other rights, if any, and the qualifications, limitations or restrictions thereof, if any, of such series, including, without limiting the generality of the foregoing, the following: (1) the designation of, and the number of shares of Preferred Stock which shall constitute, the series, which number may be increased (except as otherwise fixed by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; (2) the rate and times at which (or the method of determination thereof), and the terms and conditions upon which, dividends, if any, on shares of the series shall be paid, the nature of any preferences or the relative rights of priority of such dividends to the dividends payable, and the qualifications, limitations or restrictions, if any, with respect to such dividends payable, on any other shares of any class or classes of capital stock of the Corporation or on any shares of other series of Preferred Stock, and a statement whether or in what circumstances such dividends shall be cumulative; (3) whether shares of the series shall be convertible into or exchangeable for shares of any class or series of capital stock or other securities or property of the Corporation or of any other corporation or entity, and, if so, the terms and conditions of such conversion or exchange, including any provisions for the adjustment of the conversion or exchange rate in such events as the Board of Directors shall determine; (4) whether shares of the series shall be redeemable, and, if so, the terms and conditions of such redemption (including whether redemption shall be optional or mandatory), including the date or dates or event or events upon or after the occurrence of which they shall be redeemable, and the amount and type of consideration payable in case of redemption, which amount per share may vary under different conditions and at different redemption dates; (5) the rights, if any, of holders of shares of the series upon the voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding-up of the Corporation, and the relative rights of priority, if any, of payment of shares of the series; (6) whether shares of the series shall have a sinking fund or purchase account for the redemption or purchase of shares of the series, and if so, the terms, conditions and amount of such sinking fund or purchase account; (7) whether shares of the series shall have voting rights in addition to the voting rights as shall be provided by law and, if so, the terms of such voting rights, which may, without limiting the generality of the foregoing, include (a) the right to more or less than one vote per share on any or all matters voted upon by the stockholders of the Corporation and (b) the right to vote, as a series by itself or together with other series of Preferred Stock or together with all series of Preferred Stock as a class and/or with the Common Stock as a class, upon such matters, under such circumstances and upon such conditions as the Board of Directors shall determine, including, without limitation, the right, voting as a series by itself or together with other series of Preferred Stock or together with all series of Preferred Stock as a class and/or with the Common Stock as a class, to elect one or more Directors of the Corporation under such circumstances and upon such conditions as the Board of Directors shall determine; and (8) any other powers, preferences and relative, participating, optional or other rights, and qualifications, limitations or restrictions of shares of that series. The relative powers, preferences and rights of each series of Preferred Stock in relation to the powers, preferences and rights of each other series of Preferred Stock shall, in each case, be as fixed from time to time by the Board of Directors in the resolution or resolutions adopted pursuant to the authority granted in this Section I of this Article Fourth, and the consent, by class or series vote or otherwise, of holders of Preferred Stock of such of the series of Preferred Stock as are from time to time outstanding shall not be required for the issuance by the Board of Directors of any other series of Preferred Stock, whether or not the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, or on a parity with, the powers, preferences and rights of such outstanding series, or any of them; provided, however, that the Board of Directors may provide in such resolution or resolutions adopted with respect to any series of Preferred Stock that the consent of holders of at least a majority (or such greater proportion as shall be therein fixed) of the outstanding shares of such series voting thereon shall be required for the issuance of shares of any or all other series of Preferred Stock. SECTION II. COMMON STOCK (1) Dividends. Subject to any requirements with respect to preferential or participating dividends as shall be provided by the express terms of any outstanding series of Preferred Stock, holders of the Common Stock shall be entitled to receive such dividends thereon, if any, as may be declared from time to time by the Board of Directors. (2) Liquidation. In the event of liquidation, dissolution or winding- up of the Corporation, whether voluntary or involuntary, holders of the Common Stock shall be entitled to receive such assets and properties of the Corporation, tangible and intangible, as are available for distribution to stockholders of the Corporation, after there shall have been paid or set apart for payment the full amounts necessary to satisfy any preferential or participating rights to which holders of each outstanding series of Preferred Stock are entitled by the express terms of such series. (3) Voting. Each share of Common Stock shall entitle the holder thereof to one vote on each matter submitted to a vote of holders of shares of Common Stock. Holders of shares of Common Stock shall be entitled to vote on each matter submitted to a vote of stockholders of the Corporation, except (a) as shall otherwise be provided with respect to the election of one or more Directors of the Corporation by holders of shares of one or more outstanding series of Preferred Stock under circumstances as shall be provided by the Restated Certificate of Incorporation or by any provisions established pursuant to Section I of this Article Fourth and (b) to the extent holders of shares of one or more outstanding series of Preferred Stock are entitled to vote separately as a class by law or under circumstances as shall be provided by the Restated Certificate of Incorporation or by any provisions established pursuant to Section I of this Article Fourth. SECTION III. CAPITAL STOCK (1) Regarding Preemptive Rights. No stockholder of the Corporation shall by reason of his holding shares of any class or series of capital stock of the Corporation have any preemptive or preferential right to purchase, acquire, subscribe for or otherwise receive any additional, unissued or treasury shares (whether now or hereafter acquired) of any class or series of capital stock of the Corporation now or hereafter to be authorized, or any notes, debentures, bonds or other securities convertible into or carrying any right, option or warrant to purchase, acquire, subscribe for or otherwise receive shares of any class or series of capital stock of the Corporation now or hereafter to be authorized, whether or not the issuance of any such shares, or such notes, debentures, bonds or other securities, would adversely affect the dividends or voting or other rights of such stockholder, and the Board of Directors may issue or authorize the issuance of shares of any class or series of capital stock of the Corporation, or any notes, debentures, bonds or other securities convertible into or carrying rights, options or warrants to purchase, acquire, subscribe for or otherwise receive shares of any class or series of capital stock of the Corporation, without offering any such shares of any such class, either in whole or in part, to the existing stockholders of any such class. (2) Cumulative Voting. Cumulative voting of shares of any class or series of capital stock of the Corporation having voting rights is prohibited. FIFTH: (1) In General. (a) The powers of the Corporation shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed by or under the direction of, the Board of Directors. In addition to the authority and powers conferred upon the Board of Directors by the DGCL, the Restated Certificate of Incorporation or the Bylaws of the Corporation, the Board of Directors is hereby authorized and empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject to the provisions of the DGCL, the Restated Certificate of Incorporation and any Bylaw of the Corporation adopted by the stockholders of the Corporation; provided, however, that no Bylaw of the Corporation hereafter adopted by the stockholders of the Corporation, nor any amendment thereto, shall invalidate any prior act of the Board of Directors that would have been valid if such Bylaw or amendment thereto had not been adopted. (b) On and after the first date (the "Public Status Date") on which the Corporation has outstanding a class of equity securities registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and except as otherwise provided by the Restated Certificate of Incorporation or the Bylaws of the Corporation or to the extent prohibited by Delaware law, the Board of Directors shall have the right to establish the rights, powers, duties, rules and procedures that (i) from time to time shall govern the Board of Directors, including, without limiting the generality of the foregoing, the vote required for any action by the Board of Directors and (ii) from time to time shall affect the Directors' power to manage the business and affairs of the Corporation. (2) Number, Election and Terms of Directors. (a) Subject to such rights of holders of shares of one or more outstanding series of Preferred Stock to elect one or more Directors of the Corporation under circumstances as shall be provided by the Restated Certificate of Incorporation or by any provisions established pursuant to Article Fourth hereof, the number of Directors of the Corporation that shall constitute the Board of Directors shall not be less than three (3) nor more than fifteen (15) and shall be fixed from time to time exclusively by, and may be increased or decreased from time to time exclusively by the affirmative vote of at least a majority of the Whole Board. The term "Whole Board" shall mean the total number of Directors of the Corporation as so fixed, whether or not there exist any vacancies in previously authorized directorships. (b) Election of Directors of the Corporation need not be by written ballot unless the Bylaws of the Corporation shall so provide. (c) Each Director of the Corporation shall hold office for the full term for which such Director is elected and until such Director's successor shall have been duly elected and qualified or until his earlier death, resignation or removal in accordance with the Restated Certificate of Incorporation and the Bylaws of the Corporation. (d) On and after the Public Status Date: (i) The Directors of the Corporation, other than those who may be elected by holders of shares of one or more outstanding series of Preferred Stock under circumstances as shall be provided by the Restated Certificate of Incorporation or by any provisions established pursuant to Article Fourth hereof, shall be divided into three classes, Class I, Class II and Class III, and the Board of Directors, by resolution or resolutions adopted on or prior to the Public Status Date, shall designate the Directors of the Corporation who shall first serve in Class I, Class II and Class III, effective as of the Public Status Date. Such classes shall be as nearly equal in number of Directors as possible. Each Director of the Corporation shall serve for a term ending on the third annual meeting following the annual meeting at which such Director was elected; provided, however, that the Directors of the Corporation first designated to Class I shall serve for a term expiring at the annual meeting next following the date of their designation as Class I Directors, the Directors of the Corporation first designated to Class II shall serve for a term expiring at the second annual meeting next following the date of their designation as Class II Directors, and the Directors of the Corporation first designated to Class III shall serve for a term expiring at the third annual meeting next following the date of their designation as Class III Directors. (ii) At each annual election of Directors of the Corporation, such Directors chosen to succeed those whose terms then expire shall be of the same class as the Directors of the Corporation they succeed, unless, by reason of any intervening changes in the authorized number of Directors of the Corporation, the Board of Directors shall designate one or more directorships whose term then expires as directorships of another class in order more nearly to achieve equality of number of Directors of the Corporation among the classes. (iii) Notwithstanding that the three classes of Directors of the Corporation shall be as nearly equal in number of Directors as possible, in the event of any change in the authorized number of Directors of the Corporation, each Director of the Corporation then continuing to serve as such shall nevertheless continue as a Director of the class of which he is a member until the expiration of his current term, or his prior death, resignation or removal in accordance with the Restated Certificate of Incorporation and the Bylaws of the Corporation. If any newly created directorship may, consistent with the provision that the three classes shall be as nearly equal in number of Directors of the Corporation as possible, be allocated to one or two or more classes, the Board of Directors shall allocate it to that of the available classes whose terms of office are due to expire at the earliest date following such allocation. (3) Removal of Directors. (a) No Director of the Corporation shall be removed from such office by vote or other action of the stockholders of the Corporation or otherwise, except by the affirmative vote of holders of at least a majority of the then outstanding Voting Stock (as defined below), voting together as a single class. The term "Voting Stock" shall mean all outstanding shares of all classes and series of capital stock of the Corporation entitled to vote generally in the election of Directors of the Corporation, considered as one class; and, if the Corporation shall have shares of Voting Stock entitled to more or less than one vote for any such share, each reference in the Restated Certificate of Incorporation to a proportion or percentage in voting power of Voting Stock shall be calculated by reference to the portion or percentage of votes entitled to be cast by holders of such shares generally in the election of Directors of the Corporation. Prior to the Public Status Date, any such removal of a Director of the Corporation may be with or without cause. On and after the Public Status Date, no Director of the Corporation shall be removed from such office by vote or other action of the stockholders of the Corporation or otherwise, except for cause, which shall be deemed to exist only if: (i) such Director has been convicted, or such Director is granted immunity to testify where another has been convicted, of a felony by a court of competent jurisdiction (and such conviction is no longer subject to direct appeal); (ii) such Director has been found by a court of competent jurisdiction (and such finding is no longer subject to direct appeal) or by the affirmative vote of at least a majority of the Whole Board at any regular or special meeting of the Board of Directors called for such purpose to have been grossly negligent or guilty of willful misconduct in the performance of his duties to the Corporation in a matter of substantial importance to the Corporation; (iii) such Director has been adjudicated by a court of competent jurisdiction to be mentally incompetent, which mental incompetency directly affects his ability to perform as a Director of the Corporation; (iv) such Director has been found by a court of competent jurisdiction (and such finding is no longer subject to direct appeal) or by the affirmative vote of at least a majority of the Whole Board at any regular or special meeting of the Board of Directors called for such purpose to have breached such Director's duty of loyalty to the Corporation or its stockholders or to have engaged in any transaction with the Corporation from which such Director derived an improper personal benefit; or (v) "cause" for removal otherwise exists under Section 141(k)(1) of the DGCL. No Director of the Corporation so removed may be nominated, re-elected or reinstated as a Director of the Corporation so long as the cause for removal continues to exist. (b) Notwithstanding paragraph 3(a) of this Article Fifth, whenever holders of shares of one or more outstanding series of Preferred Stock are entitled to elect one or more Directors of the Corporation under circumstances as shall be provided by the Restated Certificate of Incorporation or by any provisions established pursuant to Article Fourth hereof with respect to the rights of holders of shares of one or more outstanding series of Preferred Stock, any Director of the Corporation so elected may be removed in accordance with such provisions. (4) Vacancies. Unless otherwise provided by the Restated Certificate of Incorporation or by any provisions established pursuant to Article Fourth hereof with respect to the rights of holders of shares of one or more outstanding series of Preferred Stock, newly created directorships resulting from any increase in the authorized number of Directors of the Corporation and any vacancies on the Board of Directors resulting from death, resignation or removal in accordance with the Restated Certificate of Incorporation and the Bylaws of the Corporation shall be filled only by the affirmative vote of at least a majority of the remaining Directors of the Corporation then in office, even if such remaining Directors constitute less than a quorum of the Board of Directors. Any Director of the Corporation elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors of the Corporation in which the new directorship was created or the vacancy occurred and until such Director's successor shall have been elected and qualified or until his earlier death, resignation or removal in accordance with the Restated Certificate of Incorporation and the Bylaws of the Corporation. Unless otherwise provided by the Restated Certificate of Incorporation or by any provisions established pursuant to Article Fourth hereof with respect to the rights of holders of shares of one or more outstanding series of Preferred Stock, no decrease in the number of Directors of the Corporation constituting the Board of Directors shall shorten the term of any incumbent Director of the Corporation. SIXTH: No action required to be taken or that may be taken at any annual or special meeting of the stockholders of the Corporation may be taken without a meeting, and the power of the stockholders of the Corporation to consent in writing to the taking of any action by written consent without a meeting is specifically denied, except for action by unanimous written consent, which is expressly allowed. Unless otherwise provided by the DGCL, by the Restated Certificate of Incorporation or by any provisions established pursuant to Article Fourth hereof with respect to the rights of holders of one or more outstanding series of Preferred Stock, special meetings of the stockholders of the Corporation may be called at any time only by the Chairman of the Board of Directors of the Corporation, or by the Board of Directors pursuant to a resolution approved by the affirmative vote of at least a majority of the Whole Board, and no such special meeting may be called by any other person or persons. SEVENTH: No Director of the Corporation shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a Director of the Corporation involving any act or omission of any such Director; provided, however, that this Article Seventh shall not eliminate or limit the liability of such a Director (1) for any breach of such Director's duty of loyalty to the Corporation or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the DGCL, as the same exists or as such provision may hereafter be amended, supplemented or replaced, or (4) for any transactions from which such Director derived an improper personal benefit. If the DGCL is amended after the filing of the Restated Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by such law, as so amended. Any repeal or modification of this Article Seventh by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a Director of the Corporation existing at the time of such repeal or modification. EIGHTH: (1) On and after the Public Status Date, in addition to any other affirmative vote that may be required by law, the Restated Certificate of Incorporation or the Bylaws of the Corporation, and except as otherwise expressly provided by paragraph (2) of this Article Eighth: (a) any merger, consolidation or share exchange of the Corporation or any subsidiary of the Corporation with (i) any Related Person or (ii) any other Person (whether or not itself a Related Person) which is, or after such merger, consolidation or share exchange would be, an Affiliate of a Related Person; or (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition by the Corporation or any subsidiary of the Corporation to, with or for the benefit of any Related Person or any Affiliate of any Related Person, or by any Related Person or any Affiliate of any Related Person to the Corporation or any subsidiary of the Corporation, of any assets or properties having an aggregate Fair Market Value of $10,000,000 or more; or (c) any issuance or transfer by the Corporation or any subsidiary of the Corporation of any securities of the Corporation or any subsidiary of the Corporation to any Related Person or any Affiliate of any Related Person (except (i) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into shares of any class or series of capital stock of the Corporation or any subsidiary of the Corporation, which securities were acquired by the Related Person prior to becoming a Related Person, or (ii) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into shares of any class or series of capital stock of the Corporation or subsidiary of the Corporation, which security is distributed pro rata to all holders of shares of any class or series of capital stock of the Corporation subsequent to the time the Related Person became such, and provided in the case of this clause (ii) that there is not an increase of more than 1% in the Related Person's proportionate share of any class or series of capital stock of the Corporation or of the outstanding Voting Stock as a result of such dividend or distribution); or (d) any adoption of any plan or proposal by the Corporation for the liquidation or dissolution of the Corporation voluntarily caused or proposed by or on behalf of a Related Person or any Affiliate of any Related Person; or (e) any reclassification of securities (including any reverse stock split) or recapitalization of the Corporation, or any merger, consolidation or share exchange of the Corporation with any of its subsidiaries or any other transaction (whether or not with or into or otherwise involving a Related Person) which has the effect, either directly or indirectly, of increasing by more than 1% the proportionate share of any outstanding shares of any class or series of capital stock of the Corporation, or the securities convertible into shares of any class or series of capital stock of the Corporation or any subsidiary of the Corporation, that is Beneficially Owned by any Related Person or any Affiliate of any Related Person or otherwise increasing the voting power of any outstanding shares of any class or series of capital stock of the Corporation or any subsidiary of the Corporation possessed by any such Related Person or Affiliate; or (f) any series or combination of transactions having, directly or indirectly, the same effect as any of the foregoing; or (g) any agreement, contract or other arrangement entered into by the Corporation providing, directly or indirectly, for any of the foregoing, shall require the affirmative vote of holders of (x) at least 80% of the then outstanding Voting Stock, voting together as a single class and (y) at least 66-2/3% of the then outstanding Voting Stock not Beneficially Owned, directly or indirectly, by any Related Person with respect to such Business Combination, voting together as a single class. Such affirmative vote shall be required on and after the Public Status Date, notwithstanding the fact that no vote may be required by, or that a lesser percentage or separate class vote may be specified in, applicable law, any provision of the Restated Certificate of Incorporation other than this Article Eighth, the Bylaws of the Corporation or any agreement with any national securities exchange or otherwise. (2) The provisions of paragraph (1) of this Article Eighth shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote that may be required by applicable law, any provision of the Restated Certificate of Incorporation other than this Article Eighth, the Bylaws of the Corporation and any agreement with any national securities exchange or otherwise, if all of the conditions specified in either of the following subparagraphs (a) or (b) are met: (a) the cash, property, securities or other consideration to be received per share by holders of shares of each and every outstanding class or series of capital stock of the Corporation in the Business Combination is, with respect to each such class or series, either (i) the same in form and amount per share as that paid by the Related Person in a tender offer in which such Related Person acquired at least 50% of the outstanding shares of capital stock of such class or series and which was consummated not more than one year prior to the date of such Business Combination or (ii) not less in amount (as to cash) or Fair Market Value (as to consideration other than cash) as of the date of the determination of the Highest Per Share Price (as to property, securities or other consideration) than the Highest Per Share Price applicable to such class or series of shares; provided, however, that in the event of any Business Combination in which the Corporation survives, any shares retained by holders thereof shall constitute consideration other than cash for purposes of this subparagraph (a); or (b) at least a majority of all Continuing Directors shall have expressly approved such Business Combination either in advance of or subsequent to such Related Person's having become a Related Person. On and after the Public Status Date, in the case of any Business Combination with a Related Person to which subparagraph (b) above does not apply, at least a majority of all Continuing Directors, promptly following the request of a Related Person, shall determine the Highest Per Share Price for shares of each class or series of capital stock of the Corporation. Such determination shall be announced not less than five (5) days prior to the meeting at which holders of shares vote on the Business Combination. Such determination shall be final, unless the Related Person becomes the Beneficial Owner of additional shares after the date of the earlier determination, in which case at least a majority of all Continuing Directors shall make a new determination as to the Highest Per Share Price for each class or series of shares prior to the consummation of the Business Combination. A Related Person shall be deemed to have acquired a share at the time that such Related Person became the Beneficial Owner thereof. With respect to shares owned by Affiliates, Associates and other Persons whose ownership is attributable to a Related Person, if the price paid by such Related Person for such shares is not determinable by at least a majority of all Continuing Directors, the price so paid shall be deemed to be the higher of (i) the price paid upon the acquisition thereof by the Affiliate, Associate or other Person or (ii) the share price of the shares in question at the time when the Related Person became the Beneficial Owner thereof. (3) For purposes of this Article Eighth: (a) The term "Affiliate," used to indicate a relationship to a specified Person, shall mean a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. (b) The term "Associate," used to indicate a relationship with a specified Person, shall mean (i) any corporation, firm, partnership, association or other organization (other than the Corporation or any wholly owned subsidiary of the Corporation) of which such specified Person is a director, officer or partner or is, directly or indirectly, the Beneficial Owner of 10% or more of any class of equity securities; (ii) any trust or other estate in which such specified Person has a beneficial interest of 10% or more or as to which such specified Person serves as trustee or in a similar fiduciary capacity; (iii) any Person who is a director or officer of such specified Person or any of its parents or subsidiaries (other than the Corporation or any wholly owned subsidiary of the Corporation); and (iv) any relative or spouse of such specified Person or of any of its Associates, or any relative of any such spouse, who has the same home as such specified Person or such Associate. (c) A Person shall be a "Beneficial Owner" of any shares of any class or series of capital stock of the Corporation (i) which such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or (ii) which such Person or any of its Affiliates or Associates has, directly or indirectly, (A) the right or obligation to acquire (whether such right or obligation is exercisable immediately or only after the passage of time or the occurrence of an event), pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the beneficial owner of any stock tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered stock is accepted for purchase or exchange, or (B) the right to vote or dispose of, including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the beneficial owner of any stock because of such Person's right to vote such stock if the agreement, arrangement or understanding to vote such stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten (10) or more Persons pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act; or (iii) which is beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person or any of its Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting or disposing of such stock; or (iv) of which such Person would be the Beneficial Owner pursuant to the terms of Rule 13d-3 of the General Rules and Regulations under Exchange Act, as in effect on March 12, 1996. Notwithstanding anything in this definition of "Beneficial Owner" to the contrary, neither General Motors Corporation, a Delaware corporation ("GM"), the board of directors of GM, any committee of such board, any member of such board or committee, any pension plan or employee benefit plan sponsored by GM or any of its Affiliates (other than the Hourly Plan (as defined below)), nor any trustee of or other fiduciary with respect to any such other plan (when acting in such capacity) shall be deemed to be the ABeneficial Owner@ of, or to ABeneficially Own,@ any securities held for the benefit of the General Motors Hourly-Rate Employees Pension Plan, or any trustee of or other fiduciary with respect to such plan (when acting in such capacity) (collectively, the "Hourly Plan"), or to be an Affiliate or Associate of the Hourly Plan (and the Hourly Plan shall not be deemed to be an Affiliate or Associate of any of the foregoing), solely by virtue of the board of directors of GM or any committee thereof or the management of GM acting under the authority thereof having the right to appoint, or terminate the appointment of, trustees or investment managers for the Hourly Plan or any such other pension plan or employee benefit plan sponsored by GM or any of its Affiliates or to cause any subsidiary of GM that provides investment management services for the Hourly Plan or any such other pension plan or other employee benefit plan sponsored by GM or any of its Affiliates to appoint, or terminate the appointment of, such trustees or investment managers. Stock shall be deemed "Beneficially Owned" by the Beneficial Owner or Owners thereof. (d) The term "Business Combination" shall mean any transaction which is referred to in any one or more of subparagraphs (a) through (g) of paragraph (1) of this Article Eighth. (e) The term "Continuing Director" shall mean, with respect to a Business Combination with any Related Person, any Director of the Corporation, while a Director of the Corporation, (i) who is unaffiliated with the Related Person, and (ii) who (A) was a Director of the Corporation on or immediately before the Public Status Date, or (B) became a Director of the Corporation prior to the time that the Related Person became a Related Person, or (C) was recommended or nominated to become a Director of the Corporation by at least a majority of all then Continuing Directors, acting separately or as a part of any action taken by the Board of Directors or any committee thereof. Without limiting the generality of the foregoing, a Director of the Corporation shall be deemed to be affiliated with a Related Person if such Director (i) is or at any previous time has been an officer, director, employee or general partner of such Related Person; (ii) is or at any previous time has been an Affiliate or Associate of such Related Person; (iii) is or at any previous time has been a relative or spouse of such Related Person or of any such officer, director, general partner, Affiliate or Associate; (iv) performs services for, or is a member, employee, greater than 5% stockholder or other equity owner of any organization (other than the Corporation and its subsidiaries) that performs services for, such Related Person or any Affiliate of such Related Person, or is a relative or spouse of any such Person; or (v) was nominated for election as a Director of the Corporation by such Related Person. (f) The term "Fair Market Value" shall mean, in the case of securities, the average of the closing sale prices during the thirty (30)-day period immediately preceding the date in question of such security on the principal United States securities exchange registered under the Exchange Act on which such security is listed (or the composite tape therefor) or, if such securities are not listed on any such exchange, the average of the closing bid quotations with respect to such security during the thirty (30)-day period preceding the date in question on the Nasdaq National Market or any similar system then in use or, if no such quotations are available, the fair market value on the date in question of such security as determined in good faith by at least a majority of all Continuing Directors; and in the case of property other than cash or securities, the fair market value of such property on the date in question as determined in good faith by at least a majority of all Continuing Directors. (g) The term "Highest Per Share Price" shall mean (i) as to shares of any class or series of capital stock of the Corporation of which the Related Person Beneficially Owns 10% or more of the outstanding shares, the highest price that can be determined to have been paid or agreed to be paid for any share or shares of that class or series by such Related Person in a transaction that either (A) resulted in such Related Person Beneficially Owning 10% or more thereof or (B) was effected at a time when such Related Person Beneficially Owned 10% or more thereof, (ii) as to shares of any class or series of capital stock of the Corporation of which the Related Person Beneficially Owns shares, but not 10% or more of the outstanding shares, the highest price that can be determined to have been paid or agreed to be paid at any time by such Related Person for any share or shares of that class or series that are then Beneficially Owned by such Related Person or (iii) as to shares of any other class or series of capital stock of the Corporation, the amount determined by at least a majority of all Continuing Directors, on whatever basis they believe is appropriate, to be the per share price equivalent of the highest price that can be determined to have been paid or agreed to be paid at any time by the Related Person for shares of any such other class or series of capital stock of the Corporation. In determining the Highest Per Share Price, all purchases by the Related Person and its Affiliates and Associates shall be taken into account regardless of whether the shares were purchased before or after the Related Person became a Related Person and the Highest Per Share Price will be appropriately adjusted to take into account (W) distributions paid or payable in stock, (X) subdivisions of outstanding stock, (Y) combinations of shares of stock into a smaller number of shares and (Z) similar events. Additionally, for purposes of this subparagraph (g), the price of any shares of Common Stock received by a stockholder from GM pursuant to a transaction (the "Split-Off") in which outstanding shares of Class E Common Stock, par value $0.10 per share, of GM ("GME Stock") are converted into shares of Common Stock, shall be the price paid for such GME Stock, as appropriately adjusted to account for the number of shares of Common Stock so received for each share of GME Stock. (h) The term "Person" shall mean any individual, firm, corporation, partnership, limited liability company, association, joint venture, trust, estate or other entity or organization. (i) The term "Related Person" shall mean any Person (other than the Corporation or any subsidiary of the Corporation and other than any profit- sharing, employee stock ownership or other employee benefit plan of the Corporation or any subsidiary of the Corporation or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who or which (i) is the Beneficial Owner of 10% or more of the aggregate voting power of all outstanding Voting Stock; or (ii) is an Affiliate of the Corporation and, at any time within the two (2)-year period immediately prior to the date in question, was the Beneficial Owner of 10% or more of the aggregate voting power of all outstanding Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of any class or series of capital stock of the Corporation which were at any time within the two (2)-year period immediately prior to the date in question Beneficially Owned by any Related Person, if such assignment or succession shall have occurred in the course of a privately negotiated transaction rather than an open market transaction. For the purposes of determining whether a Person is a Related Person, the number of shares of any class or series of capital stock of the Corporation deemed to be outstanding shall include shares of such class or series of which the Person is deemed the Beneficial Owner, but shall not include any other shares which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, exchange rights, warrants or options. Notwithstanding anything in this definition of "Related Person" to the contrary, the Hourly Plan shall not be a Related Person solely as a result of its becoming the Beneficial Owner of any shares of Common Stock in the Split-Off but may thereafter become a Related Person if the Hourly Plan or any Affiliate thereof shall after the Split-Off purchase or otherwise become the Beneficial Owner of additional shares of any class or series of capital stock of the Corporation constituting 1% or more of the aggregate voting power of all outstanding Voting Stock or any other Person (or Persons) who is (or collectively are) the Beneficial Owner of shares of any class or series of capital stock of the Corporation constituting 1% or more of the aggregate voting power of all outstanding Voting Stock shall become an Affiliate of the Hourly Plan, unless, in either case referred to in this sentence, the Hourly Plan, together with all Affiliates thereof, is not then the Beneficial Owner of 10% or more of the aggregate voting power of all outstanding Voting Stock. (4) Nothing contained in this Article Eighth shall be construed to relieve any Related Person from any fiduciary obligation imposed by law. NINTH: (1) The Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board of Directors shall require, in addition to any other affirmative vote that may be required by law, the Restated Certificate of Incorporation or the Bylaws of the Corporation, the affirmative vote of at least a majority of the Whole Board. The stockholders of the Corporation shall also have the power to adopt, amend or repeal the Bylaws of the Corporation at any annual or special meeting, by the affirmative vote of holders of at least 66-2/3% of the then outstanding Voting Stock, voting together as a single class, in addition to any other affirmative vote that may be required by law, the Restated Certificate of Incorporation or the Bylaws of the Corporation. (2) Notwithstanding any other provision of the Restated Certificate of Incorporation or the Bylaws of the Corporation (and in addition to any other affirmative vote that may be required by law, the Restated Certificate of Incorporation or the Bylaws of the Corporation), there shall be required to amend, alter, change or repeal, directly or indirectly, or adopt any provision inconsistent with, the provisions of Article Fifth hereof, Article Sixth, Article Seventh hereof, Article Eighth hereof or this Article Ninth, the affirmative vote of holders of at least 80% of the then outstanding Voting Stock, voting together as a single class. IN WITNESS WHEREOF, the Corporation has caused the Restated Certificate of Incorporation to be signed and attested by its duly authorized officers, this 12th day of March, 1996. ELECTRONIC DATA SYSTEMS HOLDING CORPORATION /s/ John R. Castle, Jr. By:_____________________________ John R. Castle, Jr. Senior Vice President CERTIFICATE OF DESIGNATIONS of SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of ELECTRONIC DATA SYSTEMS HOLDING CORPORATION Pursuant to Section 151 of the General Corporation Law of the State of Delaware ELECTRONIC DATA SYSTEMS HOLDING CORPORATION, a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY: That pursuant to the authority vested in the Board of Directors in accordance with the provisions of the Restated Certificate of Incorporation of the said Corporation, the said Board of Directors on March 12, 1996 adopted the following resolution creating a series of 15,000,000 shares of Preferred Stock designated as "Series A Junior Participating Preferred Stock": RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of the Restated Certificate of Incorporation, a series of Preferred Stock, par value $0.01 per share, of the Corporation be and hereby is created, and that the designation and number of shares thereof and the voting and other powers, preferences and relative, participating, optional or other rights of the shares of such series and the qualifications, limitations and restrictions thereof are as follows: SERIES A JUNIOR PARTICIPATING PREFERRED STOCK 1. Designation and Amount. There shall be a series of Preferred Stock that shall be designated as "Series A Junior Participating Preferred Stock," and the number of shares constituting such series shall be 15,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, however, that no decrease shall reduce the number of shares of Series A Junior Participating Preferred Stock to less than the number of shares then issued and outstanding plus the number of shares issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation. 2. Dividends and Distributions. (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock, in preference to the holders of shares of any class or series of stock of the Corporation ranking junior to the Series A Junior Participating Preferred Stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) the Adjustment Number (as defined below) times the aggregate per share amount of all cash dividends, and the Adjustment Number times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $0.01 per share, of the Corporation (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. The "Adjustment Number" shall initially be 1/4,860. In the event the Corporation shall at any time after March 12, 1996 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event; provided, however, that upon the effectiveness of the adjustment to the Corporation's common stock capitalization to be undertaken in connection with, but in advance of, the merger in which outstanding shares of Class E Common Stock, par value $0.10 per share of General Motors Corporation, a Delaware corporation, will be converted into Common Stock (whether such adjustment is effected by recapitalization or by dividend on the outstanding shares of Common Stock in Common Stock), the Adjustment Number shall be (in lieu of any other adjustment by reason of the same) 100 (subject to subsequent adjustment as hereinabove provided). (B) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless 2 the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. 3. Voting Rights. The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: (A) Each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to a number of votes equal to the Adjustment Number on all matters submitted to a vote of the stockholders of the Corporation. (B) Except as otherwise provided herein, in the Restated Certificate of Incorporation or by law, the holders of shares of Series A Junior Participating Preferred Stock, the holders of shares of any other class or series entitled to vote with the Common Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C)(i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") that shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, the holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) upon which these or like voting rights have been conferred and are exercisable (the "Voting Preferred Stock") with dividends in arrears in an amount equal to six quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two Directors. (ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that such voting right shall not be exercised unless the holders of at least one-third in number of the shares of Voting Preferred Stock outstanding shall be 3 present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Voting Preferred Stock of such voting right. At any meeting at which the holders of Voting Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two Directors or, if such right is exercised at an annual meeting, to elect two Directors. If the number that may be so elected at any special meeting does not amount to the required number, the holders of the Voting Preferred Stock shall, to the extent not inconsistent with the Restated Certificate of Incorporation, have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Voting Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Voting Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock. (iii) Unless the holders of Voting Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent of the total number of shares of Voting Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Voting Preferred Stock, which meeting shall thereupon be called by the Chairman of the Board, the President, a Vice President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Voting Preferred Stock are entitled to vote pursuant to this paragraph (C)(iii) shall be given to each holder of record of Voting Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or, in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent of the total number of shares of Voting Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any default period, after the holders of Voting Preferred Stock shall have exercised their right to elect Directors voting as a class, (x) the Directors so elected by the holders of Voting Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period, and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C)(ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class or classes of stock which elected the Director whose office shall have become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class or classes of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. 4 (v) Immediately upon the expiration of a default period, (x) the right of the holders of Voting Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Voting Preferred Stock as a class shall terminate and (z) the number of Directors shall be such number as may be provided for in the Restated Certificate of Incorporation or By-Laws irrespective of any increase made pursuant to the provisions of paragraph (C) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the Restated Certificate of Incorporation or By-Laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (D) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 4. Certain Restrictions. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; or (iii) redeem or purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of Series A Junior Participating Preferred Stock, or to all such holders and the holders of any such shares ranking on a parity therewith, upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights 5 and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. 5. Reacquired Shares. Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to any conditions and restrictions on issuance set forth herein. 6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) the Adjustment Number. Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall, subject to the prior rights of all other series of Preferred Stock, if any, ranking prior thereto, receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Series A Junior Participating Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, that rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. 6 (C) Neither the merger or consolidation of the Corporation into or with another corporation nor the merger or consolidation of any other corporation into or with the Corporation shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6, but the sale, lease or conveyance of all or substantially all the Corporation's assets shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6. 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share equal to the Adjustment Number times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. 8. Redemption. (A) The Corporation, at its option, may redeem shares of the Series A Junior Participating Preferred Stock in whole at any time and in part from time to time, at a redemption price equal to the Adjustment Number times the current per share market price (as such term is hereinafter defined) of the Common Stock on the date of the mailing of the notice of redemption, together with unpaid accumulated dividends to the date of such redemption. The "current per share market price" on any date shall be deemed to be the average of the closing price per share of such Common Stock for the ten consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that the current per share market price of the Common Stock is determined during a period following the announcement of (A) a dividend or distribution on the Common Stock other than a regular quarterly cash dividend or (B) any subdivision, combination or reclassification of such Common Stock and the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, shall not have occurred prior to the commencement of such ten Trading Day period, then, and in each such case, the current per share market price shall be properly adjusted to take into account ex-dividend trading. The closing price for each day shall be the last sales price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange, or, if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or, if the Common Stock is not listed or admitted to trading on any national securities exchange but sales price information is reported for such security, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System ("NASDAQ") or such other self-regulatory organization or registered securities information processor (as such terms are used under the Securities Exchange Act of 1934, as amended) that then reports information concerning the Common Stock, or, if sales price information is not so reported, the average of the high bid and low asked prices in the over-the-counter market on such day, as reported by NASDAQ or such other entity, or, if on any such date the Common Stock is not quoted by any such entity, the average of the closing bid and asked prices 7 as furnished by a professional market maker making a market in the Common Stock selected by the Board of Directors of the Corporation. If on any such date no such market maker is making a market in the Common Stock, the fair value of the Common Stock on such date as determined in good faith by the Board of Directors of the Corporation shall be used. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business, or, if the Common Stock is not listed or admitted to trading on any national securities exchange but is quoted by NASDAQ, a day on which NASDAQ reports trades, or, if the Common Stock is not so quoted, a Monday, Tuesday, Wednesday, Thursday or Friday on which banking institutions in the State of Texas are not authorized or obligated by law or executive order to close. (B) In the event that fewer than all the outstanding shares of the Series A Junior Participating Preferred Stock are to be redeemed, the number of shares to be redeemed shall be determined by the Board of Directors and the shares to be redeemed shall be determined by lot or pro rata as may be determined by the Board of Directors or by any other method that may be determined by the Board of Directors in its sole discretion to be equitable. (C) Notice of any such redemption shall be given by mailing to the holders of the shares of Series A Junior Participating Preferred Stock to be redeemed a notice of such redemption, first class postage prepaid, not later than the fifteenth day and not earlier than the sixtieth day before the date fixed for redemption, at their last address as the same shall appear upon the books of the Corporation. Each such notice shall state: (i) the redemption date; (ii) the number of shares to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on the close of business on such redemption date. Any notice that is mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the stockholder received such notice, and failure duly to give such notice by mail, or any defect in such notice, to any holder of Series A Junior Participating Preferred Stock shall not affect the validity of the proceedings for the redemption of any other shares of Series A Junior Participating Preferred Stock that are to be redeemed. On or after the date fixed for redemption as stated in such notice, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the redemption price. If fewer than all the shares represented by any such surrendered certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (D) The shares of Series A Junior Participating Preferred Stock shall not be subject to the operation of any purchase, retirement or sinking fund. 9. Ranking. The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the 8 distribution of assets, unless the terms of any such series shall provide otherwise, and shall rank senior to the Common Stock as to such matters. 10. Amendment. At any time that any shares of Series A Junior Participating Preferred Stock are outstanding, the Restated Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class. 11. Fractional Shares. Series A Junior Participating Preferred Stock may be issued in fractions of a share that shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. 9 IN WITNESS WHEREOF, the undersigned has executed this Certificate and does affirm the foregoing as true this 12th day of March, 1996. /s/ John R. Castle, Jr. ________________________________ John R. Castle, Jr. Senior Vice President EXHIBIT 3(B) AMENDED AND RESTATED BYLAWS OF ELECTRONIC DATA SYSTEMS HOLDING CORPORATION (Adopted as of April 15, 1996) ARTICLE I OFFICES 1.1 Registered Office. The registered office of Electronic Data Systems Holding Corporation (the "Corporation") in the State of Delaware shall be 1013 Centre Road, Wilmington, Delaware. The name of the registered agent at such address is The Prentice-Hall Corporation System, Inc. 1.2 Other Offices. The Corporation may also have offices at such other places both within and outside the State of Delaware as the Board of Directors of the Corporation (the "Board of Directors") may determine from time to time or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS 2.1 Place of Meetings. Meetings of stockholders of the Corporation shall be held at such place within or outside the State of Delaware as may be designated by the Board of Directors or the officer calling the meeting. 2.2 Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held on the third Tuesday of May in each year, at ten o'clock A.M. or on such other date and at such other time as shall be determined by the Board of Directors and set forth in the notice of meeting, and on any subsequent day or days or later time to which such meeting may be adjourned, for the purposes of electing Directors of the Corporation and transacting such other business as may properly come before the meeting. The Board of Directors shall designate the place for the holding of such meeting, and at least 10 days' notice shall be given to the stockholders of the Corporation of the place so fixed. If the day designated herein is a legal holiday, the annual meeting shall be held on the first succeeding day which is not a legal holiday. If for any reason the annual meeting shall not be held on the day designated herein, the Board of Directors shall cause the annual meeting to be held as soon thereafter as may be convenient. Failure to hold an annual meeting at the designated time or otherwise shall not work a dissolution of the Corporation. 2.3 Special Meetings. Unless otherwise provided by the provisions of the General Corporation Law of the State of Delaware, or any successor statute (the "DGCL"), or by or pursuant to the Restated Certificate of Incorporation of the Corporation, as it may be further amended or restated from time to time, including pursuant to any resolution or resolutions adopted in accordance therewith by the Board of Directors providing for the establishment of one or more series of preferred stock of the Corporation (the "Certificate of Incorporation"), special meetings of the stockholders of the Corporation may be called at any time only by the Chairman of the Board of Directors or by the Board of Directors pursuant to a resolution approved by the affirmative vote of at least a majority of the Whole Board, and no such special meeting may be called by any other person or persons (the term "Whole Board" shall mean the total number of Directors of the Corporation as fixed in accordance with the Certificate of Incorporation, whether or not there exist any vacancies in previously authorized directorships). Upon written request of any person or persons referenced in the immediately preceding sentence who are authorized to call special meetings of the stockholders of the Corporation and who have duly called such a special meeting, it shall be the duty of the Secretary of the Corporation to fix the date of the meeting to be held not less than 10 nor more than 60 days after the receipt of the request and to give due notice thereof. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so. Every special meeting of the stockholders of the Corporation shall be held at such place within or outside the State of Delaware as the Board of Directors or the officer calling the meeting may designate. 2.4 Notice of Meeting. Unless otherwise provided by the DGCL, whenever stockholders of the Corporation are required or permitted to take any action at a meeting, written or printed notice of the meeting, stating the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the Chairman of the Board, the Chief Executive Officer or the Secretary of the Corporation, to each stockholder of the Corporation entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to a stockholder of the Corporation at such stockholder's address as it appears on the stock transfer records of the Corporation, with postage thereon prepaid. Notice of any meeting of stockholders of the Corporation need not be given to any stockholder of the Corporation if waived by him in writing in accordance with Section 7.3 hereof. In addition, attendance at a meeting of the stockholders of the Corporation shall constitute a waiver of notice of such meeting, except when a stockholder of the Corporation attends a meeting for the express purpose of objecting (and so expresses such objection at the beginning of the meeting) to the transaction of any business on the ground that the meeting is not lawfully called or convened. -2- 2.5 Registered Holders of Shares; Closing of Share Transfer Records; and Record Date. (a) Registered Holders as Owners. Unless otherwise provided by Delaware law, the Corporation may regard the person in whose name any shares issued by the Corporation are registered in the stock transfer records of the Corporation at any particular time (including, without limitation, as of a record date fixed pursuant to Section 2.5(b) hereof) as the owner of such shares at that time for purposes of voting such shares, receiving distributions thereon or notices in respect thereof, transferring such shares, exercising rights of dissent with respect to such shares, entering into agreements with respect to such shares, or giving proxies with respect to such shares; and neither the Corporation nor any of its officers, Directors, employees or agents shall be liable for regarding that person to be the owner of such shares at that time for those purposes, regardless of whether that person possesses a certificate for such shares. (b) Record Date. For the purpose of determining stockholders of the Corporation entitled to notice of or to vote at any meeting of stockholders of the Corporation or any adjournment thereof, or entitled to receive a distribution by the Corporation (other than a distribution involving a purchase or redemption by the Corporation of any of its own shares) or a share dividend, or in order to make a determination of stockholders of the Corporation for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders of the Corporation, such date in any case to be not more than 60 days, and in the case of a meeting of stockholders of the Corporation, not less than 10 days, prior to the date on which the particular action requiring such determination of stockholders of the Corporation is to be taken. The Board of Directors shall not close the books of the Corporation against transfers of shares during the whole or any part of such period. 2.6 Quorum of Stockholders; Adjournment. Unless otherwise provided by the DGCL or the Certificate of Incorporation, a majority of the outstanding shares of all classes or series of capital stock of the Corporation entitled to vote, present in person or represented by proxy, shall constitute a quorum at any meeting of the stockholders of the Corporation, and the stockholders of the Corporation present at any duly convened meeting may continue to do business at such meeting or at any adjournment thereof notwithstanding any withdrawal from the meeting of holders of shares counted in determining the existence of a quorum. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, any meeting of the stockholders of the Corporation may be adjourned from time to time, without notice other than by announcement at the meeting at which such adjournment is taken, and at any such adjourned meeting at which a quorum shall be present any action may be taken that could have been taken at the meeting originally called; provided, however, that if the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the -3- adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting. 2.7 Voting by Stockholders. ---------------------- (a) Voting on Matters Other Than the Election of Directors. With respect to any matters as to which no other voting requirement is specified by the DGCL, the Certificate of Incorporation or these Bylaws, the affirmative vote required for stockholder action shall be that of at least a majority of the shares present in person or represented by proxy at the meeting (as counted for purposes of determining the existence of a quorum at the meeting). In the case of a matter submitted for a vote of the stockholders of the Corporation as to which a stockholder approval requirement is applicable under the stockholder approval policy of the New York Stock Exchange or any other exchange or quotation system on which the shares of any class or series of capital stock of the Corporation is traded or quoted, the requirements of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any other rule promulgated under the Exchange Act requiring a vote of stockholders, or any provision of the Internal Revenue Code, in each case for which no higher voting requirement is specified by the DGCL, the Certificate of Incorporation or these Bylaws, the vote required for approval shall be the requisite vote specified in such stockholder approval policy, Rule 16b-3 or such other rule promulgated under the Exchange Act or Internal Revenue Code provision, as the case may be (or the highest such requirement if more than one is applicable). For the approval of the appointment of independent public accountants (if submitted for a vote of the stockholders of the Corporation), the vote required for approval shall be at least a majority of the votes cast on the matter. (b) Voting in the Election of Directors. Unless otherwise provided by or pursuant to the Certificate of Incorporation or these Bylaws in accordance with the DGCL, at a meeting of stockholders of the Corporation at which a quorum is present, Directors of the Corporation shall be elected by a plurality of the votes cast by holders of outstanding shares of all classes or series of capital stock of the Corporation entitled to vote in the election of Directors of the Corporation. 2.8 Stockholder Proposals. --------------------- (a) The provisions of Section 2.8(b) hereof shall become effective upon (and notwithstanding any other provision of these Bylaws shall not be effective with respect to any action specified in Section 2.8(b) hereof to be taken on any date prior to) the first date on which the Corporation has outstanding a class of equity securities registered under the Exchange Act (the "Public Status Date"). -4- (b) At an annual meeting of stockholders of the Corporation, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before such annual meeting. To be properly brought before an annual meeting, business or proposals must (i) be specified in the notice relating to the meeting (or any supplement thereto) given by or at the direction of the Board of Directors in accordance with Section 2.4 hereof or (ii) be properly brought before the meeting by a stockholder of the Corporation who (A) is a stockholder of record at the time of the giving of such stockholder's notice provided for in this Section 2.8(b), (B) shall be entitled to vote at the annual meeting and (C) complies with the requirements of this Section 2.8(b), and otherwise be proper subjects for stockholder action and be properly introduced at the annual meeting. For a proposal to be properly brought before an annual meeting by a stockholder of the Corporation, in addition to any other applicable requirements, such stockholder must have given timely advance notice thereof in writing to the Secretary of the Corporation. To be timely, such stockholder's notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than 90 days nor more than 150 days prior to the scheduled annual meeting date, regardless of any postponements, deferrals or adjournments of such annual meeting to a later date; provided, however, that if the scheduled annual meeting date differs from the annual meeting date prescribed by these Bylaws as in effect on the date of the next preceding annual meeting of stockholders of the Corporation and if less than 100 days' prior notice or public disclosure of the scheduled annual meeting date is given or made, notice by such stockholder, to be timely, must be so delivered or received not later than the close of business on the 10th day following the earlier of the day on which the notice of such meeting was mailed to stockholders of the Corporation or the day on which such public disclosure was made. Any such stockholder's notice to the Secretary of the Corporation shall set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation's books, of such stockholder proposing such business and any other stockholders of the Corporation known by such stockholder to be in favor of such proposal, (iii) the number of shares of each class or series of capital stock of the Corporation Beneficially Owned (as defined below) by such stockholder on the date of such notice and (iv) any material interest of such stockholder in such proposal. A person shall be the "beneficial owner" of any shares of any class or series of capital stock of the Corporation of which such person would be the beneficial owner pursuant to the terms of Rule 13d-3 promulgated under the Exchange Act as in effect on March 12, 1996; stock shall be deemed "Beneficially Owned" by the beneficial owner or owners thereof. The presiding officer of the meeting of stockholders of the Corporation shall determine whether the requirements of this Section 2.8(b) have been met with respect to any stockholder proposal. If the presiding officer determines that any stockholder proposal was not made in accordance with the terms of this Section 2.8(b), he shall -5- so declare at the meeting and any such proposal shall not be acted upon at the meeting. At a special meeting of stockholders of the Corporation, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before such special meeting. To be properly brought before such a special meeting, business or proposals must (i) be specified in the notice relating to the meeting (or any supplement thereto) given by or at the direction of the Board of Directors in accordance with Section 2.4 hereof or (ii) constitute matters incident to the conduct of the meeting as the presiding officer of the meeting shall determine to be appropriate. In addition to the foregoing provisions of this Section 2.8(b), a stockholder of the Corporation shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.8(b). ARTICLE III DIRECTORS 3.1 Number, Classification and Tenure. --------------------------------- (a) The powers of the Corporation shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed by or under the direction of, the Board of Directors. In addition to the authority and powers conferred upon the Board of Directors by the DGCL, the Certificate of Incorporation or these Bylaws, the Board of Directors is hereby authorized and empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject to the provisions of the DGCL, the Certificate of Incorporation and any Bylaw of the Corporation adopted by the stockholders of the Corporation; provided, however, that no Bylaw of the Corporation hereafter adopted by the stockholders of the Corporation, nor any amendment thereto, shall invalidate any prior act of the Board of Directors that would have been valid if such Bylaw or amendment thereto had not been adopted. (b) On and after the Public Status Date and except as otherwise provided by the Certificate of Incorporation or these Bylaws or to the extent prohibited by Delaware law, the Board of Directors shall have the right to establish the rights, powers, duties, rules and procedures that (i) from time to time shall govern the Board of Directors, including, without limiting the generality of the foregoing, the vote required for any action by the Board of Directors and (ii) from time to time shall affect the Directors' power to manage the business and affairs of the Corporation. (c) Within the limits specified in the Certificate of Incorporation, and subject to such rights of holders of shares of one or more outstanding series of preferred stock of the Corporation to elect one or more Directors of the Corporation under circumstances -6- as shall be provided by or pursuant to the Certificate of Incorporation, the number of Directors of the Corporation that shall constitute the Board of Directors shall be fixed from time to time exclusively by, and may be increased or decreased from time to time exclusively by, the affirmative vote of at least a majority of the Whole Board. (d) Each Director of the Corporation shall hold office for the full term for which such Director is elected and until such Director's successor shall have been duly elected and qualified or until his earlier death, resignation or removal in accordance with the Certificate of Incorporation and these Bylaws. (e) On and after the Public Status Date, the Directors of the Corporation, other than those who may be elected by holders of shares of one or more outstanding series of preferred stock of the Corporation under circumstances as shall be provided by or pursuant to the Certificate of Incorporation, shall be divided into three classes as provided by the Certificate of Incorporation. (f) Unless otherwise provided by or pursuant to the Certificate of Incorporation, newly created directorships resulting from any increase in the authorized number of Directors of the Corporation and any vacancies on the Board of Directors resulting from death, resignation or removal in accordance with the Certificate of Incorporation and these Bylaws shall be filled only by the affirmative vote of at least a majority of the remaining Directors of the Corporation then in office, even if such remaining Directors constitute less than a quorum of the Board of Directors. Any Director of the Corporation elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors of the Corporation in which the new directorship was created or the vacancy occurred and until such Director's successor shall have been elected and qualified or until his earlier death, resignation or removal in accordance with the Certificate of Incorporation and these Bylaws. Unless otherwise provided by or pursuant to the Certificate of Incorporation, no decrease in the number of Directors of the Corporation constituting the Board of Directors shall shorten the term of any incumbent Director of the Corporation. The term "Voting Stock" shall mean all outstanding shares of all classes and series of capital stock of the Corporation entitled to vote generally in the election of Directors of the Corporation, considered as one class; and, if the Corporation shall have shares of Voting Stock entitled to more or less than one vote for any such share, each reference in these Bylaws to a proportion or percentage in voting power of Voting Stock shall be calculated by reference to the portion or percentage of votes entitled to be cast by holders of such shares generally in the election of Directors of the Corporation. 3.2 Qualifications. Directors of the Corporation need not be residents of the State of Delaware or stockholders of the Corporation. -7- 3.3 Nomination of Directors. ----------------------- (a) The provisions of Section 3.3(b) hereof shall become effective upon (and notwithstanding any other provision of these Bylaws shall not be effective with respect to any action specified in Section 3.3(b) hereof to be taken on any date prior to) the Public Status Date. (b) Subject to such rights of holders of shares of one or more outstanding series of preferred stock of the Corporation to elect one or more Directors of the Corporation under circumstances as shall be provided by or pursuant to the Certificate of Incorporation, only persons who are nominated in accordance with the procedures set forth in this Section 3.3(b) shall be eligible for election as, and to serve as, Directors of the Corporation. Nominations of persons for election to the Board of Directors may be made only at an annual meeting of the stockholders of the Corporation at which Directors of the Corporation are to be elected (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who is a stockholder of record at the time of the giving of such stockholder's notice provided for in this Section 3.3(b), who shall be entitled to vote at such meeting in the election of Directors of the Corporation and who complies with the requirements of this Section 3.3(b). Any such nomination by a stockholder of the Corporation shall be preceded by timely advance notice in writing to the Secretary of the Corporation. To be timely, such stockholder's notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than 90 days nor more than 150 days prior to the scheduled annual meeting date, regardless of any postponements, deferrals or adjournments of such annual meeting to a later date; provided, however, that if the scheduled annual meeting date differs from the annual meeting date prescribed by these Bylaws as in effect on the date of the next preceding annual meeting of stockholders of the Corporation and if less than 100 days' prior notice or public disclosure of the scheduled meeting date is given or made, notice by such stockholder, to be timely, must be so delivered or received not later than the close of business on the 10th day following the earlier of the day on which the notice of such meeting was mailed to stockholders of the Corporation or the day on which such public disclosure was made. Any such stockholder's notice to the Secretary of the Corporation shall set forth (i) as to each person whom such stockholder proposes to nominate for election or re-election as a Director of the Corporation, (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the number of shares of each class or series of capital stock of the Corporation Beneficially Owned by such person on the date of such notice and (D) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors of the Corporation, or is otherwise required, in each case pursuant to Regulation 14A promulgated under the Exchange Act (including, without limitation, the written consent of such person to having such person's name placed -8- in nomination at the meeting and to serve as a Director of the Corporation if elected), and (ii) as to such stockholder giving the notice, (A) the name and address, as they appear on the Corporation's books, of such stockholder and any other stockholders of the Corporation known by such stockholder to be in favor of such person being nominated and (B) the number of shares of each class or series of capital stock of the Corporation Beneficially Owned by such stockholder on the date of such notice. The presiding officer of the meeting of stockholders of the Corporation shall determine whether the requirements of this Section 3.3(b) have been met with respect to any nomination or intended nomination. If the presiding officer determines that any nomination was not made in accordance with the requirements of this Section 3.3(b), he shall so declare at the meeting and the defective nomination shall be disregarded. In addition to the foregoing provisions of this Section 3.3(b), a stockholder of the Corporation shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 3.3(b). 3.4 Place of Meeting. Meetings of the Board of Directors, regular or special, may be held either within or outside of the State of Delaware, at whatever place is specified by the person or persons calling the meeting. In the absence of specific designation, the meetings shall be held at the principal office of the Corporation. 3.5 Regular Meetings. Regular meetings of the Board of Directors shall be held at such place or places within or outside the State of Delaware, at such hour and on such day as may be fixed by resolution of the Board of Directors, without further notice of such meetings. The time or place of holding regular meetings of the Board of Directors may be changed by the Chairman of the Board or the Chief Executive Officer by giving written notice thereof as provided by Section 3.7 hereof. 3.6 Special Meetings. Special meetings of the Board of Directors shall be held, whenever called by the Chairman of the Board or the Chief Executive Officer or Directors of the Corporation constituting at least a majority of the Whole Board, at such place or places within or outside the State of Delaware as may be stated in the notice of the meeting. 3.7 Attendance at and Notice of Meetings. Written notice of the time and place of, and general nature of the business to be transacted at, all special meetings of the Board of Directors, and written notice of any change in the time or place of holding the regular meetings of the Board of Directors, shall be given to each Director of the Corporation personally or by mail or by telegraph, telecopier or similar communication at least one day before the day of the meeting; provided, however, that notice of any meeting need not be given to any Director of the Corporation if waived by him in writing in accordance with Section 7.3 hereof, or if he shall be present at such meeting. Attendance at a meeting of the Board of Directors shall constitute presence in person at such meeting, except when a Director of the Corporation attends a meeting for the express purpose of objecting (and so expresses such objection at -9- the beginning of the meeting) to the transaction of any business on the ground that the meeting is not lawfully called or convened. 3.8 Quorum of and Action by Directors. A majority of the Directors of the Corporation in office (i.e., excluding any directorships in which vacancies may exist) shall constitute a quorum of the Board of Directors for the transaction of business; but a lesser number may adjourn from day to day until a quorum is present. Unless otherwise required by the Certificate of Incorporation, the DGCL or these Bylaws, the affirmative vote of at least a majority of the Directors of the Corporation present at a meeting at which a quorum is present, shall be the act of the Board of Directors. 3.9 Board and Committee Action Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at a meeting of the Board of Directors or any committee thereof may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the Directors of the Corporation or members of such committee, as the case may be, and shall be filed with the Secretary of the Corporation. 3.10 Board and Committee Telephone Meetings. Subject to the provisions required or permitted by the DGCL for notice of meetings, unless otherwise restricted by the Certificate of Incorporation or these Bylaws, Directors of the Corporation, or members of any committee designated by the Board of Directors, may participate in and hold a meeting of such Board of Directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.10 shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting (and so expresses such objection at the beginning of the meeting) to the transaction of any business on the ground that the meeting is not lawfully called or convened. 3.11 Compensation. Directors of the Corporation shall receive such compensation for their services as shall be determined by the Board of Directors. 3.12 Removal. (a) No Director of the Corporation shall be removed from such office by vote or other action of the stockholders of the Corporation or otherwise, except by the affirmative vote of holders of at least a majority of the then outstanding Voting Stock, voting together as a single class. Prior to the Public Status Date, any such removal of a Director of the Corporation may be with or without cause. On and after the Public Status Date, no Director of the Corporation shall be removed from such office by vote or other action of the stockholders of the Corporation or otherwise, except for cause, which shall be deemed to exist only if: (i) such Director has been convicted, or such Director is granted immunity to testify where another has been convicted, of -10- a felony by a court of competent jurisdiction (and such conviction is no longer subject to direct appeal); (ii) such Director has been found by a court of competent jurisdiction (and such finding is no longer subject to direct appeal) or by the affirmative vote of at least a majority of the Whole Board at any regular or special meeting of the Board of Directors called for such purpose to have been grossly negligent or guilty of willful misconduct in the performance of his duties to the Corporation in a matter of substantial importance to the Corporation; (iii) such Director has been adjudicated by a court of competent jurisdiction to be mentally incompetent, which mental incompetency directly affects his ability to perform as a Director of the Corporation; (iv) such Director has been found by a court of competent jurisdiction (and such finding is no longer subject to direct appeal) or by the affirmative vote of at least a majority of the Whole Board at any regular or special meeting of the Board of Directors called for such purpose to have breached such Director's duty of loyalty to the Corporation or its stockholders or to have engaged in any transaction with the Corporation from which such Director derived an improper personal benefit; or (v) "cause" for removal otherwise exists under Section 141(k)(1) of the DGCL. No Director of the Corporation so removed may be nominated, re-elected or reinstated as a Director of the Corporation so long as the cause for removal continues to exist. On and after the Public Status Date, any proposal by a stockholder of the Corporation to remove a Director of the Corporation, in order to be validly acted upon at any meeting, shall comply with Section 2.8(b) hereof. (b) Notwithstanding Section 3.12(a) hereof, whenever holders of shares of one or more outstanding series of preferred stock of the Corporation are entitled to elect one or more Directors of the Corporation under circumstances as shall be provided by or pursuant to the Certificate of Incorporation, any Director of the Corporation so elected may be removed in accordance with such provisions. 3.13 Committees of the Board of Directors. (a) The Board of Directors, by resolution adopted by the affirmative vote of at least a majority of the Board of Directors, may designate and appoint from among its members one or more committees, each of which shall be comprised of one or more of its members, and may designate one or more of its members as alternate members of any committee, who may, subject to any limitations by the Board of Directors, replace absent or disqualified members at any meeting of that committee. Any such committee, to the extent provided by such resolution or in the Certificate of Incorporation or these Bylaws, shall have and may exercise all of the authority of the Board of Directors to the extent permitted by the DGCL. (b) The Board of Directors shall have the power at any time to change the membership of any committee of the Board of Directors and to fill vacancies in it. A majority of -11- the number of members of any such committee (excluding any committee memberships in which vacancies may exist) shall constitute a quorum of such committee for the transaction of business unless a greater number is required by a resolution adopted by the Board of Directors. The Board of Directors, or each such committee in the absence of action by the Board of Directors, may elect a chairman of such committee and appoint such subcommittees and assistants as it may deem necessary. Unless otherwise provided by resolution of the Board of Directors, meetings of any committee shall be conducted (i) in accordance with Sections 3.9, 3.10 and 7.3 hereof and (ii) in the same manner that Sections 3.5, 3.6, 3.7 and 3.8 hereof apply to meetings of the Board of Directors. Any member of any such committee designated or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of a member of a committee shall not of itself create contract rights. (c) Any action taken by any committee of the Board of Directors shall promptly be recorded in the minutes and filed with the Secretary of the Corporation and shall be made available to any and all Directors of the Corporation. ARTICLE IV OFFICERS 4.1 Officers. The officers of the Corporation shall consist of a Chief Executive Officer, a President, any number of Vice Presidents, a Secretary, a Chief Financial Officer, a Treasurer and a Controller, each of whom shall be elected or appointed by the Board of Directors. Such other officers of the Corporation, including a Chairman of the Board, a Vice Chairman of the Board, a Chief Operating Officer, Senior Vice Presidents, assistant officers of the Corporation, and agents as may be deemed necessary, may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person. Employees of the Corporation who serve in a capacity with an officer's title for a Division, Strategic Business Unit, Strategic Support Unit or a similar division or subdivision of the Corporation shall not be deemed officers of the Corporation with respect to such capacity. All officers and agents of the Corporation, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as is provided by these Bylaws, or as may be determined by resolution of the Board of Directors not inconsistent with these Bylaws. 4.2 Vacancies. Whenever any vacancies shall occur in any office of the Corporation by death, resignation, removal, increase in the number of offices of the Corporation, or otherwise, the same shall be filled by the Board of Directors. If any such vacancy shall occur by death, resignation or removal of an officer who was appointed by the Chief Executive Officer, the -12- Secretary, the Treasurer or the Controller in accordance with these Bylaws, such vacancy may also be filled by the Chief Executive Officer, the Secretary, the Treasurer or the Controller, as applicable. Any officer so elected or appointed shall hold office until such officer's successor is elected or appointed or until his earlier death, resignation or removal. 4.3 Removal. Any officer or agent elected or appointed by the Board of Directors or appointed by the Chief Executive Officer, the Secretary, the Treasurer or the Controller may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby. Any officer or agent appointed by the Chief Executive Officer, the Secretary, the Treasurer or the Controller may be removed by the officer (or such officer's successor) who appointed such officer or agent whenever in the judgment of the appointing officer (or such officer's successor) the best interests of the Corporation will be served thereby. Any such removal shall be without prejudice to the contract rights, if any, of the officer or agent so removed. Election or appointment of an officer or agent shall not of itself create contract rights. 4.4 Chairman of the Board. The Board of Directors may elect or appoint, from among its members, a Chairman of the Board of the Corporation. The Chairman of the Board, when present, shall preside at all meetings of the stockholders of the Corporation and of the Board of Directors. The Chairman of the Board shall perform, under the direction and subject to the control of the Board of Directors, all duties incident to the office of Chairman of the Board and such other duties as the Board of Directors may assign to the Chairman of the Board from time to time. The Chairman of the Board may execute (in facsimile or otherwise) and deliver certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts or other instruments that the Board of Directors has authorized to be executed and delivered, except in cases where the execution and delivery thereof shall be expressly and exclusively delegated to one or more other officers or agents of the Corporation by the Board of Directors or these Bylaws, or where the execution and delivery thereof shall be required by law to be executed and delivered by another person. The Chairman of the Board shall have the power and authority to appoint one or more Vice Presidents of the Corporation, including Senior Vice Presidents and Assistant Vice Presidents, which power shall not be exclusive of any right of the Board of Directors, the Vice Chairman of the Board, the Chief Executive Officer or the President to elect or appoint such officers. 4.5 Vice Chairman of the Board. The Board of Directors may elect or appoint, from among its members, a Vice Chairman of the Board of the Corporation. The Vice Chairman of the Board shall perform, under the direction and subject to the control of the Board of Directors and the Chairman of the Board, all duties incident to the office of Vice Chairman of the Board and such other duties as the Board of Directors or the Chairman of the Board may assign to the Vice Chairman of the Board from time to time. In the event of the death, disability or other absence of the Chairman of the Board, the duties of the Chairman of the Board may be performed by the Vice Chairman of the Board. The Vice Chairman of the -13- Board may execute (in facsimile or otherwise) and deliver certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts or other instruments that the Board of Directors has authorized to be executed and delivered, except in cases where the execution and delivery thereof shall be expressly and exclusively delegated to one or more other officers or agents of the Corporation by the Board of Directors or these Bylaws, or where the execution and delivery thereof shall be required by law to be executed and delivered by another person. The Vice Chairman of the Board shall have the power and authority to appoint one or more Vice Presidents of the Corporation, including Senior Vice Presidents and Assistant Vice Presidents, which power shall not be exclusive of any right of the Board of Directors, the Chairman of the Board, the Chief Executive Officer or the President to elect or appoint such officers. 4.6 Chief Executive Officer. The Chief Executive Officer in general shall supervise and control all of the business and affairs of the Corporation, under the direction and subject to the control of the Board of Directors, the Chairman of the Board and such other officer or officers as the Board of Directors or the Chairman of the Board may designate. The Chief Executive Officer shall perform, under the direction and subject to the control of the Board of Directors, the Chairman of the Board and such other officer or officers as the Board of Directors or the Chairman of the Board may designate, all duties incident to the office of Chief Executive Officer and such other duties as the Board of Directors, the Chairman of the Board or such other officer or officers may assign to the Chief Executive Officer from time to time. The Chief Executive Officer may execute (in facsimile or otherwise) and deliver certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts or other instruments that the Board of Directors has authorized to be executed and delivered, except in cases where the execution and delivery thereof shall be expressly and exclusively delegated to one or more other officers or agents of the Corporation by the Board of Directors or these Bylaws, or where the execution and delivery thereof shall be required by law to be executed and delivered by another person. The Chief Executive Officer shall have the power and authority to appoint one or more Vice Presidents of the Corporation, including Senior Vice Presidents and Assistant Vice Presidents, which power shall not be exclusive of any right of the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board or the President to elect or appoint such officers. 4.7 President. The President shall perform, under the direction and subject to the control of the Board of Directors, the Chairman of the Board and such other officer or officers as the Board of Directors or the Chairman of the Board may designate, all duties incident to the office of President and such other duties as the Board of Directors, the Chairman of the Board or such other officer or officers may assign to the President from time to time. In the event of the death, disability or other absence of the Chairman of the Board and the Vice Chairman of the Board, the duties of the Chairman of the Board may be performed by the President. The President may execute (in facsimile or otherwise) and deliver certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts or other instruments that the Board of Directors has authorized to be executed and delivered, except in cases where the execution -14- and delivery thereof shall be expressly and exclusively delegated to one or more other officers or agents of the Corporation by the Board of Directors or these Bylaws, or where the execution and delivery thereof shall be required by law to be executed and delivered by another person. The President shall have the power and authority to appoint one or more Vice Presidents of the Corporation, including Senior Vice Presidents and Assistant Vice Presidents, which power shall not be exclusive of any right of the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board or the Chief Executive Officer to elect or appoint such officers. 4.8 Chief Operating Officer. The Chief Operating Officer shall perform, under the direction and subject to the control of the Board of Directors, the Chairman of the Board and such other officer or officers as the Board of Directors or the Chairman of the Board may designate, all duties incident to the office of Chief Operating Officer and such other duties as the Board of Directors, the Chairman of the Board or such other officer or officers may assign to the Chief Operating Officer from time to time. The Chief Operating Officer may execute (in facsimile or otherwise) and deliver any deeds, mortgages, bonds, contracts or other instruments that the Board of Directors has authorized to be executed and delivered, except in cases where the execution and delivery thereof shall be expressly and exclusively delegated to one or more other officers or agents of the Corporation by the Board of Directors or these Bylaws, or where the execution and delivery thereof shall be required by law to be executed and delivered by another person. 4.9 Vice President. Each Vice President of the Corporation shall perform, under the direction and subject to the control of the Board of Directors, the Chairman of the Board and such other officer or officers as the Board of Directors or the Chairman of the Board may designate, such duties as the Board of Directors, the Chairman of the Board or such other officer or officers may assign to such Vice President from time to time. 4.10 Secretary. The Secretary of the Corporation shall attend all meetings of the stockholders of the Corporation, the Board of Directors and committees established by the Board of Directors (except where the committee has appointed its own secretary) and shall record correctly the proceedings of such meetings in a book suitable for such purposes. The Secretary shall attest with a signature and the seal of the Corporation (in facsimile or otherwise) all stock certificates issued by the Corporation and shall keep a stock ledger in which all transactions pertaining to shares of all classes and series of capital stock of the Corporation shall be correctly recorded. The Secretary, or the President, shall also attest with a signature and the seal of the Corporation (in facsimile or otherwise) all deeds, conveyances or other instruments requiring the seal of the Corporation. The Secretary shall have the power and authority on behalf of the Corporation to execute any consents of stockholders, members, partners or other owners and to attend, and to act and to vote in person or by proxy in connection with, any meetings of the stockholders, members, partners or other owners of any corporation, limited liability company, partnership or other entity in which the Corporation may own stock, membership interests, partnership interests or other securities, -15- and in connection with any such meeting, the Secretary shall possess and may exercise any and all the rights and powers incident to the ownership of such stock, membership interests, partnership interests or other securities that the Corporation, as the owner thereof, may possess and exercise. This power and authority shall not be exclusive of any right of the Board of Directors to grant such power and authority to any other person. The Chairman of the Board, the Chief Executive Officer or the Secretary shall give, or cause to be given, notice of all meetings of the stockholders of the Corporation and special meetings of the Board of Directors or committees established by the Board of Directors. The Secretary is authorized to issue certificates, to which the corporate seal may be affixed, attesting to the incumbency of officers of the Corporation or to actions duly taken by the stockholders of the Corporation, the Board of Directors or any committee established by the Board of Directors. The Secretary shall perform, under the direction and subject to the control of the Board of Directors, the Chairman of the Board and such other officer or officers as the Board of Directors or the Chairman of the Board may designate, all duties incident to the office of Secretary and such other duties as the Board of Directors, the Chairman of the Board or such other officer or officers may assign to the Secretary from time to time. The duties of the Secretary may also be performed by any Assistant Secretary of the Corporation. The Secretary shall have the power and authority to appoint one or more Assistant Secretaries of the Corporation, which power shall not be exclusive of any right of the Board of Directors to elect or appoint such officer. 4.11 Chief Financial Officer. The Chief Financial Officer of the Corporation in general shall supervise all of the financial affairs of the Corporation, under the direction and subject to the control of the Board of Directors and the President. The Chief Financial Officer shall have the power and authority on behalf of the Corporation to execute (in facsimile or otherwise) any consents of stockholders, members, partners or other owners and to attend, and to act and to vote in person or by proxy in connection with, any meetings of stockholders, members, partners or other owners of any corporation, limited liability company, partnership or other entity in which the Corporation may own stock, membership interests, partnership interests or other securities, and in connection with any such meeting, the Chief Financial Officer shall possess and may exercise any and all the rights and powers incident to the ownership of such stock, membership interests, partnership interests or other securities that the Corporation, as the owner thereof, may possess and exercise. This power and authority shall not be exclusive of any right of the Board of Directors to grant such power and authority to any other person. The Chief Financial Officer shall perform, under the direction and subject to the control of the Board of Directors, the Chairman of the Board and such other officer or officers as the Board of Directors or the Chairman of the Board may designate, all duties incident to the office of Chief Financial Officer and such other duties as the Board of Directors, the Chairman of the Board or such other officer or officers may assign to the Chief Financial Officer from time to time. 4.12 Treasurer. The Treasurer of the Corporation shall have the care and custody of all the funds, notes, bonds, debentures, stock and other securities of the Corporation that may come into -16- the hands of the Treasurer, acting in such capacity. The Treasurer shall be responsible for the investment and reinvestment of funds of the Corporation in accordance with general investment policies determined from time to time by the Corporation and shall ensure that the Corporation is adequately funded at all times by arranging, under the direction and subject to the control of the Board of Directors, for the issuance of debt, equity and other forms of securities that may be necessary or appropriate. The Treasurer may endorse (in facsimile or otherwise) checks, drafts, notes, bonds, debentures and other instruments for the payment of money for deposit or collection when necessary or appropriate and may deposit the same to the credit of the Corporation in such banks or depositories as the Board of Directors may designate from time to time, and the Treasurer may endorse (in facsimile or otherwise) all commercial documents requiring endorsements for or on behalf of the Corporation. The Treasurer may deliver instructions to financial institutions by facsimile or otherwise. The Treasurer may execute (in facsimile or otherwise) all receipts and vouchers for payments made to the Corporation. The Treasurer shall render an account of the Treasurer's transactions to the Board of Directors or its Audit Committee as often as the Board of Directors or its Audit Committee shall require from time to time. The Treasurer shall enter regularly in the books to be kept by the Treasurer for that purpose, a full and adequate account of all monies received and paid by the Treasurer on account of the Corporation. The Treasurer shall have the power and authority on behalf of the Corporation to execute (in facsimile or otherwise) any consents of stockholders, members, partners or other owners and to attend, and to act and to vote in person or by proxy in connection with, any meetings of stockholders, members, partners or other owners of any corporation, limited liability company, partnership or other entity in which the Corporation may own stock, membership interests, partnership interests or other securities and in connection with any such meeting, the Treasurer shall possess and may exercise any and all the rights and powers incident to the ownership of such stock, membership interests, partnership interests or other securities that the Corporation, as the owner thereof, may possess and exercise. This power and authority shall not be exclusive of any right of the Board of Directors to grant such power and authority to any other person. If requested by the Board of Directors, the Treasurer shall give a bond to the Corporation for the faithful performance of the Treasurer's duties, the expense of which bond shall be borne by the Corporation. The Treasurer shall perform, under the direction and subject to the control of the Board of Directors, the Chairman of the Board and such other officer or officers as the Board of Directors or the Chairman of the Board may designate, all duties incident to the office of Treasurer and such other duties as the Board of Directors, the Chairman of the Board or such other officer or officers may assign to the Treasurer from time to time. The duties of the Treasurer may also be performed by any Assistant Treasurer of the Corporation. The Treasurer shall have the power and authority to appoint one or more Assistant Treasurers of the Corporation, which power shall not be exclusive of any right of the Board of Directors to elect or appoint such officer. 4.13 Controller. The Controller of the Corporation shall be the chief accounting officer of the Corporation, shall maintain adequate records of all assets, liabilities and transactions of the -17- Corporation and shall be responsible for the design, installation and maintenance of accounting and cost control systems and procedures throughout the Corporation. The Controller also shall keep in books belonging to the Corporation full and accurate accounts of receipts of, and disbursements made by, the Corporation. The Controller shall render an account of the Controller's transactions to the Board of Directors or its Audit Committee as often as the Board of Directors or its Audit Committee shall require from time to time. If requested by the Board of Directors, the Controller shall give a bond to the Corporation for the faithful performance of the Controller's duties, the expense of which bond shall be borne by the Corporation. The Controller shall perform, under the direction and subject to the control of the Board of Directors, the Chairman of the Board and such other officer or officers as the Board of Directors or the Chairman of the Board may designate, all duties incident to the office of Controller and such other duties as the Board of Directors, the Chairman of the Board or such other officer or officers may assign to the Controller from time to time. The duties of the Controller may also be performed by any Assistant Controller of the Corporation. The Controller shall have the power and authority to appoint one or more Assistant Controllers of the Corporation, which power shall not be exclusive of any right of the Board of Directors to elect or appoint such officer. 4.14 Delegation of Authority. In the case of any absence of any officer of the Corporation or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate in writing some or all of the powers or duties of such officer to any other officer or to any Director, employee, stockholder or agent of the Corporation for whatever period of time the Board of Directors deems appropriate. ARTICLE V CAPITAL STOCK 5.1 Stock Certificates. The certificates representing shares of all classes or series of capital stock of the Corporation shall be in such form or forms as shall be approved by the Board of Directors, or the Corporation's stock may be represented by uncertificated shares. In the case of certificated shares, the Corporation shall deliver certificates representing shares to which stockholders of the Corporation are entitled. Certificates representing such certificated shares shall be signed by the Chairman of the Board, the Vice Chairman of the Board, the President or a Vice President and either the Treasurer, the Assistant Treasurer, the Secretary or an Assistant Secretary, and may, but shall not be required to, bear the seal of the Corporation or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles. In the event the original or facsimile signature on a certificate is of an officer who has ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer at the date of its issuance. -18- ARTICLE VI INDEMNIFICATION 6.1 General. Each person who at any time shall serve or shall have served as a Director, officer, employee or agent of the Corporation (including any predecessor of the Corporation), or any person who is or was serving at the written request of the Corporation (in accordance with written procedures adopted from time to time by the Board of Directors) as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, shall be entitled to (a) indemnification and (b) the advancement of expenses incurred by such person from the Corporation as, and to the fullest extent, permitted by Section 145 of the DGCL or any successor statutory provision, as from time to time amended. The foregoing right of indemnification and to the advancement of expenses shall not be deemed exclusive of any other rights to which those to be indemnified may be entitled as a matter of law or under any agreement, vote of stockholders or disinterested Directors of the Corporation, or other arrangement. 6.2 Insurance. The Corporation may purchase and maintain insurance or another arrangement on behalf of any person who is or was a Director, officer, employee or agent of the Corporation or who is or was serving at the written request of the Corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise against any liability asserted against and incurred by such person in such capacity or arising out of such person's status in such capacity, whether or not the Corporation would have the power to indemnify such person against that liability under this Article VI or the DGCL. ARTICLE VII MISCELLANEOUS PROVISIONS 7.1 Bylaw Amendments. The Board of Directors is expressly empowered to adopt, amend or repeal these Bylaws. Any adoption, amendment or repeal of these Bylaws by the Board of Directors shall require, in addition to any other affirmative vote that may be required by law, the Certificate of Incorporation or these Bylaws, the affirmative vote of at least a majority of the Whole Board. The stockholders of the Corporation shall also have the power to adopt, amend or repeal these Bylaws at any annual or special meeting, by the affirmative vote of holders of at least 66-2/3% of the then outstanding Voting Stock, voting together as a single class, in addition to any other affirmative vote that may be required by law, the Certificate of Incorporation or these Bylaws. On and after the Public Status Date, any proposal by a stockholder of the Corporation to adopt, amend or repeal these Bylaws, in order to be validly acted upon at any meeting, shall comply with Section 2.8(b) hereof. -19- 7.2 Books and Records. The Corporation shall keep books and records of account and shall keep minutes of the proceedings of its stockholders, its Board of Directors and each committee of its Board of Directors. 7.3 Waiver of Notice. Whenever any notice is required to be given to any stockholder of the Corporation, any Director of the Corporation or any member of any committee of the Board of Directors, under the provisions of the DGCL, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Neither the business transacted at, nor the purpose of, any regular or special meeting of such stockholders, Directors or committees need be stated in the written waiver of notice of such meeting. 7.4 Resignations. Any Director or officer of the Corporation may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer or the Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided by the resignation. 7.5 Seal. The seal of the Corporation shall be in such form as the Board of Directors may adopt. 7.6 Fiscal Year. The fiscal year of the Corporation shall end on the 31st day of December of each year or as otherwise provided by a resolution adopted by the Board of Directors. -20- EXHIBIT 5 BAKER & BOTTS, L.L.P. 2001 Ross Avenue Dallas, Texas 75201 April 16, 1996 Electronic Data Systems Holding Corporation 5400 Legacy Drive Plano, Texas 75024-3105 Gentlemen: As set forth in the Registration Statement on Form S-4 (the "Registration Statement") to be filed by Electronic Data Systems Holding Corporation, a Delaware corporation (the "Company"), under the Securities Act of 1933, as amended, relating to the distribution of 485,732,594 shares (the "Shares") of the Company's Common Stock, par value $0.01 per share ("Company Common Stock"), the validity of the Shares is being passed upon for you by us. At your request this opinion is being furnished to you for filing as Exhibit 5 to the Registration Statement. As set forth in the Registration Statement, the distribution of the Shares will occur in connection with the consummation of the merger (the "Split-Off Merger") of GM Mergeco Corporation, a Delaware corporation ("Mergeco"), with and into General Motors Corporation, a Delaware corporation ("General Motors"), pursuant to the Agreement and Plan of Merger (the "Split-Off Merger Agreement") to be entered into between General Motors and Mergeco. The Split-Off Merger Agreement provides that each issued and outstanding share of General Motors Class E Common Stock, par value $0.10 per share, shall be converted into one Share. In our capacity as your counsel in the connection referred to above, we have familiarized ourselves with (i) the Restated Certificate of Incorporation and Amended and Restated Bylaws of the Company, each as amended to date; (ii) the Split-Off Merger Agreement, in the form attached as Appendix A to the Solicitation Statement/Prospectus forming a part of the Registration Statement; (iii) the Agreement and Plan of Merger (the "Interco Merger Agreement") to be entered into between the Company and Electronic Data Systems Intermediate Corporation, a Delaware corporation ("Interco"), in the form provided to us by the Company, pursuant to which, immediately prior to the consummation of the Split-Off Merger, Interco shall merge with and into the Company and the issued and outstanding shares of the Company shall be converted into 487,555,556 shares of Company Common Stock; (iv) certain corporate records of the Company, including minutes of the Company as furnished to us by representatives of the Company; (v) certificates of public officials and of representatives of the Company; and (vi) statutes and other instruments and documents pertaining to the Company, as a basis for the opinions hereinafter expressed. In giving such Electronic Data Systems Holding Corporation Page 2 April 16, 1996 opinions, we have relied upon certificates of public officials and representatives of the Company with respect to the accuracy of the material factual matters contained in such certificates. Based on our examination as aforesaid, and subject to the assumptions, limitations and qualifications hereinafter set forth, we are of the opinion that: 1. The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware. 2. When the Interco Merger has become effective under the laws of the State of Delaware in accordance with the terms of the Interco Merger Agreement, the Shares to be distributed in connection with the Split-Off Merger and as described in the Registration Statement will be duly authorized, validly issued, fully paid and nonassessable. We have assumed that, immediately prior to consummation of the Interco Merger, each of the parties thereto (i) will be duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) will have full corporate power and authority to enter into the Interco Merger Agreement and perform its respective obligations thereunder, (iii) will have duly authorized the execution, delivery and performance of the Interco Merger Agreement by all necessary corporate action (including all requisite Board of Director and stockholder action); and (iv) will have duly executed and delivered the Interco Merger Agreement. The opinions set forth above are limited to matters governed by the General Corporation Law of the State of Delaware as in effect on the date hereof. We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement and to the reference to us under the caption "Legal Matters" in the Solicitation Statement/Prospectus forming a part of the Registration Statement. Very truly yours, /s/ Baker & Botts, L.L.P. EXHIBIT 8 April 16, 1996 General Motors Corporation 3044 West Grand Boulevard Detroit, Michigan 48202 Re: Split-Off of Electronic Data Systems Holding Corporation -------------------------------------------------------- Dear Sirs : In connection with the proposal to split off Electronic Data Systems Holding Corporation ("EDS") from General Motors Corporation ("GM") (the "Split- Off"), as described in the Registration Statement on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission on April 16, 1996, you have requested our legal opinion concerning certain United States federal income tax consequences of the Split-Off. We have examined the Registration Statement, the private letter ruling, dated December 27, 1995, wherein the Internal Revenue Service ruled that the Split-Off will be tax-free to both GM and its shareholders for U.S. federal income tax purposes (the "Ruling"), the representations made by you in the ruling request filed with the Internal Revenue Service on August 30, 1995 (the "Ruling Request"), and such other documents and such legal authorities as we have deemed relevant for purposes of expressing the opinions contained herein. Our opinion is based upon the applicable provisions of the Internal Revenue Code of 1986, as amended through the date hereof (the "Code"), Treasury regulations promulgated and proposed thereunder (the "Regulations"), current positions of the Internal Revenue Service (the "IRS") contained in published Revenue Rulings and Revenue Procedures and existing judicial decisions. In rendering this opinion, we have expressly assumed that the representations made by you and contained or described in the Registration Statement, the Ruling and the Ruling Request are true and correct. Based on the foregoing, and subject to the discussion set forth under the caption "Certain U.S. Federal Income Tax Considerations" in the Prospectus that forms part of the Registration Statement, our opinion as to the material federal income tax consequences of the Split-Off is as follows: General Motors Corporation April 16, 1996 Page 2 1. No gain or loss will be recognized by GM upon the exchange of EDS Common Stock for General Motors Class E Common Stock ("Class E Common Stock") pursuant to the Split-Off. 2. No gain or loss will be recognized by (and no amount will be included in the income of) the holders of Class E Common Stock upon the receipt of EDS Common Stock in exchange for Class E Common Stock pursuant to the Split-Off. 3. The tax basis of EDS Common Stock received by each holder of Class E Common Stock pursuant to the Split-Off will be the same as the basis of the Class E Common Stock held by such holder immediately before the Split-Off. 4. The holding period of the EDS Common Stock received by each holder of Class E Common Stock will include the holding period of the Class E Common Stock surrendered by such stockholder pursuant to the Split-Off, provided that such stock is held as a capital asset on the date of the Split-Off. 5. The discussion set forth under the caption "Certain U.S. Federal Income Tax Considerations" in the Prospectus that forms part of the Registration Statement is based upon reasonable interpretations of existing law and fairly summarizes the U.S. federal income tax considerations that are likely to be material to a holder of Class E Common Stock. The opinion set forth herein is based on relevant provisions of the Code, the Regulations, and interpretations of the Code and the Regulations by the courts and the IRS, all as they exist as of the date of this letter. All such provisions of the Code, Regulations, judicial decisions, and admininistrative interpretations are subject to change at any time and, in some circumstances, with retroactive effect. Any such change could affect any or all of the conclusions set forth in this opinion. General Motors Corporation April 16, 1996 Page 3 We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name under the caption "Legal Matters" in the Prospectus that forms part of the Registration Statement. Very truly yours, /s/ Kirkland & Ellis EXHIBIT 10(A) GM/EDS DRAFT APRIL 11, 1996 MASTER SERVICE AGREEMENT BETWEEN GENERAL MOTORS CORPORATION AND ELECTRONIC DATA SYSTEMS CORPORATION GM/EDS CONFIDENTIAL
TABLE OF CONTENTS ----------------- Page ---- RECITALS................................................................... 1 ARTICLE I. INTRODUCTORY PROVISIONS Section 1.1 Scope of Agreement................................... 2 Section 1.2 Definitions.......................................... 3 Section 1.3 Agreement............................................ 7 Section 1.4 Term................................................. 10 Section 1.5 Applicability of Provisions.......................... 11 Section 1.6 Fundamental Principle of Good Faith and Fair Dealing. 11 ARTICLE II. SERVICE AGREEMENTS Section 2.1 Service Agreements................................... 11 Section 2.2 Service Agreement Objectives......................... 15 Section 2.3 Competitiveness...................................... 16 Section 2.4 Continued Services to Divested Business Units........ 17 Section 2.5 Extension of Service Agreements...................... 17 Section 2.6 Payment Terms........................................ 18 Section 2.7 Removal of PRR and Similar Provisions................ 20 ARTICLE III. OPERATIONAL PROVISIONS Section 3.1 GM/EDS Relationship.................................. 20 Section 3.2 IT Strategy and Architecture......................... 20 Section 3.3 Contract Administration.............................. 21 Section 3.4 Attestation by Independent Public Accountants........ 25 Section 3.5 Audit by GM Central Office........................... 25 Section 3.6 Price Level Detail................................... 25 Section 3.7 Co-Negotiation....................................... 26 ARTICLE IV. STRUCTURAL COST REDUCTIONS Section 4.1 Delco Electronics Structural Cost Reductions......... 28 Section 4.2 General IT Structural Cost Reductions................ 29 ARTICLE V. MARKET TESTING AND RESOURCING Section 5.1 Initial Market Testing and Resourcing by GMIO........ 31 Section 5.2 Later Market Testing and Resourcing by GM............ 32 Section 5.3 General Limitations and Requirements................. 35 ARTICLE VI. GENERAL PROVISIONS Section 6.1 Termination of MSA................................... 40 Section 6.2 Insurance............................................ 42 Section 6.3 Foreign Subsidiaries................................. 43 Section 6.4 Compliance with Advance Agreement.................... 43 Section 6.5 Amendment or Modification............................ 44 Section 6.6 Incorporation of Exhibit A........................... 44 Section 6.7 Prior Master Agreement............................... 44 Section 6.8 Governing Law........................................ 45
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EXHIBIT A. STANDARD TERMS AND CONDITIONS RECOMMENDED FOR INCORPORATION INTO SERVICE AGREEMENTS ARTICLE A-I. DEFINITIONS AND INTERPRETATION Section A1.1 Definitions.......................................... A-1 Section A1.2 Interpretation....................................... A-5 ARTICLE A-II. CONTRACT ADMINISTRATION AND REVIEW Section A2.1 Management and Administration........................ A-6 Section A2.2 Performance Review................................... A-7 ARTICLE A-III. GM ASSETS AND SPACE Section A3.1 GM Assets............................................ A-7 Section A3.2 GM Space............................................. A-8 ARTICLE A-IV. SOFTWARE AND INTELLECTUAL PROPERTY Section A4.1 Ownership of Software................................ A-8 Section A4.2 Software Rights and Licenses......................... A-10 Section A4.3 Changes and Upgrades to Software..................... A-15 Section A4.4 Third Party Software Developers...................... A-16 Section A4.5 Intellectual Property................................ A-16 ARTICLE A-V. DATA PROTECTION AND AUDIT RIGHTS Section A5.1 GM Data.............................................. A-17 Section A5.2 Safeguarding of GM Data.............................. A-18 Section A5.3 Nondisclosure........................................ A-18 Section A5.4 Data Center Security................................. A-19 Section A5.5 Audit Rights......................................... A-19 ARTICLE A-VI. EMPLOYEES Section A6.1 EDS' Employees....................................... A-20 Section A6.2 Notice to EDS' Employees............................. A-20 Section A6.3 Premise and Work Rules............................... A-21 Section A6.4 Right of Access...................................... A-21 Section A6.5 Key EDS Employees for Critical Projects.............. A-21 ARTICLE A-VII. EDS COMPENSATION Section A7.1 Uniform Published Rates.............................. A-22 Section A7.2 Fixed Price Methodology.............................. A-24 Section A7.3 Cost-Plus Pricing.................................... A-26 Section A7.4 Pricing Detail....................................... A-30 Section A7.5 Tax Matters.......................................... A-31
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ARTICLE A-VIII. BILLING AND PAYMENT PROCEDURES Section A8.1 Billing Procedures................................... A-33 Section A8.2 Time of Payment...................................... A-34 ARTICLE A-IX. DISPUTES AND TERMINATION Section A9.1 Negotiation of Disputes.............................. A-36 Section A9.2 Resolution of Disputes............................... A-36 Section A9.3 Termination.......................................... A-37 Section A9.4 Cancellation of Services and Cancellation Charges.... A-38 Section A9.5 Termination Assistance and Transition................ A-41 ARTICLE A-X. WARRANTIES Section A10.1 Software Warranty.................................... A-44 Section A10.2 Hardware Warranty.................................... A-44 Section A10.3 Pass-Through Warranties.............................. A-44 Section A10.4 Survival of Warranties............................... A-45 Section A10.5 Disclaimer of Warranties............................. A-45 ARTICLE A-XI. INDEMNITIES AND LIABILITY Section A11.1 Cross Indemnity...................................... A-45 Section A11.2 Proprietary Rights Indemnity......................... A-46 Section A11.3 Hardware Damage Indemnity............................ A-46 Section A11.4 Software License Indemnity........................... A-47 Section A11.5 Limitation of Liability.............................. A-47 ARTICLE A-XII. SPECIAL PROVISIONS RELATING TO MSA SERVICES Section A12.1 GM's IT Strategy and Architecture.................... A-48 Section A12.2 Competitiveness...................................... A-48 Section A12.3 Market Testing and Resourcing........................ A-49 Section A12.4 Co-Negotiation....................................... A-49 Section A12.5 Use of Independent Auditors.......................... A-49 ARTICLE A-XIII. MISCELLANEOUS Section A13.1 Binding Nature and Assignment........................ A-50 Section A13.2 Notices.............................................. A-50 Section A13.3 Counterparts......................................... A-51 Section A13.4 Headings............................................. A-51 Section A13.5 Approvals and Similar Actions........................ A-51 Section A13.6 Force Majeure........................................ A-51 Section A13.7 Severability......................................... A-52 Section A13.8 Waiver............................................... A-52 Section A13.9 Relationship of Parties.............................. A-52 Section A13.10 Services for Others.................................. A-53 Section A13.11 Hiring of Employees.................................. A-53 Section A13.12 Compliance With Laws................................. A-53 Section A13.13 Media Releases....................................... A-53 Section A13.14 Survival............................................. A-54 Section A13.15 Entire Agreement..................................... A-54 Section A13.16 Amendment or Modification............................ A-54 Section A13.17 Good Faith and Fair Dealing.......................... A-54
iii EXHIBIT B. GM MAJOR SECTORS AS OF THE EFFECTIVE DATE EXHIBIT C. MSA SERVICES AND MSA SCOPE DOCUMENTS EXHIBIT D. PROCEDURES FOR NEGOTIATING SERVICE AGREEMENTS AND RESOLVING IMPASSES EXHIBIT E. GUIDELINES & METHODOLOGY FOR DETERMINING ACHIEVEMENT OF IT STRUCTURAL COST REDUCTION TARGETS EXHIBIT F. TERMINATION UPON CHANGE OF CONTROL EXHIBIT G. CANCELLATION LOSSES ON THE DISPOSITION OF CAPITAL ASSETS AND LONG-TERM LEASES iv MASTER SERVICE AGREEMENT ------------------------ THIS MASTER SERVICE AGREEMENT (the "MSA"), effective as of ______________, 1996 (the "Effective Date"), is made and entered into by and between General Motors Corporation, a Delaware corporation having its principal offices at 3044 West Grand Boulevard, Detroit, Michigan 48202 ("GM Parent"), and Electronic Data Systems Corporation, a Delaware corporation having its principal offices at 5400 Legacy Drive, Plano, Texas 75024 ("EDS Parent"). RECITALS -------- WHEREAS, in order to implement the service relationship contemplated by the acquisition of EDS Parent by GM Parent in 1984, GM Parent and EDS Parent entered into a certain Master Agreement, dated effective as of September 1, 1985 (the "Master Agreement"), which established certain standard terms and conditions pursuant to which EDS Service Organizations would provide services to GM User Organizations and set forth certain other understandings and agreements between the parties; WHEREAS, pursuant to the Master Agreement, GM User Organizations and EDS Service Organizations have negotiated and entered into Service Agreements specifying the services to be provided to the GM User Organizations and the amounts to be paid to EDS for such services; WHEREAS, on or about the Effective Date, GM Parent consummated a split-off and related transactions pursuant to which EDS Parent ceased to be a subsidiary of GM Parent and, in connection therewith, GM Parent and EDS Parent desire to supersede and replace the Master Agreement with this MSA in order to (i) confirm the continuation of EDS as the principal supplier to GM of information technology services, (ii) confirm the understanding of GM and EDS that GM is to continue to be the customer of EDS and will specify its IT strategy and computing and communications architecture together with its business needs, including reasonable performance levels, and that EDS will serve these requirements, on a coordinated, integrated basis, by providing 1 MSA Services which are competitive with respect to quality, service, price and technology and which are appropriate for the stated business needs of GM, and will be compensated fairly therefor, (iii) provide guidelines for GM to conduct limited market testing with third party suppliers, (iv) implement certain changes in the service relationships between GM User Organizations and EDS Service Organizations governed by Service Agreements entered into prior to the Effective Date, (v) facilitate the finalization of future Service Agreements, (vi) provide a consistent basis for the interpretation of all Service Agreements, and (vii) set forth certain other understandings and agreements between the parties; NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: ARTICLE I. INTRODUCTORY PROVISIONS ----------------------------------- 1.1 Scope of Agreement. Subject to Section 1.3 below, this MSA establishes a contractual framework for EDS' provision of MSA Services under Service Agreements worldwide. In order to provide a uniform mechanism for implementing the principles of this MSA, the provisions of this MSA, as between EDS Parent and GM Parent, shall be applicable worldwide and shall be implemented by GM Parent and EDS Parent, and their respective domestic and foreign subsidiaries and business units, entering into Service Agreements which incorporate the principles of the applicable provisions of this MSA, modified as may be necessary by reason of local law or commercial custom. GM Parent and EDS Parent each acknowledge and understand that their respective subsidiaries are not parties to this MSA and will not be legally bound by the provisions of this MSA unless and until they agree to be so bound. However, during any period and to the extent that a locally appropriate Service Agreement for any such MSA Services is not then currently in effect, GM Parent and EDS Parent shall each remain obligated to the other for the performance of the respective obligations of GM and EDS stated herein. 2 1.2 Definitions. Unless otherwise specified herein, the following terms shall have the meanings set forth below wherever they are used in this MSA: (a) The term "Agreement" shall mean (i) this MSA, or (ii) any Service Agreement, including the applicable provisions of this MSA incorporated therein. (b) The term "Bid Revenue" shall mean, with respect to each competitive bid that GM may conduct pursuant to Article V hereof, the aggregate amount of revenue that GM would pay to EDS for the performance of the MSA Services that are the subject of that competitive bid, during the first full year that such MSA Services are to be performed, computed as if the competitive bid were not conducted but GM nevertheless obtained such MSA Services from EDS pursuant to the applicable Service Agreements and other arrangements in place at the time of the competitive bid. (c) The term "Contracting Party" shall mean (i) with respect to this MSA, GM Parent or EDS Parent, and (ii) with respect to any Service Agreement, the GM User Organization receiving MSA Services pursuant to the Service Agreement or the EDS Service Organization providing such MSA Services. (d) The term "Corporate Contract Manager" shall mean the individual designated by GM Parent or EDS Parent, respectively, pursuant to sub-Section 3.3(a) hereof. (e) The term "EDS" shall mean, collectively, EDS Parent and the entities and subsidiaries owned by EDS Parent. For purposes of this definition, an entity or subsidiary will be deemed to be "owned by EDS Parent" if EDS Parent, either directly or indirectly, (i) is the beneficial owner of more than 50% of the equity of that entity or subsidiary, or (ii) is the beneficial owner of more than 35% of the equity of, and has management control of, that entity or subsidiary. 3 (f) The term "EDS Major Sector" shall mean an EDS Service Organization designated by EDS from time to time to coordinate the provision of MSA Services by EDS to the GM User Organizations within a GM Major Sector. (g) The term "EDS Service Organization" shall mean any functional entity, division, subsidiary, department or group within EDS, including an EDS Major Sector, which has been or shall be formed to provide MSA Services to GM User Organizations. (h) The term "GM" shall mean, collectively, GM Parent and the entities and subsidiaries owned by GM Parent. For purposes of this definition, an entity or subsidiary will be deemed to be "owned by GM Parent" if GM Parent, either directly or indirectly, is the beneficial owner of: (1) More than 65% of the equity of, and has management control of, that entity or subsidiary and, as of August 1, 1995, EDS was providing services under the Master Agreement pursuant to a Service Agreement in support of the business operations of that entity or subsidiary. (2) 80% or more of the equity of that entity or subsidiary if, as of August 1, 1995, EDS was not providing services under the Master Agreement pursuant to a Service Agreement in support of the business operations of that entity or subsidiary. (i) The term "GM Central Office" shall mean the corporate headquarters of GM Parent. (j) The term "GM Major Sector" shall mean a GM User Organization designated by GM from time to time to coordinate the receipt of MSA Services from EDS by numerous GM User Organizations. As of the Effective Date, the GM Major Sectors are listed in Exhibit B hereto. 4 (k) The term "GM User Organization" shall mean any functional entity, division, subsidiary, department or group within GM, including a GM Major Sector, which has or shall have requirements for MSA Services applicable to that functional entity, division, subsidiary, department or group that this MSA provides are to be obtained from EDS. Each of the following terms shall mean the GM User Organization indicated below and any successors thereto: (1) "Delco" means Delco Electronics Corporation. (2) "Delphi" means Delphi Automotive Systems. (3) "GMAC" means General Motors Acceptance Corporation. (4) "GMIO" means GM International Operations. (5) "MIC" means Motors Insurance Corporation. (6) "NAO" means GM North American Operations. (l) The term "IT" shall mean information technology consisting of computer and information processing and communications. (m) The term "Major Sector Contract Manager" shall mean the person designated by either the GM Major Sector having responsibility for the GM Contracting Party or the EDS Major Sector having responsibility for the EDS Contracting Party, as applicable, pursuant to sub-Section 3.3(b) hereof. (n) The term "Master Agreement" shall mean the Master Agreement, effective as of September 1, 1985, made and entered into by and between GM Parent and EDS Parent, as amended by the Addendum thereto dated May 29, 1987. 5 (o) The term "MSA Scope Document" shall mean any document developed in accordance with Section II of Exhibit C hereto. (p) The term "MSA Services" shall mean those services described in Section I of Exhibit C hereto. (q) The term "Service Agreement" shall mean any written agreement, as provided for in Section 2.1 hereof, that is entered into between a GM User Organization and an EDS Service Organization for the provision of MSA Services to that GM User Organization, whether entered into before or after the Effective Date. (r) The term "Software" shall mean the source code and object code versions of any applications programs, operating system software, computer software languages, utilities and other computer programs, and documentation and supporting materials relating thereto, in whatever form or media, including, but not limited to, the tangible media upon which such applications programs, operating system software, computer software languages, utilities and other computer programs, and documentation and supporting materials relating thereto, are recorded or printed, together with all corrections, improvements, updates and releases thereof. (s) The term "Unit Project Manager" shall mean any person designated pursuant to sub-Section 3.3(c) hereof. (t) The term "UPR Catalog" shall mean the catalog published by GM Parent in accordance with Section A7.1 of Exhibit A hereto. Other terms used in this MSA are defined in the context in which they are used and, unless otherwise specified herein, shall have the meanings there indicated wherever they are used in this MSA. 6 1.3 Agreement. GM Parent and EDS Parent agree that, during the term of this MSA and except as provided in Article V hereof and any other applicable provision of this MSA, EDS shall supply to GM, and GM shall obtain from EDS, GM's requirements for MSA Services, except that: (a) With respect to any MSA Services reasonably requested from EDS by a GM User Organization (which request shall not be unreasonably specific), where it is mutually agreed that EDS lacks the technical proficiency or resources to satisfactorily provide such MSA Services, either directly or through a third party subcontract, within the timeframe reasonably required by the GM User Organization, then the GM User Organization may, with the prior approval of the GM Corporate Contract Manager, obtain such MSA Services from a third party for so long as EDS is unable to provide such MSA Services; provided, however, that under no circumstances shall GM be required to cancel, renegotiate or otherwise nullify a contract with a third party to obtain such MSA Services during the period of time covered by that contract. In addition, any MSA Services obtained by a GM User Organization from a third party pursuant to this provision shall not count against either the annual or aggregate limitations on competitive bidding and resourcing set forth in Article V hereof. (b) Unless agreed otherwise by GM Parent and EDS Parent, GM shall not be required to obtain from EDS, and EDS shall not be required to provide to GM, MSA Services for: (1) Hughes Aircraft Corporation. (2) Any other business or entity, or portion thereof, if and to the extent that such business or entity, or portion thereof, was or is acquired by GM Parent after January 1, 1985, except for (i) GMAC Mortgage Corporation (but not 7 including its subsidiary, Residential Funding Corporation), and (ii) any other business or entity, or portion thereof, which executed a Service Agreement prior to August 1, 1995. However, GM Parent and EDS Parent acknowledge and agree that, unless it is inappropriate in the circumstances, in the normal case it is expected that EDS will be permitted to submit a bid to provide MSA Services to businesses and entities, or portions thereof, acquired by GM Parent after January 1, 1985. However, under no circumstances shall the competitive bidding and resourcing of such services count against either the annual or aggregate limitations on competitive bidding and resourcing set forth in Article V hereof. (c) GM shall not be required to obtain from EDS, and EDS shall not be required to provide to GM, services in any country to the extent and for so long as the provision of those services by EDS to GM in that country would violate any national law of that country. (d) GM User Organizations outside of North America ("GM Overseas User Organizations") shall not be required to obtain from EDS, and EDS shall not be required to provide to GM Overseas User Organizations, any MSA Services in any Emerging Market other than MSA Services that (i) were being provided to a GM Overseas User Organization for the same GM Major Business Function in the same GM Line of Business by an EDS Service Organization in that Emerging Market prior to August 1, 1995, or (ii) are substantially similar to or a replacement of MSA Services that were being provided to a GM Overseas User Organization for the same GM Major Business Function in the same GM Line of Business by an EDS Service Organization in that Emerging Market prior to August 1, 1995. As used in this sub-Section 1.3(d): (1) The term "Emerging Market" means any country other than [Confidential information has been omitted.] 8 Confidential treatment has been requested by EDS for the indicated portions of this page. [Confidential information has been omitted.] (2) The term "GM Line of Business" shall mean any of the GM Major Sectors listed on Exhibit B hereto as of the Effective Date modified to also designate each of the six divisional entities of Delphi Automotive Systems Operations Outside of North America as of the Effective Date as a separate GM Line of Business. (3) The term "GM Major Business Function" shall mean any of the following six (6) major business functions which may exist within a GM Line of Business: (i) manufacturing, (ii) assembly, (iii) distribution, (iv) sales and service, (v) administration, and (vi) other. As applied to a specific facility or location, the major business function of a specific facility or location shall be based on the principal major business function conducted at that facility or location. For example, the major business function of a GM facility which manufactures and assembles finished automobiles and also houses incidental administrative activities is manufacturing. (e) GM shall not be required to obtain from EDS, and EDS shall not be required to provide to GM, any plant floor services other than (i) plant floor services for all GM North American business units under NAO and Delphi specifically set forth in the Plant Floor Systems Services Agreement, entered into as of _________, 1996, between GM and EDS, but excluding Saturn Corporation, and (ii) plant floor services being provided to GM Overseas User Organizations as of the Effective Date to the extent that, prior to the Effective Date, those plant floor services were treated mutually by the parties as within the scope of Section 1.3 of the Master 9 Confidential treatment has been requested by EDS for the indicated portions of this page. Agreement, including the plant floor services provided for (x) the European Production Information Control System (EPICs), (y) the Component Production Information Control Systems (CPICs), and (z) Manufacturing Resource Planning Systems. As used in this sub-Section 1.3(e), the term "plant floor services" shall mean those IT services that are specific to plant floor operations and shall not include any such services when used in any context other than in conjunction with plant floor operations. (f) Any other arrangement or relationship between the parties may be mutually agreed upon and approved by the GM and EDS Corporate Contract Managers. The GM and EDS Corporate Contract Managers will develop mutually acceptable business procedures for (i) reviewing any additional IT services or goods desired by GM and determining which are MSA Services based on the definition of MSA Services contained in this MSA, and (ii) designating which out-of-scope services, if any, EDS and GM may mutually desire to bring into scope under this MSA. 1.4 Term. ---- (a) The term of this MSA shall commence as of the Effective Date and shall continue until the expiration of an initial term of ten (10) years. The term of this MSA may be extended for an additional term upon mutual agreement by GM Parent and EDS Parent prior to the end of the initial term. (b) Service Agreement terms which extend beyond the term of this MSA shall be subject to the approval of the Corporate Contract Managers according to sub-Section A9.3(c) of Exhibit A hereto. If this MSA expires or is terminated, GM Parent and EDS Parent will not enforce any Service Agreement term which purports to extend beyond the expiration or termination of this MSA unless such extension is or has been mutually agreed by the Corporate Contract Managers. With respect to 10 any Service Agreement which survives expiration or termination of this MSA (as a result of such approval by the Corporate Contract Managers), the provisions of this MSA that have been incorporated into such Service Agreement shall remain valid provisions of that Service Agreement unless and until the Contracting Parties thereto otherwise agree, notwithstanding termination of this MSA. 1.5 Applicability of Provisions. The provisions of Exhibit A hereto are intended to be applicable to both this MSA and each Service Agreement and, when used in connection with a Service Agreement, a reference to the applicable provisions of this MSA shall be considered a reference to the provisions of Exhibit A hereto, except, subject to the provisions of Section A1.2 of Exhibit A hereto, (i) to the extent that any such provisions are expressly modified or excluded therefrom in a Service Agreement, or (ii) any GM Major Sector and the corresponding EDS Major Sector may negotiate different or additional standard terms and conditions that will be applicable to Service Agreements between GM User Organizations within that GM Major Sector and EDS Service Organizations within that EDS Major Sector. 1.6 Fundamental Principle of Good Faith and Fair Dealing. In entering into this MSA, GM Parent and EDS Parent each acknowledge and agree that all aspects of the worldwide business relationship and dealings between GM and EDS contemplated by this MSA and each Service Agreement, including the performance of all obligations and the exercise of all rights under this MSA and each Service Agreement, will be governed by the fundamental principle of good faith and fair dealing. GM Parent and EDS Parent shall assure that each GM User Organization and EDS Service Organization, respectively, complies with this principle of good faith and fair dealing. ARTICLE II. SERVICE AGREEMENTS ------------------------------- 2.1 Service Agreements. As of the Effective Date, each GM User Organization and the corresponding EDS Service Organization have agreed upon and entered into or shall, as 11 soon as practicable, agree upon and enter into one or more Service Agreements for the performance of MSA Services for that GM User Organization on mutually agreeable terms and conditions, subject to the limitations set forth in this MSA. (a) If and to the extent applicable, each such Service Agreement shall: (1) Refer to this MSA, which reference shall be deemed to incorporate into the Service Agreement the applicable provisions of this MSA. (2) Designate the date as of which the provisions of the Service Agreement will be effective and the term or period of time during which EDS will perform MSA Services pursuant to the Service Agreement. (3) Describe the obligations of EDS related to the Service Agreement, including any hardware or software to be delivered in conformance with GM's IT architecture and any MSA Services to be performed by EDS pursuant to the Service Agreement, together with the general performance standards and related provisions agreed to by the parties. (4) Describe the obligations of GM related to the Service Agreement, including without limitation any space, facilities, equipment, or other support to be provided by GM. (5) Specify the mutually agreed upon pricing structure, method and amounts of payment to be made to EDS for the MSA Services performed pursuant to the Service Agreement and, with respect to the provision of any Software previously developed by EDS for GM, exclude therefrom any amounts for the development of such Software if and to the extent such amounts have previously been paid to EDS by GM. 12 (6) Identify any hardware, software, system or EDS facility to be used by EDS which is designated, consistent with Section 3.2 hereof, as so critical to the business operations of the GM Contracting Party that the EDS Contracting Party may not modify, upgrade, enhance or move the same without notice to and the approval of the GM Contracting Party. (7) Specify the acceptance criteria, test period and procedures for any hardware or software to be provided to the GM Contracting Party, including appropriate restrictions on the use of any such hardware or software by the GM Contracting Party until it has accepted the same in writing. (8) Specify the appropriate mailing address for invoices and the name, address and telephone number of the applicable GM and EDS Unit Project Managers and Major Sector Contract Managers. (b) In addition to the provisions specified in sub-Section 2.1(a) above, EDS Parent and GM Parent will recommend to their respective Contracting Parties that the following provisions be reviewed and considered for possible inclusion in an applicable Service Agreement. If and to the extent mutually agreed to be desirable by the Contracting Parties thereto, each such Service Agreement may: (1) Identify (i) EDS expenses to be rebilled to GM without profit or mark-up, and (ii) amounts to be retained by GM until acceptance of deliverables provided by EDS. (2) Specify the method and amounts of performance incentive payments, such as portions of documented cost savings or profit improvements experienced by the GM Contracting Party as a result of the MSA Services performed by EDS, that are to be payable to EDS. GM Parent and EDS Parent shall each 13 encourage their respective Contracting Parties to provide for such performance incentive payments where appropriate. (3) Establish specific measurable standards of performance applicable to EDS' performance under the Service Agreement, such as function point analysis for application software development and hardware and software availability standards, as well as related remedies and rewards available if the EDS Contracting Party's performance fails to meet or exceeds those performance standards. Any such remedies and rewards shall be designed to incent and reward good performance and not to distort the intended economic effects of the Service Agreement. (4) Allocate the respective obligations of EDS and GM in connection with the transportation, insurance, delivery, relocation and/or installation of any hardware being provided by EDS to GM and in connection with any site preparation therefor and any ongoing maintenance obligations applicable thereto. (5) Describe all support services to be provided by EDS to GM in connection with the delivery to GM of software provided by EDS, including without limitation the number of user manuals, level of consulting services, amount of training services, documentation, and ongoing support and maintenance services to be provided in connection therewith. (6) Delineate the manner in which secretarial, custodial, and/or other supporting services will be made available by GM to EDS. (7) Describe any reports, in addition to those required under Exhibit A hereto, and the frequency of submittal. 14 (8) If and to the extent that the MSA Services provided by EDS pursuant to the Service Agreement relate to U.S. Government contracts or subcontracts held by the GM Contracting Party, (i) provide for an equitable distribution of the profits otherwise obtainable by EDS that are allocable to such contracts and subcontracts, and (ii) take into account any related costs incurred by EDS that are specified as unallowable in applicable federal regulations. (9) Identify any provisions of Exhibit A hereto that are expressly excluded from the Service Agreement and any provisions of the Service Agreement that shall supersede and prevail over any conflicting or inconsistent provisions of Exhibit A hereto, subject to the provisions of Section A1.2 of Exhibit A hereto. (10) Include any other provisions deemed necessary or desirable by the Contracting Parties to the Service Agreement, such as, but not limited to, provisions enabling the Service Agreement to conform to the requirements of any applicable government contracts, subject to the provisions of Section A1.2 of Exhibit A hereto. Notwithstanding anything to the contrary herein, any Service Agreement executed by the Major Sector Contract Manager or other authorized representative of each Contracting Party thereto shall conclusively be deemed to satisfy the provisions of this Section 2.1 and neither EDS nor GM may thereafter claim that the Service Agreement is invalid or defective as a result of any failure to comply with the provisions of this Section 2.1. 2.2 Service Agreement Objectives. Each applicable GM User Organization and EDS Service Organization will negotiate in good faith to agree upon and enter into fixed-price Service Agreements which meet the Competitiveness Standard established in Section 2.3 hereof. 15 2.3 Competitiveness. As provided in this Section 2.3, the MSA Services to be provided to GM by EDS under Service Agreements shall be competitive with respect to quality, service, price and technology giving due consideration to the GM requirements that GM expects EDS to meet and other relevant factors (the "Competitiveness Standard"), all subject to the following provisions: (a) As used in this Section 2.3, the term "Competitiveness Event" shall mean the negotiation or renegotiation by a GM User Organization and an EDS Service Organization of (i) a new or replacement Service Agreement, (ii) the terms and conditions applicable to a new or replacement MSA Service that is proposed to be provided under a then- current Service Agreement, or (iii) the pricing of any MSA Services when and to the extent that the negotiation or renegotiation of such pricing is contractually provided for in a then-current Service Agreement. (b) The Competitiveness Standard and methodology set forth in this Section 2.3 will apply to each Competitiveness Event and will govern the resolution of any disagreement or negotiation impasse that may arise between a GM User Organization and an EDS Service Organization in connection with that Competitiveness Event. (c) If a GM User Organization and an EDS Service Organization reach a mutually acceptable agreement with respect to a particular Competitiveness Event, that agreement will be deemed to satisfy the Competitiveness Standard and methodology set forth in this Section 2.3 with respect to that Competitiveness Event for the duration of the term of that agreement. (d) If a Service Agreement provides a specific competitiveness mechanism (such as a competitive assessment or benchmarking process) for use in determining the competitiveness of specific MSA Services, (i) the application of that specific competitiveness mechanism shall not in and of itself constitute a Competitiveness 16 Event as contemplated in this Section 2.3, and (ii) the specific competitiveness mechanism shall be used to establish the competitiveness of such specific MSA Services in lieu of the Competitiveness Standard and methodology set forth in this Section 2.3. The above provisions notwithstanding, under no circumstances shall such specific competitiveness mechanism preclude or otherwise inhibit the occurrence of a Competitiveness Event pursuant to sub- Section 2.3(a) hereof, or the utilization of the Competitiveness Standard and methodology set forth in this Section 2.3, with regard to MSA Services that the specific competitiveness mechanism was neither designed nor intended to cover. (e) If a GM User Organization and an EDS Service Organization are unable to reach a mutually acceptable agreement with respect to a particular Competitiveness Event, the methodology set forth in Exhibit D hereto will be used to resolve that disagreement or negotiation impasse. 2.4 Continued Services to Divested Business Units. In any situation where an existing Service Agreement does not accommodate the continued provision of MSA Services to a divested GM business unit, EDS will negotiate in good faith with the divested GM business unit to enter into an agreement pursuant to which EDS will continue providing services to the divested GM business unit on such terms and conditions as may be mutually agreed upon by EDS and the divested GM business units. 2.5 Extension of Service Agreements. Notwithstanding any provision to the contrary in any applicable existing Service Agreement, the terms of the Major Sector Service Agreements, including the scopes of work thereunder, in effect as of the Effective Date with respect to the following GM User Organizations will be extended through the expiration date specified below with respect to that GM User Organization: 17 GM User Organization Expiration Date -------------------- --------------- NAO (including Corporate Staffs) December 31, 1999 GMAC (U.S. and Canada) December 31, 1999 MIC (U.S. and Canada) December 31, 1999 Delphi (U.S.) December 31, 1998 To the extent not completed prior to the Effective Date, GM Parent and EDS Parent shall each cause their respective applicable Contracting Parties to promptly amend each Service Agreement referred to above in order to extend the term thereof as specified above. Additionally, to the extent not completed prior to the Effective Date, GM Parent and EDS Parent shall ensure that Allison Transmission, GM of Canada (including Delphi operations in Canada), and GM de Mexico will promptly complete and execute Service Agreements, which have been substantially negotiated prior to the Effective Date, and which shall be coterminous with the NAO Service Agreement referred to above. 2.6 Payment Terms. Notwithstanding any provision to the contrary in any applicable Service Agreement, the time of payment for invoices submitted pursuant to each Service Agreement in effect as of the Effective Date, shall be modified as indicated below; provided, however, that under no circumstances shall there be an acceleration in the time of payment for a Contracting Party when compared to the mutually agreed corresponding payment terms applicable to that Contracting Party that are in effect just prior to the Effective Date. (a) Through December 31, 1996, each Contracting Party will pay the other Contracting Party's invoices for each month in 1996 in accordance with the payment terms of the applicable Service Agreement in effect just prior to the Effective Date. (b) As of January 1, 1997, each Service Agreement in effect as of the Effective Date that does not provide for longer payment terms will require each Contracting 18 Party to pay the other Contracting Party's invoices for each month of 1997 by the thirtieth (30th) day of the month in which the invoiced MSA Services were provided. (c) As of January 1, 1998, each Service Agreement in effect as of the Effective Date with Delco, Delphi, Allison Transmission, and the GM Locomotive Group that does not provide for longer payment terms will require each Contracting Party to pay the other Contracting Party's invoices for each month in 1998 and thereafter by the twentieth (20th) day of the month following the month in which the invoiced MSA Services were provided. (d) As of January 1, 1999, each remaining Service Agreement in effect as of the Effective Date that does not provide for longer payment terms will require each Contracting Party to pay the other Contracting Party's invoices for each month in 1999 and thereafter by the twentieth (20th) day of the month following the month in which the invoiced MSA Services were provided. The Contracting Parties will submit invoices on or before the first (1st) day of the month in which the MSA Services are provided for each month through December of 1998. For January of 1999 and each subsequent month during the term of each Service Agreement referred to above, the Contracting Parties will submit invoices on or before the first (1st) day of the month following the month in which the MSA Services are provided, or such other day as may be mutually agreed upon by the Contracting Parties if the Contracting Parties are able to agree upon a day which will (i) allow the invoicing Contracting Party to invoice actual amounts payable for the month in which MSA Services were provided without having to invoice for estimated amounts payable for that month, and (ii) allow the paying Contracting Party to pay the invoice on the twentieth (20th) day of the month following the month in which the invoiced MSA Services were provided. To the extent not completed prior to the Effective Date, GM Parent and EDS Parent shall each cause 19 their respective Contracting Parties to amend each applicable Service Agreement to reflect the foregoing payment terms. 2.7 Removal of PRR and Similar Provisions. To the extent not completed prior to the Effective Date, GM Parent and EDS Parent shall each cause their respective Contracting Parties to amend the NAO Service Agreement to remove the Performance Reduction Requirement provision and to amend other applicable Service Agreements in effect as of the Effective Date, with the exception of those relating to GM Overseas User Organizations, to remove provisions similar to the Performance Reduction Requirement provision in the NAO Service Agreement. ARTICLE III. OPERATIONAL PROVISIONS ------------------------------------ 3.1 GM/EDS Relationship. GM Parent and EDS Parent will establish a group, which will include the Corporate Contract Managers and other executives key to the GM/EDS relationship as may be designated by each party, to ensure that the parties are acting in a manner consistent with the principles of this MSA, and to address any issues that may arise in connection with this MSA. 3.2 IT Strategy and Architecture. The respective roles and responsibilities of GM and EDS in connection with the performance of the MSA Services pursuant to the Service Agreements will be governed by the following: (a) GM will be responsible for, and will decide and direct, its IT strategies and requirements, including GM's computing and communications architecture. This includes GM's right (i) to develop, maintain and publish technology standards that support the implementation of GM's architecture, and architecture and technology compliance processes, and (ii) to identify and select vendors of hardware and software used by EDS to provide MSA Services that are performed for GM on a dedicated basis. In this regard, EDS will cooperate, as reasonably 20 requested by GM, in preparing and updating any such strategies and requirements. Upon receiving such a request for assistance from GM which is outside the scope of the MSA Services then being performed under any Service Agreement, EDS may submit a proposal to GM for additional compensation. If GM decides to use EDS' assistance after receiving the EDS proposal, then GM and EDS will negotiate an appropriate agreement to cover such services. (b) EDS will be responsible for, and will decide and direct, its performance of the MSA Services in furtherance of GM's IT strategies and requirements, and will retain specific responsibility for the computing and communications architecture and technology for EDS' Information Processing Centers (IPCs). (c) When establishing its strategies and requirements for the MSA Services, GM will consult with EDS and will avoid "micromanagement" by GM of EDS' performance of its responsibilities. (d) In managing its own functions and operations in performing the MSA Services, EDS will consult with GM and take into account GM's legitimate suggestions and concerns regarding the delivery of the MSA Services. (e) To the extent feasible, the roles and responsibilities that EDS and GM respectively will have initially with respect to GM's IT strategies and EDS' performance of the MSA Services will be described in the MSA Scope Documents in a manner consistent with the foregoing provisions of this Section 3.2. 3.3 Contract Administration. Applicable managers will be designated in accordance with the following: 21 (a) GM Parent and EDS Parent shall each designate a Corporate Contract Manager who, in addition to the responsibilities and authorities specified in Section A2.1 of Exhibit A hereto, shall be responsible for, among other things: (1) The implementation, management and enforcement of this MSA on behalf of that Parent, including overall management of its performance under this MSA. (2) Supporting the implementation of the Service Agreements by the Major Sector Contract Managers or Unit Project Managers for the Contracting Parties thereto, including through the formulation of guidelines for use by the Major Sector Contract Managers or Unit Project Managers to implement the Service Agreements. (3) Exercising day-to-day responsibility for achieving resolution of corporate-wide issues relating to this MSA or the Service Agreements. (4) Working with the Major Sector Contract Managers or Unit Project Managers for the User Organizations or Service Organizations, as applicable, of that Parent to establish uniform policies applicable to the MSA Services provided to GM by EDS. (5) Interfacing with any committees or other bodies of that Parent with responsibility for reviewing or approving any matters relating to this MSA or the Service Agreements and otherwise satisfying any administrative requirements internally required by that Parent. (6) Monitoring the activities of the Major Sector Contract Managers or Unit Project Managers for the User Organizations or Service Organizations, as applicable, of that Parent. 22 (b) Promptly after the Effective Date and as required thereafter to maintain the accuracy of such information, GM Parent will provide EDS Parent with written notice of the GM Major Sectors and the GM User Organizations within each GM Major Sector. To the extent not previously designated, each GM Major Sector will designate a Major Sector Contract Manager for that GM Major Sector, and each EDS Major Sector will designate a Major Sector Contract Manager for that EDS Major Sector. GM Parent and EDS Parent agree that the Major Sector Contract Manager for a particular GM Major Sector or EDS Major Sector, if not previously designated, shall be designated within a reasonable period of time after the applicable GM Major Sector or EDS Major Sector receives a written request for such designation. (c) To the extent not previously designated, each GM User Organization will designate a Unit Project Manager for that GM User Organization, and each EDS Service Organization will designate a Unit Project Manager for that EDS Service Organization. GM Parent and EDS Parent agree that the Unit Project Manager for a particular GM User Organization or EDS Service Organization, if not previously designated, shall be designated within a reasonable period of time after the applicable GM User Organization or EDS Service Organization receives a written request for such designation. (d) The GM and EDS Corporate Contract Managers shall mutually designate a reasonable number of key EDS management positions, which will include the EDS Corporate Contract Manager and the EDS Major Sector Contract Managers, that are critical to the GM/EDS relationship and the successful performance of the MSA Services. (1) Before an EDS employee is assigned to one of these key EDS management positions, EDS will notify the GM Corporate Contract 23 Manager of the proposed assignment, will introduce the EDS employee to the appropriate GM representatives, and will provide GM with a resume and any other information about the EDS employee reasonably requested by the GM Corporate Contract Manager. If the GM Corporate Contract Manager reasonably and in good faith objects to the proposed assignment within five (5) working days following actual receipt of the aforementioned notification, then EDS will not assign that EDS employee to that position. However, EDS may appoint another EDS employee to serve in that position on an interim basis until an EDS employee who is reasonably acceptable to the GM Corporate Contract Manager can be assigned to that position. (2) No EDS employee assigned to one of these key EDS management positions will be reassigned for a period of one (1) year from the date of such assignment without the prior consent of the GM Corporate Contract Manager, which consent will not be unreasonably withheld, unless the employee voluntarily resigns from EDS' employment, is dismissed from EDS' employment for cause, fails to properly perform his or her duties in the reasonable judgment of EDS, or is unable to work as a result of death or disability. (3) If GM reasonably and in good faith decides that any employee assigned to one of these key EDS management positions should not continue in that position, then the GM Corporate Contract Manager may request the removal of that employee by providing written notice to the EDS Corporate Contract Manager specifying the reasons for such request. EDS shall promptly investigate the matters specified in the request and, if it determines that the concerns are reasonable and valid, shall promptly remove that employee from that position. 24 Subject to the provisions of this Section 3.3, (i) GM Parent and EDS Parent may, at any time and from time to time, designate a new Corporate Contract Manager by notifying the other party's Corporate Contract Manager of the new designation, (ii) each GM Major Sector and each EDS Major Sector may, at any time and from time to time, designate a new Major Sector Contract Manager by notifying the other party's Corporate Contract Manager and Major Sector Contract Manager of the new designation, and (iii) each GM User Organization and each EDS Service Organization may, at any time and from time to time, designate a new Unit Project Manager by notifying the other party's Major Sector Contract Manager and Unit Project Manager of the new designation. 3.4 Attestation by Independent Public Accountants. Upon request by GM Parent, an annual special report shall be obtained by EDS Parent from its independent certified public accounting firm expressing an opinion as to whether the amounts billed to GM by EDS for the then preceding year for MSA Services provided by EDS pursuant to this MSA or pursuant to Service Agreements, are fairly presented in accordance with the provisions of the applicable Agreement(s). Unless waived by EDS Parent, GM Parent shall reimburse EDS Parent for the expenses incurred by EDS Parent in obtaining any such report. 3.5 Audit by GM Central Office. With respect to any MSA Services for which EDS is to be compensated in accordance with Section A7.3 of Exhibit A hereto, the GM Central Office may, at its expense, audit the books and records of EDS to the extent necessary to verify the applicability and accuracy of EDS' charges for such MSA Services. Any such audit may be conducted at any time during normal business hours, upon reasonable notice to EDS, with or without a dispute as to such charges. 3.6 Price Level Detail. Whenever additional MSA Services not being provided under a current Service Agreement are required by a GM User Organization (e.g., under a Request for Information Systems Services ("RISS"), System Development Agreement ("SDA"), or other method) and the GM User Organization so requests, the applicable EDS Service Organization will present to the GM User Organization a business proposal 25 containing a breakdown of the proposed price in such detail as will provide sufficient information to enable the GM User Organization to reasonably understand and evaluate the proposed options and make an informed business decision. When reasonably requested by the GM User Organization, the EDS Service Organization will provide a reasonable number of alternative proposals that demonstrate the impact with respect to content, quality, service levels, price and technology of various alternatives in order to aid the GM User Organization in the evaluation of value and GM cost drivers and provide a platform for rational business decisions. The price detail presented by the EDS Service Organization will [Confidential information has been omitted.] In addition, the price detail will identify the price and source or nature of the pricing methodology (e.g., UPR catalog, fixed- price, cost-plus, pass-through, specific pricing agreement or other arrangement), will be sufficient to allow the GM User Organization to perform a reasonable business analysis of value and competitiveness, and will be consistent with the level of detail at which value judgments related to additions, deletions, and modifications can reasonably be made. 3.7 Co-Negotiation. Upon GM's request, in situations where GM is willing to make volume or other strategic commitments, EDS and GM will jointly negotiate the GM price and terms with suppliers for items EDS will be providing to GM under this MSA where the price and terms upon which EDS will provide those items to GM are the GM price and terms, together with any mark-up or additional fees which are mutually agreed upon, all in accordance with and subject to the following: (a) To the extent that the GM price and terms accepted by GM include GM volume or strategic commitments to a supplier, GM shall make such commitments to EDS. (b) Following any such joint negotiation with a supplier that results in price and terms that GM agrees to accept as the GM price and terms for the applicable items, [Confidential information has been omitted.] 26 Confidential treatment has been requested by EDS for the indicated portions of this page. [Confidential information has been omitted.] (c) EDS may separately negotiate with suppliers for price and terms applicable with respect to EDS, taking into account both GM's volume and commitments, as well as EDS' additional volume and commitments, under the following circumstances: (1) EDS' total volume requirements (including volume requirements for GM) are sufficiently greater than the GM volume so that, after taking into account the particular supplier involved and the items being purchased, it is reasonably to be expected that such separate negotiations would result in an additional volume discount; or (2) After disclosing the potential terms to GM, EDS is willing to agree to terms to which GM is unwilling to agree; provided, however, that where there have previously been joint negotiations with a supplier based on GM volumes and commitments, there shall be no separate negotiations between EDS and the supplier based solely on GM's volumes and commitments without GM's consent, which will not be unreasonably withheld. Regardless of the price and terms EDS negotiates for itself under either of the above circumstances, EDS shall, unless GM otherwise consents, remain obligated to [Confidential information has been omitted.] 27 Confidential treatment has been requested by EDS for the indicated portions of this page. (d) GM may initiate a joint renegotiation, with EDS and a supplier, of the GM price and terms based on changes in volume, seasonal discounts, market changes, price wars, or other similar opportunities presented by changing market and economic conditions, as long as the renegotiations are not materially detrimental to any prior volume or strategic commitments GM has made to EDS. (e) To the extent that the GM price and terms have been determined through good faith co-negotiation with a supplier, GM may not subsequently assert to EDS that such price and terms are non-competitive, but must pursue any issue of non-competitiveness through joint renegotiation with the supplier. As used in this Section 3.7, the term "GM price and terms" means the price and terms jointly negotiated and/or renegotiated by GM and EDS with a supplier and accepted by GM. ARTICLE IV. STRUCTURAL COST REDUCTIONS --------------------------------------- 4.1 Delco Electronics Structural Cost Reductions. GM Parent and EDS Parent agree that, during 1996, EDS and Delco management shall work together to achieve structural cost reductions in the MSA Services being provided to Delco by EDS in the amount of $30 million. Such cost reductions shall be measured [Confidential information has been omitted.] Subject to the above restrictions, cost reductions related to changes in UPR Catalog rates and volume usage (excluding reductions resulting from normal variations in business usage) shall be included in determining the total structural cost reductions achieved pursuant to this Section 4.1. (a) The structural cost reduction target specified above represents firm good faith business commitments on the part of both Delco and EDS, but are not intended to be performance guarantees. In this regard, the parties mutually agree to utilize their reasonable best efforts to obtain such cost reductions, but recognize that 28 Confidential treatment has been requested by EDS for the indicated portions of this page. there shall be no gain sharing or similar incentives for over achievement, nor penalties or other liabilities in the event the targeted reductions are not achieved. (b) EDS shall also support the efforts of Delco management to reduce the costs of "rebilled" commodities by a similar percentage during 1996 through changes in volume, selection of less expensive alternatives, co-negotiation with third party vendors to secure price or cost reductions, and similar actions. (c) Similarly, EDS and Delco management shall commit to utilize their good faith efforts to work together towards obtaining further structural cost reductions on MSA Services throughout the remaining current term of the Delco Electronics Service Agreement. 4.2 General IT Structural Cost Reductions. GM and EDS have established mutual annual targets for IT structural cost reductions in base level MSA Services provided to GM by EDS during calendar years 1996, 1997, 1998 and 1999 in accordance with the following schedule: Calendar Year Annual Target ------------- ------------- 1996 $100,000,000 1997 $100,000,000 1998 $100,000,000 1999 $ 50,000,000 (a) The IT structural cost reduction targets specified above represent firm good faith business commitments on the part of both EDS and GM, but are not intended to be performance guarantees. In this regard, the parties mutually agree to utilize their reasonable best efforts to obtain such cost reductions, but recognize that there shall be no gain sharing or similar incentives for over achievement, nor penalties or other liabilities in the event the targeted reductions are not achieved. 29 (b) With regard to the annual target for 1996, the parties recognize that achievement of the 1996 annual target will be more difficult in view of the fact that the term of this MSA will not include a significant portion of calendar year 1996. Nevertheless, EDS and GM agree to strive in good faith to achieve the 1996 annual target; provided, however, that any shortfall in achieving the 1996 annual target will be carried over and added to the 1997 annual target. (c) Cost reductions pursuant to this Section 4.2 will be calculated in accordance with Exhibit E to this MSA. In this regard, Exhibit E establishes the guidelines and methodology through which cost reductions attributable to initiatives funded by GM, in whole or in part, may be credited towards the achievement of annual targets. As also set forth in Exhibit E, the parties have agreed on the amount that will be credited towards the achievement of the 1996 annual target for carry over amounts of savings initially realized in 1996 from 1995 cost reduction efforts pursuant to the Performance Reduction Requirement provision of the NAO Service Agreement and similar provisions of other Service Agreements in effect as of the Effective Date. (d) Cost reductions will be credited toward achievement of the annual targets [Confidential information has been omitted.] in which the cost reductions are realized, [Confidential information has been omitted.] (e) The calculation of cost reductions to be credited toward achievement of the annual targets pursuant to this Section 4.2 shall specifically exclude (i) cost reductions achieved at GMIO or Delco, (ii) reductions in the UPR Catalog rates or usage due to normal variations in business usage, and (iii) reductions in GM's annual 30 Confidential treatment has been requested by EDS for the indicated portions of this page. expenditures on new initiatives and application development. The above provisions of this sub-Section notwithstanding, cost reductions resulting from decreased usage of UPR Catalog items attributable to process improvements or other efforts of EDS and cost reductions resulting from the implementation of new initiatives and application developments shall be credited towards the achievement of the annual targets pursuant to this Section 4.2; provided, however, that such inclusion is in accordance with the guidelines and methodology established in Exhibit E hereto. (f) GM will allocate the annual cost reduction target amounts among the GM Major Sectors in North America (excluding Delco) roughly in proportion to their relative charges for base level MSA Services and will reflect the impact of the allocated cost reductions in the calendar year commitments of those GM Major Sectors. GM will consult with EDS in making these allocations. GM and EDS will each exert its good faith efforts to achieve each GM Major Sector's allocated target, and, on that basis, the parties agree that measurement of whether the structural cost reductions have been achieved will be made on a GM corporate basis taking into account over achievement of any particular GM Major Sector's target, as well as any shortfall. With respect to calendar year 1999, however, unless otherwise mutually agreed, the entire annual cost reduction target amount shall be allocated to NAO, and the achievement of such annual target shall be measured primarily on the net IT structural costs reductions achieved within NAO. ARTICLE V. MARKET TESTING AND RESOURCING ------------------------------------------ 5.1 Initial Market Testing and Resourcing by GMIO. During each of 1996 and 1997, GMIO may expose to competitive bidding MSA Services so long as the aggregate Bid Revenue associated with such MSA Services in each such year does not exceed $30 million. Following such competitive bidding, GMIO, at its discretion, may then source such MSA Services directly to third parties or to EDS. In this regard, GMIO shall utilize its 31 reasonable best efforts to complete such competitive bidding process during each applicable year, but shall be allowed to complete the sourcing of MSA Services associated with such bidding in the following year without regard to the limitations in Section 5.2 hereof. The competitive bidding and the sourcing of MSA Services to third parties described above, shall be subject to the limitations and requirements set forth in this Section 5.1 and in Section 5.3 hereof. With respect to any competitive bid that satisfies the limitations on competitive bidding set forth in this Section 5.1 and subject only to the aggregate limitations on resourcing set forth in sub- Section 5.3(e) hereof, GMIO may accept any bid submitted in response to that competitive bid regardless of whether or not the amount of the accepted bid is greater or less than the Bid Revenue applicable to that competitive bid. (a) Excluded Services. In no event may GMIO expose to competitive bidding, or resource, pursuant to this Section 5.1 the following MSA Services: (1) Any information processing resources listed on Attachment A, as the same may be modified from time to time, to the Agreement for Global Information Processing Resource Pricing, entered into as of _____________, between GM Parent and EDS Parent. (2) Any other MSA Services which are subject to a specific pricing agreement entered into after February 1, 1996, so long as the pricing term applicable to such MSA Services continues in force. (b) No Further Limitation. Nothing in this Section 5.1 shall be construed as a limitation or constraint on GMIO's ability to participate in "Later Market Testing and Resourcing by GM" as contemplated in Section 5.2. 5.2 Later Market Testing and Resourcing by GM. During the time periods specified below, GM may expose MSA Services to competitive bidding and, at its discretion, may then 32 source such MSA Services directly to third parties or to EDS, subject to the limitations and requirements set forth in this Section 5.2 and in Section 5.3 hereof. (a) Annual Limitations. During calendar year 1998 and each subsequent calendar year during the term of this MSA, GM may expose to competitive bidding MSA Services so long as the aggregate Bid Revenue associated with such MSA Services does not exceed the applicable percentage set forth below of the aggregate annual revenue paid to EDS by GM for MSA Services performed pursuant to this MSA and Service Agreements hereunder during the prior calendar year: Calendar Year Percentage ------------- ---------- 1998 5.75% 1999 6.125% 2000 6.375% 2001 2.6% 2002 2.5% 2003 2.5% 2004 2.4% 2005-06 2.2% With respect to any competitive bid that satisfies the limitations on competitive bidding set forth in this sub-Section 5.2(a) and subject only to the aggregate limitations on resourcing set forth in sub- Section 5.3(e) hereof, GM may accept any bid submitted in response to that competitive bid regardless of whether or not the amount of the accepted bid is greater or less than the Bid Revenue applicable to that competitive bid. (b) Commencement. The competitive bidding of MSA Services allowed during any calendar year pursuant to this Section 5.2 may commence ninety (90) days prior to 33 the first of that year, but no resourcing to third parties which results from such competitive bidding may be effective until the first of that year. (c) Excluded Services. In no event may GM expose to competitive bidding, or resource, the following MSA Services: (1) Any UPR Catalog items which are subject to a specific long-term contract (such as (i) the information processing resources listed on Attachment A, as the same may be modified from time to time, to the Agreement for Global Information Processing Resource Pricing, entered into as of ___________, between GM Parent and EDS Parent, and (ii) the communications products and services listed on Attachment A, as the same may be modified from time to time, to the Agreement for U. S. Communications Product and Service Pricing, entered into as of _______________, between GM Parent and EDS Parent), for so long as such specific contract continues in force. (2) Any other MSA Services which are subject to a specific pricing agreement entered into after February 1, 1996, so long as the pricing term applicable to such MSA Services continues in force. However, the exclusion set forth in this sub-Section 5.2(c)(2) will not apply to the MSA Services being provided pursuant to (i) the Service Agreement signed on __________, 1996, between EDS and Allison Transmission, (ii) the Service Agreement signed on __________, 1996, between EDS and GM of Canada, and (iii) the Service Agreement signed on __________, 1996, between EDS and GM de Mexico. The above provisions notwithstanding, but subject to the other limitations set forth in this Article V, during the final ninety (90) days of any such contract or pricing agreement referred to in this sub-Section 5.2(c), GM may commence 34 competitive bidding of the MSA Services which are subject to that contract or pricing agreement, but no resourcing to third parties which results from such competitive bidding may be effective until the expiration of that contract or pricing agreement. 5.3 General Limitations and Requirements. The competitive bidding, and resourcing to third parties, of MSA Services by GM pursuant to Sections 5.1 and 5.2 hereof shall be subject to the following limitations and requirements: (a) Consultation. Prior to the commencement of any competitive bidding pursuant to this Article V, GM shall consult with EDS regarding the appropriateness and potential consequences of exposing any particular MSA Services to competitive bidding and will give due regard to the impact that such competitive bidding and any resulting resourcing may have upon EDS. In this regard, EDS shall be obligated consistent with sub-Section 5.3(h) hereof to promptly inform GM of any potential impairment of EDS' ability to perform MSA Services as a result of such resourcing to the extent EDS is then aware or reasonably should be aware of such potential impairment. The final decision to proceed with such competitive bidding and any resulting resourcing, however, shall at all times be retained by GM. (b) Estimate of Bid Revenue. Prior to the commencement of any competitive bid that GM may conduct pursuant to this Article V, GM will develop a good faith, reasonable estimate of the Bid Revenue associated with the MSA Services that will be subject to that competitive bid, based upon the amounts previously paid to EDS for those or similar MSA Services provided under comparable circumstances, the EDS rates for applicable resources then in effect, and other similar criteria. If GM so requests, EDS will assist GM in developing the Bid Revenue estimate and, in any event, GM will inform EDS of GM's proposed estimate of the Bid Revenue prior to the commencement of the competitive bid. 35 Promptly after being informed of the proposed estimate, EDS will inform GM as to whether or not EDS is in agreement with the proposed estimate and, if not, the basis for EDS' disagreement. If EDS is not in agreement with the proposed estimate and GM so requests, EDS and GM will work together in good faith to resolve the differences. (c) Commencement of Competitive Bid. Upon finalization of GM's good faith, reasonable estimate of the Bid Revenue associated with the MSA Services that GM proposes to subject to a competitive bid pursuant to this Article V and notwithstanding any disagreement by EDS with that estimate, GM may proceed with the competitive bid for such MSA Services if the amount of such GM final estimate of the Bid Revenue for those MSA Services, when aggregated with the amounts of Bid Revenue associated with all other competitive bids previously commenced by GM during the applicable period, is less than the applicable initial or annual bidding limitation set forth in Section 5.1 or 5.2 hereof. (d) Right to Bid. No MSA Services shall be resourced to third parties without the prior competitive bidding of such services in accordance with this Article V. EDS shall have the right to bid on any MSA Services exposed to competitive bidding pursuant to this Article V, and its bid shall be fairly evaluated by GM along with all other bids submitted by any third parties. In this regard, however, the exclusive right to select the successful bidder shall at all times be retained by GM. (e) Aggregate Limitations. Following any competitive bidding of any MSA Services allowed by this Article V, GM may source such MSA Services to the successful bidder, whether EDS or a third party; provided, however, that the amount of MSA Services which may be resourced to third parties by GM shall be subject to the following aggregate limitations: 36 (1) Through calendar year 2000, in no single calendar year shall the aggregate amount paid to third parties by GM for MSA Services performed during that calendar year exceed fifteen percent (15%) of the aggregate amount of revenue paid to EDS by GM for MSA Services performed during the prior calendar year. (2) After calendar year 2000, in no single calendar year shall the aggregate amount paid to third parties by GM for MSA Services performed during that calendar year exceed twenty-five percent (25%) of the aggregate amount of revenue paid to EDS by GM for MSA Services performed during the prior calendar year. Commencing if and when GM resources any MSA Service to a third party, GM shall provide to EDS, promptly after the end of each calendar year during the remaining term of this MSA, a report of the amounts paid by GM to third parties for MSA Services during that year. In addition, upon request by EDS Parent, an annual special report shall be obtained by GM Parent from its independent certified public accounting firm expressing an opinion as to whether GM, for the then preceding year, was in compliance with the provisions of this Article V. Unless waived by GM Parent, EDS Parent shall reimburse GM Parent for the expenses incurred by GM Parent in obtaining any such special report. (f) Compliance with Limitations. GM shall not conduct competitive bidding of any MSA Service, or source any MSA Service as a result of such competitive bidding, if, at the time such bidding or sourcing would otherwise occur, it is reasonably to be expected that the effect of such bidding or sourcing would result in GM's exceeding any annual or aggregate limitation provided in this Article V. Subject to the foregoing, GM will not be required to cancel, renegotiate, or otherwise nullify any contract for MSA Services previously entered into with a third party in 37 the event that any such limitation is reached or exceeded during the terms of those contracts. (g) Order of Precedence. The limitations set forth in this Article V shall supersede any different or inconsistent rights which GM may have pursuant to any Service Agreement, whether in effect as of or entered into after the Effective Date, to conduct competitive bidding of, or resource, any MSA Services, and GM Parent agrees that neither it nor any of its Contracting Parties worldwide will enforce any provision of any Service Agreement in a manner that would result in GM being in violation of this Article V. (h) Performance Excused. If, as a result of GM's resourcing of any MSA Service, EDS is prevented or materially impaired from performing any other MSA Services as a direct result of the performance or non- performance of the third party providing the resourced MSA Service, EDS will not be liable or otherwise held responsible for any failure in the performance of those other MSA Services for so long as and to the extent that EDS' performance is thus prevented or materially impaired, provided that EDS gives GM prompt notice that such situation is likely to occur as soon as EDS becomes aware or reasonably should have become aware of that potential. In any such event, EDS shall, upon GM's request, utilize its reasonable best efforts, in cooperation with GM and the applicable third party, to develop and implement suitable work around plans and any other actions that may be necessary to eliminate the prevention or impairment of EDS' performance of the MSA Services as expeditiously as reasonably possible. GM shall pay EDS for additional work associated with EDS' implementation of any such work around or related actions in accordance with the cost-plus pricing methodology set forth in Section A7.3 of Exhibit A hereto or as may be otherwise mutually agreed. In all such cases, EDS shall be obligated to utilize its reasonable best efforts to perform the MSA Services for which it is retaining responsibility regardless of the performance or non-performance of the 38 third party providing the resourced MSA Service. For purposes of this sub-Section 5.3(h), EDS will be deemed "materially impaired" from performing any MSA Services if EDS is not able to perform such MSA Services without expending significant additional effort or expense. (i) Plant Floor Exclusion. If GM terminates the Plant Floor Systems Services Agreement, entered into as of _____________, 1996, between GM and EDS on or before the end of the Probationary Period (as defined in that agreement) as a result of a Material Failure (as defined in that agreement) by EDS, then GM may competitively bid and resource any plant floor services provided thereunder, other than any such plant floor services that, prior to the Effective Date, were mutually agreed by the parties to be within the scope of services described in Section 1.3 of the Master Agreement, and such competitive bidding and resourcing shall not count against either the annual or the aggregate limitations on competitive bidding and resourcing set forth elsewhere in this Article V. (j) Assistance and Cooperation. EDS will fully cooperate as necessary to facilitate GM's exercise of the market testing rights under this Article V, including, without limitation, by providing to GM and designated third party vendors relevant information regarding the MSA Services being exposed to market testing. The above provision notwithstanding, EDS shall not be required to (i) provide any information relating to EDS' costs, or (ii) disclose any other bona fide EDS proprietary or trade secret information unless such other proprietary or trade secret information is required to understand GM's requirements and specifications and the recipient of such information has provided EDS with a confidentiality agreement regarding such information that is mutually acceptable to EDS and GM. (k) Transition Services. In the event that GM awards or resources any MSA Services to a third party pursuant to this Article V, then EDS shall provide reasonable 39 transition services to GM and such third party in accordance with the provisions of Section A9.5 of Exhibit A hereto. (l) Cancellation Charges. In the event that, pursuant to this Article V, GM awards or sources, either to EDS or to a third party, any MSA Services pursuant to a competitive bid that (i) results in the cancellation of any MSA Services then being provided by EDS pursuant to a Project Service Agreement (as defined below) executed on or before February 1, 1996, or (ii) requires the disposition of any capital asset or the cancellation of any long-term lease acquired or entered into prior to February 1, 1996, then, in each such case, GM will pay to EDS any wind-down expenses and cancellation charges, determined in accordance with Section A9.4 of Exhibit A hereto, incurred by EDS in connection with the sourcing of such MSA Services. Except as provided in this sub-Section 5.3(l), EDS will not be entitled to wind-down expenses or cancellation charges pursuant to such Section A9.4 with respect to the bidding or sourcing of MSA Services pursuant to this Article V. For purposes of this sub-Section 5.3(l), the term "Project Service Agreement" shall mean a RISS, SDA, scope of work, or other Service Agreement for a specified set of MSA Services, but specifically excluding any GM Major Sector or similar "umbrella" type Service Agreement except to the extent such Service Agreement is utilized to authorize performance of a specified MSA Service without the creation of another Service Agreement. ARTICLE VI. GENERAL PROVISIONS ------------------------------- 6.1 Termination of MSA. This MSA may be terminated as follows: (a) In the event either EDS Parent or GM Parent defaults in the performance of any of its duties or obligations that are material in the context of the overall relationship between GM and EDS (except for a default in payments to EDS) and fails to cure such default within forty-five (45) days after being given written notice specifying 40 the default, or, with respect to those defaults which cannot reasonably be cured within forty-five (45) days, if the defaulting party fails to provide, promptly after being given written notice specifying the default, a specific written action plan for curing the default as expeditiously as reasonably possible, including a specified schedule for the action plan and a mutually agreed upon end date by which the action plan is to be completed and the default cured, and to proceed utilizing its reasonable best efforts to cure the default in accordance with and on the schedule specified in the action plan, then the party not in default may, by giving written notice thereof to the defaulting party, terminate this MSA as of a date specified in such notice of termination. Additionally, in the event that the defaulting party fails to cure the default by the mutually agreed upon end date as set forth in the action plan, the party not in default may, by giving written notice thereof to the defaulting party, immediately terminate this MSA. (b) In the event GM defaults in the payment when due of any amount due to EDS that is material in the context of the overall relationship between GM and EDS and fails to cure such default within ten (10) days after being given written notice specifying the default, then the EDS Corporate Contract Manager may, by giving written notice thereof to GM, terminate this MSA as of a date specified in such notice of termination. Notwithstanding the foregoing, the EDS Corporate Contract Manager shall not be entitled to terminate this MSA for failure to pay any amount that is reasonably and in good faith disputed by GM if, within the ten (10) day period specified above, GM pays such disputed amount into an escrow account established at a mutually selected financial institution for that purpose. Upon resolution of the dispute, any portion of the disputed amount that is determined to be payable to EDS, together with interest earned thereon, will be promptly paid to EDS from the escrow account and any remaining amount in the escrow account will be paid to GM. (c) In the event that either party is unable to pay its debts generally as they come due or is declared insolvent or bankrupt, is the subject of any proceedings relating to 41 its liquidation, insolvency or for the appointment of a receiver or similar officer for it, makes an assignment for the benefit of all or substantially all of its creditors, or enters into an agreement for the composition, extension, or readjustment of all or substantially all of its obligations, then the other party hereto may, by giving written notice thereof to such party, terminate this MSA as of a date specified in such notice of termination. (d) In the event that a Change of Control (as defined in Exhibit F hereto) occurs, then GM Parent may terminate this MSA or any applicable Service Agreement in accordance with and subject to the provisions of Exhibit F hereto. 6.2 Insurance. EDS shall maintain, during the term hereof, all insurance and/or bonds required by law or mutually agreed to be reasonably required to protect GM's interests, including but not limited to: (1) Workers Compensation insurance as prescribed by the law of the jurisdiction(s) in which the applicable MSA Services are to be performed; (2) Employer's and Occupational Disease Liability insurances with limits of at least Five Million Dollars ($5,000,000) per occurrence; and (3) Comprehensive General Liability insurance (including products liability, personal injury, property damage or loss, and broad form contractual liability insurance or its equivalent with limits of Twenty-Five Million Dollars ($25,000,000) and, if the use of automobiles is required, Comprehensive Automobile Liability insurance with combined single limits of at least Ten Million Dollars ($10,000,000) for bodily injury, including death, and for property damage. EDS insurance policies shall be issued by reputable insurance company(ies) authorized to do business where the applicable MSA Services are to be performed. The above policies shall be primary in coverage to any other insurance or self insurance arrangements which may be available to GM. EDS shall be prepared, prior to the start of the applicable MSA Services to furnish, if requested by GM, certificates or adequate proof of the foregoing insurance, which insurance shall name GM Parent as an additional insured. Certificates furnished by EDS shall contain a clause stating that GM is to be notified in writing at least thirty (30) days prior to termination of, or any material change in, the policy. The purchase of 42 insurance coverage and furnishing of certificates pursuant to this Section 6.2 shall neither modify nor be in satisfaction of EDS' liability under this MSA or any Service Agreement. 6.3 Foreign Subsidiaries. GM Parent and EDS Parent have recommended and shall continue to recommend to their respective foreign subsidiaries (including second and lower tier subsidiaries and foreign branches of U.S. subsidiaries, including second and lower tier subsidiaries) that they enter into locally appropriate agreements for the provision of MSA Services in accordance with the principles set forth in the provisions of this MSA. GM Parent and EDS Parent each acknowledge and understand that their respective foreign subsidiaries are not parties to this MSA and will not be legally bound by the provisions of this MSA unless and until they agree to be so bound. However, during any period and to the extent that a locally appropriate Service Agreement for any such MSA Services is not then currently in effect, GM Parent and EDS Parent shall each remain obligated to the other for the performance of the respective obligations of GM and EDS stated herein. 6.4 Compliance with Advance Agreement. EDS and GM will continue to adhere to the practices in effect as of the Effective Date that have been agreed upon and put in place to carry out the provisions of the Advance Agreement, concerning EDS profit and unallowable costs included in GM Central Office allocations to the U.S. Government, that has been negotiated and agreed upon by GM Parent, EDS Parent, and the United States Defense Department; provided, however, that the parties' obligation to adhere to these practices will continue only for so long as and to the extent that EDS' charges to the GM Central Office are not accepted by the Defense Department as market-based prices, fully allowable for U.S. Government contract financial accounting purposes. In addition, for so long as the parties continue to adhere to the Advance Agreement as provided in the preceding sentence, EDS shall give GM an annual credit against EDS' charges to the GM Central Office in the amount of $115,000 per year. GM Parent and EDS Parent each agree to use all reasonable efforts to cause the Defense Department to accept EDS' charges to the GM Central Office as market-based prices as soon as feasible after the Effective Date. 43 6.5 Amendment or Modification. This MSA may be amended or modified upon mutual agreement of GM Parent and EDS Parent; provided, however, such amendment or modification shall only be effective if made in writing by the Corporate Contract Managers or other authorized representatives of GM Parent and EDS Parent. 6.6 Incorporation of Exhibit A. The provisions of Exhibit A hereto, except for and expressly excluding Section A9.3 thereof, are hereby incorporated into and made a part of this MSA for all purposes. Notwithstanding anything to the contrary in Exhibit A hereto, for purposes of these provisions as incorporated into this MSA (i) the Effective Date shall mean the Effective Date of this MSA, (ii) the Contracting Parties shall mean GM Parent and EDS Parent, and (iii) the Major Sector Contract Managers and the Unit Project Managers of the Contracting Parties shall mean the GM and EDS Corporate Contract Managers. 6.7 Prior Master Agreement. This MSA amends, restates and supersedes in its entirety the Master Agreement by and between GM and EDS and, effective as of the Effective Date, the Master Agreement is hereby terminated and replaced in all respects. However, any Service Agreement in effect as of the Effective Date will survive execution of this MSA, but GM Parent and EDS Parent shall, subject to Section 1.5 hereof, cause their respective Contracting Parties thereto to incorporate into that Service Agreement the provisions of Exhibit A to this MSA in lieu of the corresponding provisions of Exhibit A to the Master Agreement (with appropriate adjustments or exclusions necessary to accommodate differences between this MSA and the Master Agreement, subject to the provisions of Section A1.2 of Exhibit A hereto) as promptly as reasonably practicable. Without limiting the generality of the foregoing, GM Parent and EDS Parent shall, subject to Section 1.5 hereof, cause their respective Contracting Parties, in connection with their incorporating into any such Service Agreement the provisions of Exhibit A to this MSA, to make the following adjustments and exclusions to those provisions as incorporated into the Service Agreement: 44 (a) GM Space. If the Contracting Parties did not expressly exclude Section A3.2(b) of Exhibit A to the Master Agreement from the Service Agreement, then the Service Agreement shall be amended to include such Section A3.2(b) as it may have been modified in the Service Agreement. (b) Time of Payment. If the payment terms applicable to the Service Agreement have been modified, either pursuant to Section 2.6 hereof or otherwise, so that such provisions are different from the provisions of Section A8.2 of Exhibit A to the Master Agreement, then the Service Agreement shall retain such modified payment terms in lieu of the payment terms provided in Section A8.2 of Exhibit A to this MSA. In no event, however, shall the payment terms applicable to any Service Agreement be less favorable to the GM Contracting Party thereto than the applicable payment terms described in Section 2.6 hereof. GM Parent and EDS Parent each agree that, unless otherwise expressly agreed by the Contracting Parties thereto in accordance with the provisions of Section A1.2 of Exhibit A hereto, no Service Agreement in effect as of the Effective Date will be enforced in a manner that is inconsistent with the provisions of this Section 6.7. 6.8 Governing Law. This MSA shall be governed by the laws of the State of Michigan without regard to the principles of conflict of laws. IN WITNESS WHEREOF, the parties hereto, by their duly authorized representatives, have executed this MSA effective as of the Effective Date first above written. GENERAL MOTORS CORPORATION ELECTRONIC DATA SYSTEMS CORPORATION By: By: ----------------------- ----------------------- Date: Date: --------------------- --------------------- 45 EXHIBIT A STANDARD TERMS AND CONDITIONS RECOMMENDED FOR INCORPORATION INTO SERVICE AGREEMENTS ----------------------------------------------------- TABLE OF CONTENTS ARTICLE A-I. DEFINITIONS AND INTERPRETATION Section A1.1 Definitions........................................... A-1 Section A1.2 Interpretation........................................ A-5 ARTICLE A-II. CONTRACT ADMINISTRATION AND REVIEW Section A2.1 Management and Administration......................... A-6 Section A2.2 Performance Review.................................... A-7 ARTICLE A-III. GM ASSETS AND SPACE Section A3.1 GM Assets............................................. A-7 Section A3.2 GM Space.............................................. A-8 ARTICLE A-IV. SOFTWARE AND INTELLECTUAL PROPERTY Section A4.1 Ownership of Software................................. A-8 Section A4.2 Software Rights and Licenses.......................... A-10 Section A4.3 Changes and Upgrades to Software...................... A-15 Section A4.4 Third Party Software Developers....................... A-16 Section A4.5 Intellectual Property................................. A-16 ARTICLE A-V. DATA PROTECTION AND AUDIT RIGHTS Section A5.1 GM Data............................................... A-17 Section A5.2 Safeguarding of GM Data............................... A-18 Section A5.3 Nondisclosure......................................... A-18 Section A5.4 Data Center Security.................................. A-19 Section A5.5 Audit Rights.......................................... A-19 ARTICLE A-VI. EMPLOYEES Section A6.1 EDS' Employees........................................ A-20 Section A6.2 Notice to EDS' Employees.............................. A-20 Section A6.3 Premise and Work Rules................................ A-21 Section A6.4 Right of Access....................................... A-21 Section A6.5 Key EDS Employees for Critical Projects............... A-21 ARTICLE A-VII. EDS COMPENSATION Section A7.1 Uniform Published Rates............................... A-22 Section A7.2 Fixed Price Methodology............................... A-24 Section A7.3 Cost-Plus Pricing..................................... A-26 Section A7.4 Pricing Detail........................................ A-30 Section A7.5 Tax Matters........................................... A-31 A-i ARTICLE A-VIII. BILLING AND PAYMENT PROCEDURES Section A8.1 Billing Procedures.................................... A-33 Section A8.2 Time of Payment....................................... A-34 ARTICLE A-IX. DISPUTES AND TERMINATION Section A9.1 Negotiation of Disputes............................... A-36 Section A9.2 Resolution of Disputes................................ A-36 Section A9.3 Termination........................................... A-37 Section A9.4 Cancellation of Services and Cancellation Charges..... A-38 Section A9.5 Termination Assistance and Transition................. A-41 ARTICLE A-X. WARRANTIES Section A10.1 Software Warranty..................................... A-44 Section A10.2 Hardware Warranty..................................... A-44 Section A10.3 Pass-Through Warranties............................... A-44 Section A10.4 Survival of Warranties................................ A-45 Section A10.5 Disclaimer of Warranties.............................. A-45 ARTICLE A-XI. INDEMNITIES AND LIABILITY Section A11.1 Cross Indemnity....................................... A-45 Section A11.2 Proprietary Rights Indemnity.......................... A-46 Section A11.3 Hardware Damage Indemnity............................. A-46 Section A11.4 Software License Indemnity............................ A-47 Section A11.5 Limitation of Liability............................... A-47 ARTICLE A-XII. SPECIAL PROVISIONS RELATING TO MSA SERVICES Section A12.1 GM's IT Strategy and Architecture..................... A-48 Section A12.2 Competitiveness....................................... A-48 Section A12.3 Market Testing and Resourcing......................... A-49 Section A12.4 Co-Negotiation........................................ A-49 Section A12.5 Use of Independent Auditors........................... A-49 ARTICLE A-XIII. MISCELLANEOUS Section A13.1 Binding Nature and Assignment......................... A-50 Section A13.2 Notices............................................... A-50 Section A13.3 Counterparts.......................................... A-51 Section A13.4 Headings.............................................. A-51 Section A13.5 Approvals and Similar Actions......................... A-51 Section A13.6 Force Majeure......................................... A-51 Section A13.7 Severability.......................................... A-52 Section A13.8 Waiver................................................ A-52 Section A13.9 Relationship of Parties............................... A-52 Section A13.10 Services for Others................................... A-53 Section A13.11 Hiring of Employees................................... A-53 Section A13.12 Compliance With Laws.................................. A-53 Section A13.13 Media Releases........................................ A-53 Section A13.14 Survival.............................................. A-54 Section A13.15 Entire Agreement...................................... A-54 Section A13.16 Amendment or Modification............................. A-54 Section A13.17 Good Faith and Fair Dealing........................... A-54 A-ii EXHIBIT A STANDARD TERMS AND CONDITIONS RECOMMENDED FOR INCORPORATION INTO SERVICE AGREEMENTS ----------------------------------------------------- ARTICLE A-I. DEFINITIONS AND INTERPRETATION ------------------------------------------- A1.1 Definitions. The following terms shall have the meanings set forth below wherever they are used in the provisions of this Exhibit A: (a) The term "Agreement" shall mean the agreement into which the provisions of this Exhibit A are incorporated. (b) The term "Contracting Party" shall mean (i) with respect to the MSA, GM Parent or EDS Parent, and (ii) with respect to any Service Agreement, the GM User Organization receiving MSA Services pursuant to the Service Agreement or the EDS Service Organization providing such MSA Services. (c) The term "Corporate Contract Manager" shall mean the individual designated by GM Parent or EDS Parent, respectively, pursuant to sub- Section 3.3(a) of the MSA. (d) The term "EDS" shall mean, collectively, EDS Parent and the entities and subsidiaries owned by EDS Parent. For purposes of this definition, an entity or subsidiary will be deemed to be "owned by EDS Parent" if EDS Parent, either directly or indirectly, (i) is the beneficial owner of more than 50% of the equity of that entity or subsidiary, or (ii) is the beneficial owner of more than 35% of the equity of, and has management control of, that entity or subsidiary. (e) The term "EDS Cost" shall mean the costs of EDS, calculated pursuant to sub-Section A7.3(b) hereof, in providing to GM the applicable MSA Services. A-1 (f) The term "EDS Major Sector" shall mean an EDS Service Organization designated by EDS from time to time to coordinate the provision of MSA Services by EDS to the GM User Organizations within a GM Major Sector. (g) The term "EDS Parent" shall mean Electronic Data Systems Corporation, a Delaware corporation. (h) The term "EDS Service Organization" shall mean any functional entity, division, subsidiary, department or group within EDS, including an EDS Major Sector, which has been or shall be formed to provide MSA Services to GM User Organizations. (i) The term "Effective Date" shall mean the date as of which the term of the Agreement commences or the provisions of the Agreement otherwise become effective. (j) The term "GM" shall mean, collectively, GM Parent and the entities and subsidiaries owned by GM Parent. For purposes of this definition, an entity or subsidiary will be deemed to be "owned by GM Parent" if GM Parent, either directly or indirectly, is the beneficial owner of: (1) More than 65% of the equity of, and has management control of, that entity or subsidiary and, as of August 1, 1995, EDS was providing services under the Master Agreement pursuant to a Service Agreement in support of the business operations of that entity or subsidiary. (2) 80% or more of the equity of that entity or subsidiary if, as of August 1, 1995, EDS was not providing services under the Master Agreement pursuant to a Service Agreement in support of the business operations of that entity or subsidiary. A-2 (k) The term "GM Assets" shall mean all GM fixed and related assets, other than Software and facilities, used in the performance of the MSA Services and transferred to the management and control of EDS as of January 1, 1985 or, by mutual agreement, at anytime thereafter. (l) The term "GM Central Office" shall mean the corporate headquarters of GM Parent. (m) The term "GM Major Sector" shall mean a GM User Organization designated by GM from time to time to coordinate the receipt of MSA Services from EDS by numerous GM User Organizations. As of the Effective Date of the MSA, the GM Major Sectors are listed in Exhibit B to the MSA. (n) The term "GM Parent" shall mean General Motors Corporation, a Delaware corporation. (o) The term "GM User Organization" shall mean any functional entity, division, subsidiary, department or group within GM, including a GM Major Sector, which has or shall have requirements for MSA Services applicable to that functional entity, division, subsidiary, department or group that the MSA provides are to be obtained from EDS. (p) The term "Hardware" shall mean computers and related equipment, including, but not limited to, central processing units and other processors, controllers, modems, communications and telecommunications equipment (voice, data and video), cables, storage devices, printers, terminals, other peripherals and input and output devices, and other tangible mechanical and electronic equipment intended for the processing, input, output, storage, manipulation, communication, transmission and retrieval of information and data. A-3 (q) The term "Invoice" shall mean an invoice prepared by EDS for GM pursuant to the terms of the Agreement. (r) The term "IT" shall mean information technology consisting of computer and information processing and communications. (s) The term "Major Sector Contract Manager" shall mean the person designated by either the GM Major Sector having responsibility for the GM Contracting Party or the EDS Major Sector having responsibility for the EDS Contracting Party, as applicable, pursuant to sub-Section 3.3(b) of the MSA. (t) The term "Master Agreement" shall mean the Master Agreement, effective as of September 1, 1985, made and entered into by and between GM Parent and EDS Parent, as amended by the Addendum thereto dated May 29, 1987. (u) The term "MSA" shall mean the Master Service Agreement, effective as of _____________, 1996, made and entered into by and between GM Parent and EDS Parent. (v) The term "MSA Services" shall mean those services described in Section I of Exhibit C to the MSA. (w) The term "Service Agreement" shall mean any agreement, as provided for in Section 2.1 of the MSA, that is entered into between a GM User Organization and an EDS Service Organization for the provision of MSA Services to that GM User Organization, whether entered into before or after the Effective Date of the MSA. (x) The term "Site" or "Sites" shall mean the space within GM facilities or entire GM facilities utilized in the performance of MSA Services. A-4 (y) The term "Software " shall mean the source code and object code versions of any applications programs, operating system software, computer software languages, utilities and other computer programs, and documentation and supporting materials relating thereto, in whatever form or media, including, but not limited to, the tangible media upon which such applications programs, operating system software, computer software languages, utilities and other computer programs, and documentation and supporting materials relating thereto are recorded or printed, together with all corrections, improvements, updates and releases thereof. (z) The term "Unit Project Manager" shall mean the person designated by either Contracting Party pursuant to sub-Section 3.3(c) of the MSA. Other terms used in this Exhibit A are defined in the context in which they are used and, unless otherwise specified herein, shall have the meanings there indicated wherever they are used in this Exhibit A. A1.2 Interpretation. Unless expressly modified or excluded therefrom, the provisions of this Exhibit A shall be deemed incorporated into the Agreement and shall supersede and prevail over any conflicting or inconsistent provisions of the Agreement, unless expressly provided otherwise under the Agreement by: (a) Mutual agreement of the Corporate Contract Managers with respect to the provisions of Sections A1.1, A1.2, and A8.2 and Articles A-IX and A-XII. (b) Mutual agreement of the Major Sector Contract Managers with respect to the provisions of Articles A-IV, A-V, A-X, A-XI, and A-XIII. (c) Mutual agreement of the Unit Project Managers with respect to the remaining provisions of this Exhibit A. A-5 The GM Contracting Party and the EDS Contracting Party with respect to the Agreement shall be responsible for the performance of the obligations of GM and EDS, respectively, under the Agreement. ARTICLE A-II. CONTRACT ADMINISTRATION AND REVIEW ------------------------------------------------ A2.1 Management and Administration. The Unit Project Manager for each Contracting Party, as designated pursuant to sub-Section 3.3(c) of the MSA, under the supervision of the applicable Major Sector Contract Manager, shall: (a) Be responsible for the implementation, management and enforcement of the Agreement on behalf of the Contracting Party. (b) Supervise performance of that Contracting Party's obligations under the Agreement. (c) Have principal responsibility to resolve disputes between the GM and EDS Contracting Parties. (d) Ensure that the policies and procedures established with respect to the Agreement are consistent with the policies and procedures of general applicability established by the applicable Corporate Contract Manager or Major Sector Contract Manager. Each Major Sector Contract Manager or Unit Project Manager may delegate any of his or her authority to a designated representative by notifying the other Major Sector Contract Manager or Unit Project Manager of the designated representative to whom such authority is delegated and the extent of the authority delegated, which notice shall be confirmed in writing if requested by the other Major Sector Contract Manager or Unit Project Manager. Each Contracting Party shall be entitled to rely upon instructions received from the Major Sector Contract Manager or Unit Project Manager for the other Contracting Party with respect to all matters relating to the Agreement and upon instructions received from any A-6 designated representative of the Major Sector Contract Manager or Unit Project Manager for the other Contracting Party with respect to the MSA Services and areas for which such designated representative is responsible and each Major Sector Contract Manager or Unit Project Manager and designated representative thereof shall make himself or herself reasonably available for such purpose. A2.2 Performance Review. The GM and EDS Major Sector Contract Managers and Unit Project Managers for the Contracting Parties shall meet as often as shall reasonably be requested by either Contracting Party to review the performance of the EDS and GM Contracting Parties under the Agreement. Written minutes of such meetings may be kept. ARTICLE A-III. GM ASSETS AND SPACE ---------------------------------- A3.1 GM Assets. Commencing on the Effective Date, during the term of the Agreement, GM shall provide the GM Assets used in the performance of the MSA Services to EDS for EDS' use as provided herein. (a) All GM Assets owned, leased or otherwise held by GM during the term of this Agreement shall at all times remain the property of GM. (b) EDS will have access to and use of the GM Assets and such ability to manage the GM Assets as may be necessary or appropriate to enable EDS to properly perform its obligations pursuant to the Agreement. Unless otherwise mutually agreed, on a monthly basis, EDS will (i) pay on behalf of GM to any third party, pursuant to the terms of any agreements therefor, or (ii) reimburse GM for, the actual costs, including depreciation, incurred by GM in connection with such GM Assets. (c) As and when such GM Assets are no longer required for the MSA Services, EDS will arrange for the sale or disposal of such GM Assets on such terms as EDS determines to be advantageous using the same efforts as EDS uses with respect to A-7 its own similar assets and will advise GM of those terms. Upon GM's approval, EDS will sell or dispose of such GM Assets on the terms approved by GM and will forward to GM all proceeds of such sale or disposal. In the event GM does not approve of the proposed terms of sale, EDS shall return such GM Assets to GM. A3.2 GM Space. Commencing on the Effective Date: (a) EDS will have access to and use of the space at all Sites utilized in the performance of MSA Services; and EDS shall have such right of access to the GM facilities in which such Sites are located as is appropriate to its responsibilities hereunder upon compliance with all GM security and safety policies of general applicability in effect at such facilities. (b) Unless otherwise mutually agreed, such space and related facilities, utilities and services will be provided by GM at no cost to EDS and will be consistent with that provided at the Sites for employees of EDS performing MSA Services as of the Effective Date or as otherwise reasonably required by EDS. EDS shall comply with the terms of GM's lease for such space to the extent that such terms are made known to the EDS Contracting Party and are applicable to the EDS Contracting Party's use of such space and shall indemnify GM from and against all claims, losses or damages arising out of EDS noncompliance with such terms. ARTICLE A-IV. SOFTWARE AND INTELLECTUAL PROPERTY ------------------------------------------------ A4.1 Ownership of Software. GM and EDS agree that ownership of Software shall be as follows: (a) "GM Software" shall mean all Software owned, developed, leased, licensed, or acquired by GM and used by EDS in providing MSA Services to GM under the Agreement, but not including any Developed Software, EDS Restricted Software, A-8 Software Development Tools, or Third Party Software. As between GM and EDS, the GM Software shall be owned by and be the property of GM. (b) "Developed Software" shall mean all Software developed by EDS, and EDS agents or subcontractors, pursuant to the Agreement, including all Software modifications and Software derivatives thereto, but not including any Software that the parties have agreed or may agree will be used to service other EDS customers in a service bureau environment or on a multiple customer product or platform basis. The Developed Software shall be owned by and be the property of GM. EDS hereby assigns to GM the copyright in the Developed Software and agrees to execute such documents as may be reasonably necessary to effect this assignment. (c) "EDS Restricted Software" shall mean all Software transferred to EDS by GM pursuant to the Master Agreement and all Software developed or acquired by EDS for GM under the Master Agreement. As between GM and EDS, the EDS Restricted Software shall be owned by and be the property of EDS. (d) "Software Development Tools" shall mean all software development tools utilized by EDS in creating Developed Software and not otherwise embodied in such Developed Software. As between GM and EDS, the Software Development Tools shall be owned by and be the property of EDS. (e) "EDS Software" shall mean all Software (i) owned by EDS as of the effective date of the MSA or which EDS acquires ownership of after the effective date of the MSA and which is used in connection with the MSA Services performed under the Agreement, and/or (ii) developed by or on behalf of EDS after the effective date of the MSA for use in connection with the MSA Services performed under the Agreement, but not including, in either case, any Developed Software, A-9 EDS Restricted Software, Software Development Tools, or Third Party Software. The EDS Software shall be owned by and be the property of EDS. (f) "Third Party Software" shall mean all Software owned by a third party that is licensed or leased from the third party by EDS, either in its own name or in the name of GM, which is or will be used in the performance of or in connection with the MSA Services performed under the Agreement. All Third Party Software acquired primarily for use by EDS in providing MSA Services to GM under the Agreement shall be acquired in the name of GM, with EDS having access to and the right to use such Software to the extent necessary to perform the MSA Services pursuant to the Agreement. A4.2 Software Rights and Licenses. GM and EDS agree to license Software as follows: (a) GM Software. (1) GM grants to EDS a world-wide, non-exclusive, non-transferable, fully paid, royalty-free license, with right to sublicense to the extent permitted under third party license agreements, to use GM Software for the limited purpose of providing MSA Services pursuant to the Agreement. The license granted to EDS herein includes the right to modify the licensed GM Software and to develop software derivatives of or interfacing with the licensed GM Software for the limited purpose as set forth herein. (2) In the event GM ceases to obtain all or a portion of the MSA Services from EDS including upon the expiration or termination of the Agreement, for any reason, the related license to the GM Software granted under sub-Section A4.2(a)(1) hereof to EDS, and any sublicense to such GM Software granted by EDS to any third party, shall terminate to the extent such GM Software is used for such ceased MSA Services, and EDS shall A-10 (i) deliver cost-free to GM a current copy of such GM Software in the form in use as of the cessation of such MSA Services, and (ii) unless such GM Software is the subject of a further license granted under sub-Section A4.2(a)(1) hereof, promptly destroy or erase all other copies of such GM Software in its possession, except for copies retained by EDS for archival purposes only. (b) Developed Software. (1) GM grants to EDS a world-wide, non-exclusive, non-transferable, fully paid, royalty-free license, with right to sublicense, to use Developed Software for the limited purpose of providing MSA Services pursuant to the Agreement. The license granted to EDS herein includes the right to modify the licensed Developed Software and to develop software derivatives of or interfacing with the licensed Developed Software for the limited purpose as set forth herein. (2) In the event GM ceases to obtain all or a portion of the MSA Services from EDS, including upon the expiration or termination of the Agreement, for any reason, the related license to any Developed Software granted under sub-Section A4.2(b)(1) hereof to EDS, and any sublicense to such Developed Software granted by EDS to any third party, shall terminate to the extent such Developed Software is used for such ceased MSA Services, and EDS shall (i) deliver cost-free to GM a current copy of such Developed Software in the form in use as of the cessation of MSA Services, and (ii) unless such Developed Software is the subject of a further license granted under sub-Section A4.2(b)(1) or A4.2(b)(3) hereof, promptly destroy or erase all other copies of such Developed Software in its possession, except for copies retained by EDS for archival purposes only. A-11 (3) In response to a request from EDS to license specified Developed Software to use such Developed Software for the benefit of a third party or to otherwise commercially exploit such Developed Software, the parties shall in good faith determine restrictions, if any, required to maintain the confidentiality of GM's proprietary information [Confidential information has been omitted.] including restrictions on delay of distribution of the specified Developed Software [Confidential information has been omitted.] GM shall license the specified Developed Software subject to the determined restrictions [Confidential information has been omitted.] (c) EDS Restricted Software. (1) EDS grants to GM a world-wide, non-exclusive, non-transferable, fully paid, royalty-free, perpetual license, with right to sublicense, solely for GM business activities, to use, modify, enhance, develop software derivatives and interfaces, reproduce, and distribute all EDS Restricted Software used in connection with the MSA Services performed under the Agreement. (2) EDS shall not use EDS Restricted Software for the benefit of a third party, or sell or sublicense such Software to a third party (other than to provide MSA Services to GM), without (i) the parties first agreeing to restrictions, if any, required to maintain the confidentiality of GM's proprietary information [Confidential information has been omitted.] and (ii) [Confidential information has been omitted.] A-12 Confidential treatment has been requested by EDS for the indicated portions of this page. [Confidential information has been omitted.] Notwithstanding the foregoing, EDS may continue to exercise such rights in the EDS Restricted Software following the effective date of the MSA to the extent previously agreed to between GM and EDS. (d) EDS Software. In the event GM shall at any time be properly entitled, in accordance with the provisions of the MSA, to cease obtaining any MSA Services from EDS and to commence performing such MSA Services for itself or to obtain such MSA Services from a third party service provider and shall elect to do so, then, if GM so requests in writing, GM shall have, effective as of that time, a perpetual, irrevocable (except in the event of a breach of the license herein), world-wide, non-transferable, non-exclusive, fully paid, royalty-free license to use, operate, maintain, copy, modify, create derivative works for use of GM, and sublicense (as expressly provided in sub-Section A4.2(d)(4) hereof) the application programs, documentation, and any other materials that the Contracting Parties determine is necessary, of any EDS Software then being used by EDS in providing the MSA Services to GM and as to which EDS is entitled to grant such a license (such application programs, documentation, and other materials being hereinafter referred to as the "Licensed Software"), subject to the following terms and conditions: (1) Except with the prior written consent of EDS or to the extent required by natural disaster or similar emergency, the Licensed Software shall not be operated, directly or indirectly (i) by persons other than bona fide employees of GM or an authorized third party, or (ii) on equipment that is not under the control of GM or an authorized third party. For purposes of this sub- Section A4.2(d)(1), an "authorized third party" shall mean (x) a third party provider of data processing services or other supplier of services to GM to the extent such supplier requires access to the Licensed Software in connection with the services being provided to GM, or (y) any A-13 Confidential treatment has been requested by EDS for the indicated portions of this page. other third party (including dealers authorized to sell and service GM vehicles) to the extent such third party requires access to the Licensed Software in connection with the internal business purposes of GM; provided, however, that any such authorized third party shall have entered into an agreement with EDS to comply with the provisions of this sub-Section A4.2(d) and to not use the Licensed Software to compete in any manner, direct or indirect, with EDS. (2) Except with the prior written consent of EDS, the Licensed Software shall be utilized only to support GM's business activities. (3) GM shall keep the Licensed Software confidential, shall not at any time allow the Licensed Software, or any of the various components thereof or any modifications thereto, to be disclosed to third parties, sold, assigned, leased or commercially exploited or marketed in any way, with or without charge, by GM or its employees or agents and, except to the extent required for normal operation of the Licensed Software as permitted herein, shall not permit the Licensed Software to be copied or reproduced, in whole or in part, by any person, firm or corporation, at any time. (4) GM may sublicense Licensed Software only to entities acquiring all or any part of the business of GM. In the event such a sublicense is granted, GM shall notify EDS and provide EDS with a copy of any such sublicense. The sublicense shall limit use of the Licensed Software to use in the business acquired, shall be under terms no less restrictive than those set forth in this sub- Section A4.2(d) and shall provide that EDS is an intended third party beneficiary thereof. A-14 With the granting of the license to GM hereunder, EDS shall promptly provide GM with a copy of the Licensed Software in the form being used to provide MSA Services at the time such license becomes effective. (e) Third Party Software. In the event GM ceases to obtain all or a portion of the MSA Services from EDS in any situation where GM is entitled to commence performing such MSA Services for itself or to obtain such MSA Services from a third party service provider, then, with respect to any Third Party Software then being used by EDS in providing such MSA Services to GM, other than any such Third Party Software acquired in GM's name, EDS shall either (i) grant GM a non- exclusive, non-transferable, sublicense with right to sublicense for GM business activities to use, modify, and enhance such Third Party Software to the extent permitted by any applicable third party agreements and subject to the provisions of sub-Section A9.5(e) of this Exhibit A, or (ii) assist GM in obtaining from the applicable third party a non-exclusive, non-transferable license with right to sublicense for GM business activities to use, modify, and enhance such Third Party Software. Notwithstanding the foregoing, in a situation where GM is ceasing to obtain all or a portion of the MSA Services from EDS as a result of resourcing such MSA Services to a third party pursuant to Article V of the MSA, EDS shall not be required to grant GM a sublicense to any Third Party Software then being used by EDS in providing such MSA Services if and to the extent that such Third Party Software is commercially available to such third party. With the granting by EDS of a sublicense to GM hereunder, EDS shall promptly provide GM with a copy of such Third Party Software in the form being used to provide MSA Services at the time such sublicense becomes effective. A4.3 Changes and Upgrades to Software. Except as may be approved by GM, EDS shall not make any changes or modifications to any Software then being used by EDS in providing MSA Services to GM that would adversely materially alter the functionality of the Software or any associated Hardware or materially degrade the performance of the A-15 Software or any associated Hardware, except as may be necessary on a temporary basis to maintain the continuity of the MSA Services being provided under the Agreements. A4.4 Third Party Software Developers. EDS shall fully cooperate with GM's third party Software developers and upon GM's request, provide such third party Software developers with all pertinent interface requirements for applicable EDS Software, [Confidential information has been omitted.] and, to the extent permitted by the applicable license agreements, Third Party Software. EDS shall not be required to provide such interface requirements [Confidential information has been omitted.] to a third party Software developer unless EDS and the third party Software developer first enter into a confidentiality agreement with respect to such interface requirements. GM shall not request disclosure of such interface requirements [Confidential information has been omitted.] to any third party, except as required for normal operation of any licensed EDS Software for GM business activities. A4.5 Intellectual Property. GM and EDS agree that intellectual property shall be treated as follows: (a) "Intellectual Property" or "IP" shall mean inventions, designs, mask works, and works of authorship, as those terms are understood under United States law, conceived or fixed in tangible form by EDS pursuant to work done under the Agreement. IP shall not include general skill and knowledge of an EDS employee resulting from that employee's work under the Agreement. (b) EDS shall own all IP that relates to computer system implementation, data processing and data communications ("EDS IP"). All other IP not comprising EDS IP, including all IP that relates to core business operations of GM and the GM Major Sectors (collectively, "GM IP"), shall be owned by GM. EDS IP shall not include copyright in any Developed Software. A-16 Confidential treatment has been requested by EDS for the indicated portions of this page. (c) GM and EDS shall each disclose promptly to the other sufficient information to enable the other, at its cost, to protect its IP and, in connection therewith, shall execute such documents or take such other actions as may be reasonably required to enable the other to file applications, to obtain patents and to otherwise perfect its IP rights granted hereunder. (d) GM and EDS shall each grant to the other a license, with no right to sublicense, to make, have made, use, have used, sell and have sold under the granting party's IP for the other's internal business activities. To the extent EDS desires to use this license for the benefit of a third party or to otherwise commercially exploit the rights granted, [Confidential information has been omitted.] ARTICLE A-V. DATA PROTECTION AND AUDIT RIGHTS --------------------------------------------- A5.1 GM Data. GM Contracting Party data shall be and remain GM's property and, upon the expiration or termination of the Agreement for any reason or, with respect to any particular data, on such earlier date that the same shall be no longer required by the EDS Contracting Party in order to render MSA Services under the Agreement, all copies of such data shall, upon prior notice to the GM Contracting Party, be either, at the election of the GM Contracting Party, (i) deleted from the data files maintained by the EDS Contracting Party or (ii) returned to the GM Contracting Party by the EDS Contracting Party. GM Contracting Party data shall not be utilized by the EDS Contracting Party for any purpose other than that of rendering services to the GM Contracting Party nor shall GM Contracting Party data or any part thereof be disclosed, sold, assigned, leased or otherwise disposed of to third parties by the EDS Contracting Party or commercially exploited by or on behalf of the EDS Contracting Party, its employees or agents. The EDS Contracting Party agrees that GM Contracting Party data is the valuable property of GM and that violation in any A-17 Confidential treatment has been requested by EDS for the indicated portions of this page. material respect of any provision of this Section A5.1 could cause GM irreparable injury for which it would not have an adequate remedy at law. A5.2 Safeguarding of GM Data. The EDS Contracting Party will establish and maintain safeguards against the destruction, loss or alteration of GM Contracting Party data in the possession of the EDS Contracting Party, which safeguards shall be, unless otherwise mutually agreed upon between the Contracting Parties, no less rigorous than those which were in effect, or which EDS was contractually obligated to have in effect, as of the Effective Date. In the event that additional safeguards for GM Contracting Party data are reasonably requested by the GM Contracting Party (e.g., in the event GM sells or otherwise divests a part of the business of the GM Contracting Party) and upon mutual agreement as to reasonable charges therefor, the EDS Contracting Party shall provide such additional safeguards and the GM Contracting Party shall pay the EDS Contracting Party such reasonable charges therefor as are mutually agreed to. The EDS Contracting Party shall promptly notify the GM Contracting Party of any information the EDS Contracting Party obtains as to any unauthorized possession, use or disclosure of any GM Contracting Party data in the possession of the EDS Contracting Party and will cooperate with the GM Contracting Party in preventing any further unauthorized possession, use or disclosure of such GM Contracting Party data and in instituting appropriate legal proceedings relating to such unauthorized possession, use or disclosure of GM Contracting Party data. The GM Contracting Party shall have the right to establish backup security for data and to keep backup data and data files in its possession if it so chooses; provided, however, that the EDS Contracting Party will have the access to such backup data and data files as is reasonably required by the EDS Contracting Party, subject to the GM Contracting Party security restrictions, if any. A5.3 Nondisclosure. The EDS Contracting Party and the GM Contracting Party each acknowledge that it shall have access to information, technology, know how, procedures, processes or other information ("Information") which the other deems confidential, the disclosure of which could result in irreparable harm to the other. The EDS Contracting A-18 Party and the GM Contracting Party each hereby agrees that all Information communicated to it, whether before or after the Effective Date, shall be and was received in strict confidence, shall be used only in connection with the performance of the MSA Services requested hereunder by the GM Contracting Party, and that no such Information shall be disclosed by it except with the express written consent of the Major Sector Contract Manager of the other. In addition, the EDS Contracting Party and the GM Contracting Party shall each comply with all applicable data protection and similar laws and regulations. This provision shall survive termination of the Agreement for any reason. A5.4 Data Center Security. The EDS Contracting Party will perform security procedures at any data center or information processing center where MSA Services are performed by the EDS Contracting Party for the GM Contracting Party, which security procedures shall be, unless otherwise mutually agreed upon between the Contracting Parties, no less rigorous than those which were in effect, or which EDS was contractually obligated to have in effect, as of the Effective Date. In the event that additional security procedures are reasonably requested by the GM Contracting Party (e.g., in the event GM sells or otherwise divests of a part of the business of the GM Contracting Party) and upon mutual agreement as to reasonable charges therefor, the EDS Contracting Party shall perform such additional security procedures and the GM Contracting Party shall pay the EDS Contracting Party such reasonable charges therefor as are mutually agreed to. Except as otherwise provided in the Agreement, the GM Contracting Party personnel shall not operate the equipment and systems to be utilized by the EDS Contracting Party under the Agreement and shall not enter any room where any such equipment and systems may be located or assist the EDS Contracting Party in any manner therein without the prior consent of the EDS Contracting Party, which will not be unreasonably withheld. A5.5 Audit Rights. The EDS Contracting Party will provide such auditors or inspectors as the GM Contracting Party may from time to time designate in writing with reasonable access to any data center or information processing center from which the EDS Contracting Party is performing MSA Services under the Agreement for the limited purpose of performing A-19 audits or inspections of the GM Contracting Party and will provide to such auditors or inspectors any assistance that they may reasonably require. The GM Contracting Party shall also have the right to audit the documentation, security and integrity of GM Contracting Party data being maintained by the EDS Contracting Party hereunder at such times as will not unreasonably interfere with the EDS Contracting Party's ability to perform its obligations hereunder. In addition, whenever a government audit of any GM User Organization is required, EDS will allow the government to audit EDS' books and records as required to verify EDS charges to that GM User Organization and shall cooperate to the extent necessary to support the government's audit. If EDS is required to provide any services, other than of a routine nature, in connection with any such audit or inspection, then GM shall pay EDS for the resources utilized in providing such services at the standard EDS rates generally applicable to GM or at such other rates as the parties may negotiate and agree upon at that time. ARTICLE A-VI. EMPLOYEES ----------------------- A6.1 EDS' Employees. The staff provided by EDS to perform the MSA Services shall be suitably trained and have the skill sets necessary to perform the MSA Services. All persons utilized by EDS in performing the MSA Services shall be considered solely EDS' employees or agents and EDS shall be responsible for compliance with all laws, rules, and regulations involving, but not limited to, employment of labor, hours of labor, working conditions, payment of wages, and payment of taxes, such as unemployment, social security and other payroll taxes, including applicable contributions from such persons when required by law and GM shall have no responsibility in relation thereto. With respect to such personnel, EDS shall have sole responsibility for supervision, daily direction and control of the work by its employees. A6.2 Notice to EDS' Employees. To the extent applicable to the performance of their duties, the EDS Contracting Party shall notify its employees of, and require its employees to comply A-20 with, the nondisclosure, marketing restrictions, security obligations and other similar requirements of EDS set forth in the Agreement. A6.3 Premise and Work Rules. Both EDS Contracting Party and GM Contracting Party employees, subcontractors and agents while on the premises of the other, shall comply with all rules, regulations, and labor agreements regarding personnel and professional conduct that are generally applicable to personnel at that location, including, where required by U.S. Government regulations, submission of satisfactory clearance from the U.S. Department of Defense and other federal authorities concerned. A6.4 Right of Access. Both the EDS Contracting Party and the GM Contracting Party shall permit reasonable access, upon prior notice, to the other's facilities in connection with MSA Services performed hereunder. No charge shall be made for such access. A6.5 Key EDS Employees for Critical Projects. With respect to each project being supported by the EDS Contracting Party pursuant to the Agreement that the GM and EDS Major Sector Contract Managers jointly identify as a critical project with respect to which the continuity of key personnel is especially important for the success of the project (a "Critical Project"), the Contracting Parties agree as follows: (a) The Unit Project Managers may jointly identify those EDS employees (the "Key Employees") providing dedicated support for that Critical Project that are key to the completion of that Critical Project. No more than 10% of the total number of EDS employees providing dedicated support for that Critical Project may be designated as Key Employees except by mutual agreement of the Contracting Parties. The above provision notwithstanding, the number of Key Employees on any Critical Project shall not be less than one (1). (b) For a period of [Confidential information has been omitted.] or the duration of the applicable Critical Project, whichever is shorter, EDS will not reassign any Key Employee for that Critical A-21 Confidential treatment has been requested by EDS for the indicated portions of this page. Project except with the GM Contracting Party's consent, which will not be unreasonably withheld, unless the employee voluntarily resigns from EDS' employment, is dismissed from EDS' employment for cause, fails to properly perform his or her duties in the reasonable judgment of EDS, or is unable to work as a result of death or disability. (c) In the event any Key Employee is reassigned or otherwise removed from a Critical Project before his or her service for that Critical Project is completed, EDS shall promptly assign an appropriate replacement who shall thereafter be designated as a Key Employee. Additionally, upon mutual agreement of the Unit Project Managers, in appropriate situations, in order to ensure a smooth transition between such Key Employees, the parties shall jointly agree upon an appropriate overlap period where both the Key Employee being reassigned or removed and the replacement Key Employee are assigned to the Critical Project. In this regard, the Unit Project Managers shall mutually agree upon the financial considerations, if any, associated with the aforementioned overlap period in a manner consistent with the underlying agreement for the Critical Project. (d) For a period of [Confidential information has been omitted.] following completion of a Key Employee's participation in a Critical Project, EDS will [Confidential information has been omitted.] ARTICLE A-VII. EDS COMPENSATION ------------------------------- A7.1 Uniform Published Rates. With respect to any MSA Services for which EDS is to be compensated on the basis of Uniform Published Rates (as defined below), including UPR Items (as defined below) for which the Agreement does not specify an alternative method of compensation (except with respect to personnel UPR Items as provided in sub-Section A-22 Confidential treatment has been requested by EDS for the indicated portions of this page. A7.1(b)(2) hereof), GM will compensate EDS for the resources utilized or managed by EDS in the performance of those MSA Services as set forth below. (a) The provisions of this Section A7.1 are applicable to "off-the-shelf" commercially available items to be acquired in significant quantities ("UPR Items"), such as [Confidential information has been omitted.] and other similar goods and services, (i) for which then-current prices and rates, including lease rates for use where appropriate, (the "Uniform Published Rates") have been proposed by EDS and approved by GM Parent, and (ii) which the parties mutually agree to list, together with the applicable Uniform Published Rates, in a catalog (the "UPR Catalog") published by GM Parent. GM Parent and EDS Parent will mutually agree upon a competitive assessment process which will assist GM Parent and EDS Parent in mutually agreeing upon the Uniform Published Rates. Except to the extent otherwise mutually agreed by GM Parent and EDS Parent, the Uniform Published Rates shall be established for and remain in effect during each calendar year, subject to market condition changes which render such rates non- competitive. Except to the extent otherwise mutually agreed by GM Parent and EDS Parent, a Catalog of Uniform Published Rates may be established in each country outside the United States by mutual agreement of the local Contracting Parties. (b) The Uniform Published Rates will be utilized according to the following provisions: (1) Except to the extent that the Contracting Parties may otherwise mutually agree, the GM Contracting Party will compensate EDS for all non- A-23 Confidential treatment has been requested by EDS for the indicated portions of this page. personnel UPR Items at the then-current Uniform Published Rates for such UPR Items. (2) To the extent that the Contracting Parties mutually agree, for projects which are of a short-term, limited scope nature (e.g., studies or project start-up MSA Services where the scope of services to be performed is unknown or difficult to specify) and when personnel resources in connection with such projects are to be provided on a time and materials basis, the GM Contracting Party will compensate the EDS Contracting Party for such personnel resources as UPR Items at the then-current Uniform Published Rates for such UPR Items. In addition to the foregoing, (i) the GM Contracting Party will reimburse EDS for the actual cost of sales, use and similar taxes, any specific travel, freight to the GM destination, and similar out-of- pocket expenses incurred by EDS as a direct result of providing the UPR Items to the GM Contracting Party (at the express request or with the prior approval of the GM Contracting Party) in connection with the UPR Items for which EDS is compensated pursuant to this Section A7.1, and (ii) the GM Contracting Party will pay EDS for any installation, maintenance, or training services required by the GM Contracting Party and related to such UPR Items at the rates therefor set forth in the UPR Catalog or, to the extent that such rates are not set forth in the UPR Catalog, at rates to be negotiated and agreed upon by the Contracting Parties. A7.2 Fixed Price Methodology. The fixed price methodology may be used in instances where the scope of work and deliverables can be well-defined and the pricing and terms are mutually agreed by the Contracting Parties. Included in the definition of fixed price methodology are fixed unit or transaction-based pricing. Examples of instances in which the fixed price methodology may be used include systems maintenance and operations, systems integration projects performed on a turnkey basis, unit prices for GMAC loan A-24 applications, transaction pricing for transactions processed against employee benefit eligibility files, and fixed pricing for new systems development based on a defined scope of work. With respect to any MSA Services for which EDS is to be compensated pursuant to a fixed price methodology, the following provisions shall be applicable: (a) GM shall pay, or reimburse EDS for, the reasonable out-of-pocket expenses, including, but not limited to, travel and travel-related expenses, incurred by EDS in connection with the performance of the Agreement at the express request or with the prior approval of the GM Contracting Party. (b) In the event that the GM Contracting Party relocates any of its business premises being provided MSA Services by EDS under the Agreement or establishes any additional business premises which shall require MSA Services, GM shall reimburse EDS for any expenses reasonably incurred by EDS as a result thereof. (c) GM shall pay the reasonable charges of EDS for any reruns in excess of the level reasonably expected that are necessitated by incorrect or incomplete data or erroneous instructions supplied to EDS by the GM Contracting Party and for correction of programming, operator and other processing errors caused by the GM Contracting Party, its employees or agents. EDS shall perform, at no cost to GM, any reruns resulting from the acts or omissions of EDS, its employees or agents. (d) If, during the term of the Agreement, the Index (as defined below) at any anniversary of the Effective Date (the "Current Index") is higher than the Index one year prior thereto (the "Base Index"), then, effective as of such anniversary, all monetary amounts then payable to EDS pursuant to the Agreement, as previously adjusted pursuant to this sub-Section A7.2(d), shall be increased thereafter by [Confidential information has been omitted.] Current Index [Confidential information has been omitted.] Base Index. For purposes of this sub-Section A7.2(d), (i) with respect to amounts payable to EDS in the United States, the term "Index" shall mean the A-25 Confidential treatment has been requested by EDS for the indicated portions of this page. Consumer Price Index for All Urban Consumers, U.S. City Average, for All Items (1982-84=100), as published by the Bureau of Labor Statistics of the Department of Labor, and (ii) with respect to amounts payable to EDS in any other country, the term "Index" shall mean a comparable index reflecting changes in the cost of living in that country published by a mutually agreeable source and the adjustments contemplated by this sub-Section A7.2(d) shall be made on such more frequent basis as may be appropriate for that country. In the event that the publisher of the Index stops publishing the Index or substantially changes the content or format thereof, the Contracting Parties shall substitute therefor another comparable measure published by a mutually agreeable source; provided, however, that if such change is merely to redefine the base year for the Index, the parties shall continue to use the Index but shall, if necessary, convert either the Base Index or the Current Index to the same basis as the other by multiplying such Index by the appropriate conversion factor. (e) There shall be added to any charges under the Agreement, or separately billed to GM, and GM shall pay to EDS, amounts equal to any taxes, however designated or levied, based upon such charges, or upon the Agreement or the MSA Services, Software or other materials provided under the Agreement, or their use, including state and local sales, use, privilege, value added, telecommunications or excise taxes, and any taxes or amounts in lieu thereof paid or payable by EDS in respect of the foregoing, exclusive, however, of franchise taxes and taxes based on income of EDS and any fines, interest or penalties due as a result of EDS' failure to pay any such taxes in a timely manner. A7.3 Cost-Plus Pricing. Except as otherwise provided in Exhibit D to the MSA regarding Competitiveness Events (as defined in Section 2.3 of the MSA), in the event that the Contracting Parties are unable to reach mutual agreement on the price or other terms of any fixed price negotiation and the Contracting Parties mutually agree or in other circumstances where the Contracting Parties mutually agree to utilize such cost-plus A-26 pricing, EDS will be compensated on the basis of the cost-plus pricing methodology as provided in this Section A7.3. In accordance with sub- Section 2.1(a)(3) of the MSA, although there may be some uncertainty in the extent of the MSA Services to be provided on a cost-plus basis under the Agreement, the Contracting Parties will use all reasonable efforts to develop a description of the MSA Services to be provided on a cost-plus basis under the Agreement and the schedule for completion of those MSA Services. With respect to any MSA Services for which EDS is to be compensated on the basis of the cost-plus pricing methodology specified in this Section A7.3 (excluding UPR Items for which EDS is to be compensated at the Uniform Published Rates pursuant to Section A7.1 hereof and MSA Services for which EDS is to be compensated on the basis of a fixed price methodology pursuant to Section A7.2 hereof), the following provisions will be applicable: (a) The GM Contracting Party shall pay EDS monthly according to the terms of the Agreement for the EDS Cost of such MSA Services and resources provided by EDS, plus a markup on the EDS Cost of [Confidential information has been omitted.] thereof. (b) The EDS Cost for any MSA Services provided to the GM Contracting Party will include all verifiable costs that are directly related to the MSA Services or that are portions of EDS overhead expenses which are properly allocable to the MSA Services, as specified in sub-Section A7.3(b)(11) hereof. EDS Cost will not include markups for profit by any EDS internal business or support unit. With respect to the items listed below, EDS Cost will be determined as follows: (1) With respect to EDS personnel, EDS Cost shall mean all reasonable, direct salary, wages or other compensation payable and all costs of fringe benefits directly attributable to such EDS personnel. With respect to any such EDS personnel who spend less than substantially all of their time on GM Contracting Party matters, such amounts payable shall be determined A-27 Confidential treatment has been requested by EDS for the indicated portions of this page. on a prorata basis for the amount of time spent directly on GM Contracting Party matters. (2) With respect to GM Assets, EDS Cost shall mean all reasonable, direct expenses incurred by EDS with respect to GM Assets, whether paid to GM or any third party. (3) With respect to all other fixed and related assets (except as described in sub-Section A7.3(b)(8) hereof), EDS Cost shall mean all reasonable amounts payable and expenses incurred by EDS with respect to such assets, including depreciation computed on the straight-line basis used by EDS for its accrual basis books and interest expenses for debt relating to capital expenditures for such assets. (4) With respect to the Sites, EDS Cost shall mean all amounts payable by EDS with respect to EDS' use of such space, whether paid to GM or any third party. (5) With respect to all other space (except as described in sub- Section A7.3(b)(8) hereof), EDS Cost shall mean all reasonable amounts payable and expenses incurred by EDS in connection with such space, including depreciation computed on the straight-line basis used by EDS for its accrual basis books and interest expenses for debt relating to capital expenditures for such space. (6) With respect to all telecommunication (including voice, data and video) capabilities (except as described in sub-Section A7.3(b)(8) hereof), EDS Cost shall mean all reasonable, direct costs and expenses incurred by EDS in connection with such capabilities. A-28 (7) With respect to all subcontracted services directly attributable to the GM Contracting Party, EDS Cost shall mean all reasonable amounts payable and expenses incurred by EDS in connection with such subcontracted services. (8) With respect to resources utilized by EDS to provide services to the GM Contracting Party and other EDS customers on a shared basis (including without limitation such of those resources as may be utilized at an EDS Information Processing Center), EDS Cost shall mean all reasonable amounts determined in accordance with EDS' then-current cost allocation methodology, utilizing the resource management system or systems then utilized by EDS. Upon reasonable request by the GM Corporate Contract Manager, EDS will review the then-current cost allocation methodology with the GM Corporate Contract Manager. (9) With respect to all other expenses incurred by EDS allocable to the GM Contracting Party, including all EDS-supplied expendables, all start-up expenses such as staffing and corporate developmental standardization, all foreign service related expenses such as foreign service premiums and expatriate bonuses and allowances, and all travel, travel-related and relocation expenses, EDS Cost shall mean all reasonable amounts payable and expenses incurred by EDS in connection with such other expenses. (10) With respect to taxes, EDS Cost will include all applicable taxes attributable to the MSA Services and/or associated property provided by EDS to the GM Contracting Party or the resources utilized therefor, including property, sales, use, privilege, excise, value added, franchise, gross receipts and similar taxes; but excluding any income or profits taxes imposed upon EDS by any taxing authority; provided, however, that there will be no markup with respect to any sales or use tax collected by EDS on A-29 behalf of a state or local taxing authority. Sales, use, excise and similar taxes collected by EDS with respect to MSA Services and/or associated property provided by EDS to GM will be separately displayed in accordance with, and in the aggregate categories described in, sub-Section A8.1(d) hereof. (11) With respect to overhead expenses, EDS Cost will include that portion of EDS overhead expenses as is properly allocable to the GM Contracting Party pursuant to the methodology used consistently throughout EDS, i.e., all expenses that cannot be reasonably charged to specific profit centers are allocated to all EDS profit centers on the basis of the ratio of the direct expenses charged to a particular profit center to the total direct expenses charged to all EDS profit centers; [Confidential information has been omitted.] Upon reasonable request by the GM Corporate Contract Manager, EDS will review the then-current overhead expense allocation methodology with the GM Corporate Contract Manager. (c) In order to provide verification of amounts charged to GM by EDS under this Section A7.3, (i) for MSA Services for which EDS is to be compensated pursuant to this Section A7.3, in support of each Invoice therefor, the EDS Contracting Party will provide to the GM Contracting Party a reasonable breakdown of EDS Cost on an ongoing basis in accordance with the standard formats and procedures agreed upon between the GM Central Office (or the applicable GM Major Sector) and EDS, and (ii) the charges will be subject to audit according to Section 3.5 of the MSA. A7.4 Pricing Detail. In connection with any MSA Services to be performed by the EDS Contracting Party pursuant to the Agreement, the EDS Contracting Party will provide to A-30 Confidential treatment has been requested by EDS for the indicated portions of this page. the GM Contracting Party a reasonable level of pricing detail and input to the price structure preferred, technology content detail, and support services detail, in each case as outlined in Section 3.6 of the MSA, in order to assist the GM Contracting Party in making informed purchase decisions. EDS will not be required to disclose its costs of doing business to the GM Contracting Party, except as otherwise expressly provided in the Agreement. The GM Contracting Party shall keep confidential the prices it is charged by EDS, as well as any EDS cost information supplied on a confidential basis to the GM Contracting Party by EDS. A7.5 Tax Matters. With respect to the Contracting Parties' respective obligations relating to the collection and payment of sales, use, value added and similar taxes imposed by applicable taxing authorities, as well as other taxes payable by the GM Contracting Party pursuant to the Agreement, the Contracting Parties agree as follows: (a) Each Contracting Party shall provide and make available to the other any applicable resale certificates, information regarding out-of-state sales or use of equipment, materials or services, and other exemption certificates or information reasonably requested by the other Contracting Party. (b) The Contracting Parties agree to utilize reasonable efforts to structure the provision and receipt of MSA Services, as the case may be, in such a fashion as to minimize, to the extent legally permissible, any sales, use, value added, withholding, and similar taxes payable by the GM Contracting Party. (c) In the event that the EDS Contracting Party is entitled to claim a foreign tax credit benefit with regard to withholding taxes associated with cross border payments under this Agreement, the Contracting Parties agree that the GM Contracting Party shall not be charged or otherwise billed for such taxes. A-31 (d) The Contracting Parties shall reasonably cooperate with each other in connection with the other Contracting Party's efforts to minimize its liability for sales, use, value added and similar taxes, to the extent legally permissible, and to support the other Contracting Party upon audit by applicable taxing authorities in the following manner: (1) The EDS Tax Department will, at least annually, and more frequently if reasonably requested by GM, provide the GM Tax Staff with a taxability matrix which depicts the taxability positions taken with respect to the collection of Taxes (as defined in sub-Section A8.1(d) of this Exhibit A). The parties will work together to ensure that the taxability positions are jointly discussed. Further, EDS agrees to allow the GM Tax Staff, [Confidential information has been omitted.] if reasonably requested by GM, and at GM's expense, to [Confidential information has been omitted.] relating to Taxes collected by EDS from GM under the Agreement. (2) In the event EDS has previously collected Taxes from GM and remitted such Taxes to the applicable taxing authority, and such Taxes pertain to the items described in sub-Section [Confidential information has been omitted.] of this Exhibit A, EDS shall disclose to GM, if reasonably requested by GM, the type of Taxes, the applicable taxing authority, and the amount of such Taxes. (3) In the event that a taxing authority within the United States does not agree to audit the charges payable in connection with the Agreement for sales and use tax purposes as part of EDS' sales and use tax audits and proposes to assess sales and use taxes directly against GM on the aggregate charges described in sub-Section [Confidential information has been omitted.] of this Exhibit A, EDS shall work directly with the taxing authority to address audit concerns as they pertain to the charges or sales and use taxes payable in connection with the Agreement. In the event that the taxing authority requires any A-32 Confidential treatment has been requested by EDS for the indicated portions of this page. documentation to be submitted directly by GM, EDS agrees to cooperate with GM in providing the necessary documentation. ARTICLE A-VIII. BILLING AND PAYMENT PROCEDURES ---------------------------------------------- A8.1 Billing Procedures. EDS will submit Invoices to GM for the amounts payable to EDS pursuant to the Agreement in accordance with the following provisions: (a) On a monthly basis, EDS will submit to the GM Contracting Party an Invoice or Invoices, in accordance with mutually agreeable procedures, for the amounts payable to EDS pursuant to the Agreement for such month. Each Invoice shall be based upon a standard format and procedure to be developed and agreed upon by the GM Central Office (or the applicable GM User Organization or GM Major Sector) and EDS. (b) EDS shall provide with each Invoice such documentation and verifying materials in such detail as required by procedures agreed upon by the GM Contracting Party and EDS to allow the GM Contracting Party to verify the amounts reflected on each such Invoice. (c) In the event all or any portion of an Invoice is disputed by the GM Contracting Party, GM shall promptly notify EDS within ten (10) GM business days after receipt of the Invoice; provided, however, that the undisputed portion of any such Invoice shall remain due and payable in accordance with the provisions of Section A8.2 hereof. (d) With respect to any sales, use or similar taxes imposed by and collected on behalf of any state or local taxing authorities within the United States or any United States Federal telecommunications excise taxes (collectively, "Taxes"), EDS shall segregate the charges on each Invoice into aggregate charges for each of the A-33 following categories: (i) services provided to the GM Contracting Party for which Taxes are collected; (ii) services provided to the GM Contracting Party for which Taxes are not collected; [Confidential information has been omitted.] (e) If the applicable GM Contracting Party and EDS Contracting Party are unable to resolve a dispute arising in connection with any Invoice within a reasonable period of time, then upon the written request of the applicable GM Unit Project Manager, the GM Central Office may, at its expense, audit the books and records of EDS to the extent necessary to verify the applicability and accuracy of EDS' charges to the GM Contracting Party pursuant to the Agreement. The GM Central Office shall report to the GM and EDS Contracting Parties any variance from the amounts reflected on the disputed Invoice that is discovered by the GM Central Office audit. If EDS disputes the existence or scope of any such variance, then EDS may, at its expense, engage an independent public accounting firm reasonably acceptable to GM to audit the applicable EDS books and records and either verify the accuracy and validity of the disputed EDS charges or confirm the existence and scope of any variance. Unless the parties otherwise agree to the resolution of the dispute, the findings of such accounting firm shall be binding upon the parties. If a variance from what has been invoiced to the GM Contracting Party shall be discovered, then the GM Contracting Party shall be entitled to a credit, or shall pay to EDS, as appropriate, the amount of such variance. A8.2 Time of Payment. Except as otherwise mutually agreed by the Corporate Contract Managers, amounts payable under the Agreement shall be due and payable as follows: (a) On or before the first (1st) day of each month or such other day as may be mutually agreed by the Contracting Parties, the EDS Contracting Party will submit to the GM Contracting Party an Invoice for the amounts reasonably A-34 Confidential treatment has been requested by EDS for the indicated portions of this page. estimated by the EDS Contracting Party to be payable to the EDS Contracting Party pursuant to the Agreement for MSA Services received from the EDS Contracting Party in the immediately preceding month, together with any credits or additional amounts necessary to reconcile the estimated amounts invoiced for previous months with the actual amounts payable for such previous months. Each such Invoice will be due and payable by the twentieth (20th) day of the month following the month in which the MSA Services were provided. (b) On or before the first (1st) day of each month or such other day as may be mutually agreed by the Contracting Parties, the GM Contracting Party will submit to the EDS Contracting Party an invoice for the amounts reasonably estimated by the GM Contracting Party to be payable to the GM Contracting Party pursuant to the Agreement for services received from the GM Contracting Party under the Agreement in the immediately preceding month, together with any credits or additional amounts necessary to reconcile the estimated amounts invoiced for previous months with the actual amounts payable for such previous months. Each such invoice will be due and payable by the twentieth (20th) day of the month following the month in which such services were provided. (c) Any payments due to either Contracting Party from the other Contracting Party for which the amount cannot be reasonably estimated or for which a time of payment has not otherwise been specified will be invoiced in arrears and will be due and payable on the twentieth (20th) day of the month if received by the fifteenth (15th) day of the preceding month. (d) Any amount payable under the Agreement that is not paid when due shall bear interest thereafter until paid at a rate per annum equal to the base rate established from time to time by Citibank, N.A., or a comparable financial institution mutually selected by GM and EDS, but in no event to exceed the maximum rate of interest allowed by applicable law. A-35 ARTICLE A-IX. DISPUTES AND TERMINATION -------------------------------------- A9.1 Negotiation of Disputes. In the event of any dispute or disagreement between the Contracting Parties to the Agreement with respect to the interpretation of any provision of the Agreement or the performance of the EDS Contracting Party or the GM Contracting Party under the Agreement, upon the written request of either Contracting Party, the applicable GM and EDS Unit Project Managers, or a designated representative of either of them, will meet for the purpose of resolving such dispute or negotiating an adjustment or modification to such provision of the Agreement. The GM and EDS Unit Project Managers or designated representatives shall meet as often as the Contracting Parties reasonably deem necessary in order to furnish to the other all information with respect to the matter in issue which the Contracting Parties believe to be appropriate and germane in connection with its resolution. The GM and EDS Unit Project Managers or designated representatives will discuss the problem and negotiate in good faith without the necessity of any formal proceeding relating thereto. During the course of such negotiation, all reasonable requests made by one Contracting Party to the other for information will be honored in order that each of the Contracting Parties may be fully advised in the premises. The specific format for such discussion will be left to the discretion of the GM and EDS Unit Project Managers or designated representatives but may include the preparation of agreed upon statements of fact or written statements of position furnished to the other Contracting Party. In the event the Unit Project Managers or their designated representatives are unable to amicably resolve the dispute within ten (10) days, the formal proceedings for the resolution of such dispute in accordance with Section A9.2 hereof shall be commenced. A9.2 Resolution of Disputes. Any dispute relating to the Agreement which cannot be resolved by the respective GM and EDS Unit Project Managers or their designated representatives pursuant to Section A9.1 hereof shall be referred to the GM and EDS Major Sector Contract Managers or their designated representatives for resolution. Any such dispute which cannot be resolved by the respective GM and EDS Major Sector Contract Managers or their A-36 designated representatives within twenty (20) days shall be referred to the GM and EDS Corporate Contract Managers for resolution. Without prejudice to the Contracting Parties' ability to mutually agree upon mediation, arbitration, or any other alternative dispute resolution process with respect to the dispute, no litigation or other formal proceeding for the resolution of such dispute may be commenced until either Corporate Contract Manager concludes in good faith that amicable resolution of the dispute through continued negotiation does not appear likely. A9.3 Termination. The Agreement may be terminated as follows: (a) In the event either Contracting Party to the Agreement defaults in the performance of any of its material duties or obligations (except for a default in payments to EDS) and fails to cure such default within forty-five (45) days after being given written notice specifying the default, or, with respect to those defaults which cannot reasonably be cured within forty-five (45) days, if the defaulting party fails to provide, promptly after being given written notice specifying the default, a specific written action plan for curing the default as expeditiously as reasonably possible, including a specified schedule for the action plan and a mutually agreed upon end date by which the action plan is to be completed and the default cured, and to proceed utilizing its reasonable best efforts to cure the default in accordance with and on the schedule specified in the action plan, then the party not in default may, by giving written notice thereof to the defaulting Contracting Party, terminate the Agreement as of a date specified in such notice of termination. Additionally, in the event that the defaulting party fails to cure the default by the mutually agreed upon end date as set forth in the action plan, the party not in default may, by giving written notice thereof to the defaulting party, immediately terminate the Agreement. (b) In the event the GM Contracting Party defaults in the payment when due of any amount due to the EDS Contracting Party under the Agreement and fails to cure such default within ten (10) days after being given written notice specifying the A-37 default, then the EDS Major Sector Contract Manager may, by giving written notice thereof to the GM Contracting Party, terminate the Agreement as of a date specified in such notice of termination. Notwithstanding the foregoing, the EDS Major Sector Contract Manager shall not be entitled to terminate the Agreement for failure to pay any amount that is reasonably and in good faith disputed by the GM Contracting Party if, within the ten (10) day period specified above, the GM Contracting Party pays such disputed amount into an escrow account established at a mutually selected financial institution for that purpose. Upon resolution of the dispute, any portion of the disputed amount that is determined to be payable to EDS, together with interest earned thereon, will be promptly paid to EDS from the escrow account and any remaining amount in the escrow account will be paid to GM. (c) Unless the Corporate Contract Managers otherwise agree in writing, if the MSA expires or is terminated for any reason, then the Agreement shall, without the necessity of any separate notice, terminate as of the same date upon which the MSA expires or is terminated. A9.4 Cancellation of Services and Cancellation Charges. (a) Cancellation. In addition to any other rights to terminate or reduce MSA Services that it may have pursuant to the Agreement, the GM Contracting Party may at its option cancel any MSA Services no longer required by the GM Contracting Party, in whole or in part, at any time and for any reason, upon at least thirty (30) days prior written notice to EDS. (b) Entitlement to Cancellation Charges. EDS shall be entitled to cancellation charges only in the following circumstances: (1) Cancellation pursuant to sub-Section A9.4(a) hereof. A-38 (2) GM's termination of the MSA or the Agreement pursuant to the provisions of sub-Section 6.1(d) of the MSA subject to the provisions of Exhibit F to the MSA. (3) GM's exercise of its market testing rights pursuant to Article V of the MSA subject to the provisions of sub-Section 5.3(1) of the MSA. (c) Computation of Cancellation Charges. The GM Contracting Party and EDS will mutually agree on a wind-down period which will in all cases be of sufficient duration to reasonably effect an orderly wind-down of the MSA Services. During the wind-down period, the GM Contracting Party and EDS shall cooperate with and assist each other in effectuating an orderly wind-down of work affected by the cancellation or termination, and the GM Contracting Party shall compensate EDS, in accordance with Section A7.3 hereof or as otherwise mutually agreed, for all services provided during such wind-down period that are not otherwise covered by the Agreement. After the wind-down period, the GM Contracting Party shall pay to EDS the following amounts, without duplication: (1) The agreed price for all MSA Services which have been completed in accordance with the Agreement and have not previously been paid for. (2) [Confidential information has been omitted.] (i) are reasonable in amount and are properly allocable or apportionable under generally accepted accounting principles to the cancelled MSA Services, (ii) have not already been directly paid for by GM, and (iii) cannot be reduced by (x) transferring such work or materials to GM or GM's designee upon GM's request, or (y) if GM does not so request, use of such work or materials elsewhere within EDS. A-39 Confidential treatment has been requested by EDS for the indicated portions of this page. (3) [Confidential information has been omitted.] associated with the wind-down of MSA Services, including but not limited to systems development expenses and personnel expenses. Personnel expenses shall be limited to relocation expenses (actually incurred), and severance pay [Confidential information has been omitted.] EDS will act in good faith using all reasonable efforts to mitigate such relocation expenses and severance pay. Further, such expenses may only be paid for personnel who (i) are directly affected by the cancellation, and (ii) with respect to a cancellation resulting from a termination of the Agreement or from a transfer of MSA Services to a third party as a result of a resourcing pursuant to Article V of the MSA, [Confidential information has been omitted.] (4) EDS' losses on the disposition of capital assets or cancellation of long-term lease commitments and the like, which are not otherwise transferred to GM pursuant to Section A9.5 hereof, will be handled in accordance with the principles set forth in Exhibit G to the MSA. At the request of the GM Contracting Party and upon receipt of necessary information from the GM Contracting Party, EDS will provide a good faith estimate of EDS' expenses as described above as promptly as practically possible. EDS will act reasonably and in good faith in attempting to avoid or minimize any such cancellation charges, including by, upon GM's request, transferring assets to, [Confidential information has been omitted.] GM or its designee or, if GM does not so request, redeploying such assets [Confidential information has been omitted.] within EDS. EDS shall credit to the GM Contracting Party the reasonable value or cost (whichever is higher) of goods or materials used or sold by EDS with the GM Contracting Party's written consent and the cost of any damaged or destroyed goods or materials. Additionally, in order to facilitate a full and complete business case review by GM of situations involving the replacement of assets, including, but not limited to, equipment and technology A-40 Confidential treatment has been requested by EDS for the indicated portions of this page. upgrades, EDS shall utilize its reasonable best efforts to promptly bring to the attention of the GM Contracting Party a good faith estimate of any and all cancellation charges which might be incurred with regard to the disposition of existing capital assets and/or the cancellation of long-term leases as a result of such replacement of assets. No later than the date therefor mutually agreed upon by the applicable Contracting Parties in connection with each such cancellation of MSA Services, EDS shall submit a comprehensive cancellation claim to GM, with sufficient supporting data to permit GM to verify the same, and shall thereafter promptly furnish such supplemental and supporting information as GM shall request. GM or its agents shall have the right to audit and examine such books, records, facilities, work, material, inventories, and other items relating to any cancellation claim of EDS to the extent necessary to verify the cancellation claim. A9.5 Termination Assistance and Transition. In the event the GM Contracting Party ceases to obtain all or a portion of the MSA Services from EDS in a situation in which the GM Contracting Party is entitled to provide the MSA Services itself, such as upon the expiration or termination of the Agreement, or in which the GM Contracting Party is entitled to obtain the MSA Services from a third party, including upon the expiration or termination of the Agreement or in accordance with Article V of the MSA, then EDS will, upon the GM Contracting Party's request, continue to provide the MSA Services which were provided by EDS prior thereto and any new services requested by the GM Contracting Party that may be required to facilitate the transfer of the affected MSA Services to the GM Contracting Party or a third party service provider, as applicable, including providing to GM or third party personnel training in the performance of the affected MSA Services (collectively, the "Transition Services") in accordance with the following: A-41 (a) At no additional cost, EDS shall provide to GM and any designated third party service provider (i) in writing, to the extent available, applicable requirements, standards and policies relating to the affected MSA Services, and (ii) necessary access to the systems and sites from which the affected MSA Services were provided. (b) If requested by the GM Contracting Party, EDS will assist the GM Contracting Party in developing a plan which shall specify the tasks to be performed by the parties in connection with the Transition Services and the schedule for the performance of such tasks. (c) EDS will provide the Transition Services for a period of up to [Confidential information has been omitted.] as may be reasonably required by the GM Contracting Party for the orderly transition of the affected MSA Services (the "Transition Period"), at the rates [Confidential information has been omitted.] or otherwise agreed upon by the Contracting Parties, except to the extent that resources included in the fees otherwise being paid by the GM Contracting Party to EDS can be used to provide the Transition Services. If the MSA Services are being terminated as a result of the GM Contracting Party's default, non-payment, or insolvency, EDS will be entitled to reasonable assurances that GM will pay all amounts due and payable to EDS, including payments for Transition Services. (d) Following the Transition Period, EDS shall (i) answer questions from the GM Contracting Party regarding the MSA Services on an "as needed" basis at EDS' then standard commercial billing rates, and (ii) deliver to the GM Contracting Party any remaining GM-owned reports and documentation still in the EDS Contracting Party's possession. (e) Upon request from the GM Contracting Party, EDS will, to the extent permitted by third party contracts: A-42 Confidential treatment has been requested by EDS for the indicated portions of this page. (1) Make available any Hardware owned or leased by EDS and dedicated to the performance of the affected MSA Services by allowing the GM Contracting Party or its designee to (i) purchase [Confidential information has been omitted.] any such Hardware owned by EDS, and (ii) assume the lease of any such Hardware leased by EDS. (2) Transfer or assign, upon the GM Contracting Party's request, any third party contracts applicable to the affected MSA Services for maintenance, disaster recovery services or other necessary third party services being used by EDS and dedicated to the performance of the affected MSA Services, to the GM Contracting Party or its designee, on terms and conditions acceptable to all applicable parties. (3) License to the GM Contracting Party, or assist the GM Contracting Party in obtaining a license to, Software then being used by EDS in providing the EDS services in accordance with the provisions of sub-Sections A4.2(d) and A4.2(e) hereof. GM shall be responsible for the payment of any transfer fee or non- recurring charge imposed by the applicable third parties, but EDS shall use its reasonable best efforts (without being required to incur any additional expenses) to eliminate or minimize the amount of any such fee or charge, both at the time that it enters into any such lease, license or third party contract and at the time of the transfer to the GM Contracting Party or its designee. (f) Notwithstanding the provisions of Section [Confidential information has been omitted.] hereof, upon request from the GM Contracting Party, EDS will allow the GM Contracting Party or its designee [Confidential information has been omitted.] A-43 Confidential treatment has been requested by EDS for the indicated portions of this page. ARTICLE A-X. WARRANTIES ----------------------- A10.1 Software Warranty. EDS warrants that it has the right to grant to the GM Contracting Party any license to use the EDS Software provided hereunder. EDS further warrants that the EDS Software, EDS Restricted Software, and Software Development Tools utilized in the provision of the MSA Services, including any modifications to the Software by EDS or any third party on behalf of EDS, will not infringe the copyright or patent or misappropriate the trade secrets or other proprietary rights of a third party and that when installed the Software will conform with all applicable written specifications therefor mutually agreed upon by the EDS and GM Contracting Parties and set forth in or incorporated by reference into the Agreement. A10.2 Hardware Warranty. With respect to all Hardware sold to the GM Contracting Party pursuant to the Agreement, EDS warrants that it can and shall deliver good and marketable title, free from any claim or encumbrance except as otherwise mutually agreed. With respect to all Hardware leased to the GM Contracting Party pursuant to the Agreement, EDS warrants that it has the authority to enter into a lease of the Hardware. With respect to all such Hardware sold or leased to the GM Contracting Party pursuant to the Agreement, EDS warrants that upon delivery, all such Hardware will conform with the written specifications mutually agreed upon by the EDS and GM Contracting Parties and set forth in or incorporated by reference into the Agreement. A10.3 Pass-Through Warranties. With respect to all Hardware and Software sold, leased or licensed, as applicable, to the GM Contracting Party pursuant to the Agreement, EDS shall assign to the GM Contracting Party joint rights, including rights to recoveries, it obtains under warranties or indemnifications given by its subcontractors, vendors, suppliers or agents in connection with the Hardware and Software provided under the Agreement to the extent such rights are assignable. EDS shall, at the GM Contracting Party's request and expense, enforce any such warranties that are not assignable. EDS shall notify the GM A-44 Contracting Party of each warranty given by its subcontractors, vendors, suppliers or agents applicable to such Hardware and Software and shall deliver to the GM Contracting Party any documents issued by the warrantor evidencing such warranty. A10.4 Survival of Warranties. The warranties set forth in this Article A-X shall survive acceptance of and payment for the applicable MSA Services, Software, or Hardware. A10.5 Disclaimer of Warranties. WITHOUT IN ANY WAY DEROGATING ANY OF THE EXPRESS WARRANTIES SET FORTH IN THIS ARTICLE A-X, EDS MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH OTHER WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. ARTICLE A-XI. INDEMNITIES AND LIABILITY --------------------------------------- A11.1 Cross Indemnity. The EDS and GM Contracting Parties each shall indemnify, defend and hold harmless the other, its directors, officers and employees, from any and all claims, actions, damages, liabilities, costs and expenses, including reasonable attorneys' fees and expenses, for: (a) The death or personal injury of third parties, including but not limited to invitees or employees of the indemnitor, arising out of, or in any way resulting from, the negligent or willful acts or omissions of the indemnitor or any of its agents, employees or representatives. (b) The damage, loss or destruction of real or tangible personal property of the other party or third parties, including but not limited to invitees or employees of the indemnitor, arising out of, or in any way resulting from, the negligent or willful acts or omissions of the indemnitor or its agents, employees or representatives. A-45 A11.2 Proprietary Rights Indemnity. The EDS and GM Contracting Parties each shall indemnify the other against any claim that any MSA Services, Hardware, Software, or information provided by the indemnitor or its agents and utilized in the provision of MSA Services constitutes an infringement of a third party's patent, copyright, or trademark, or constitutes an unlawful disclosure, use, or misappropriation of a third party's confidential information, all in accordance with and subject to the following: (a) The indemnitor will bear the expense of defending such claim and pay any damages and attorney's fees finally awarded by a court of competent jurisdiction, provided that the indemnitee gives the indemnitor prompt notice of the existence of the claim, reasonable assistance in defending such claim, and full opportunity to control the response thereto and the defense thereof, including any agreement relating to the settlement thereof. The indemnitor shall not be responsible for any settlement or compromise of a claim made without its consent. (b) The indemnitor shall have no responsibility under this Section A11.2 for (i) any claims of infringement [Confidential information has been omitted.] or (ii) any infringement [Confidential information has been omitted.] (c) If any Software provided by the indemnitor becomes or in the indemnitor's opinion is likely to become, the subject of a claim of infringement, the indemnitor will, at its option, either (i) attempt to procure for the indemnitee the right to continue using the Software, or (ii) replace or modify the Software to make its use hereunder non-infringing. A11.3 Hardware Damage Indemnity. The GM Contracting Party shall indemnify and reimburse EDS for any damages, liabilities, costs and expenses incurred by EDS as a result of the A-46 Confidential treatment has been requested by EDS for the indicated portions of this page. damage, destruction or loss of any EDS Hardware which, in accordance with the provisions of the Agreement, is in the care or custody of, or is located in premises controlled by, the GM Contracting Party; provided, however, that the foregoing provisions of this Section A11.3 shall not apply to normal wear and tear or to damage caused by EDS or its employees, agents, or representatives. A11.4 Software License Indemnity. With respect to any Software licensed or otherwise obtained from a third party by EDS to be used by or for the GM Contracting Party, GM shall comply with the terms of EDS' agreement with the third party for such Software to the extent that such terms are made known to the GM Contracting Party and are applicable to the use of such Software by or for the GM Contracting Party and shall indemnify EDS from and against all claims, losses or damages arising out of GM noncompliance with such terms. A11.5 Limitation of Liability. The parties' liability under the Agreement shall be subject to the following: (a) In addition to the limitation under sub-Section A11.5(b), any liabilities of [Confidential information has been omitted.] EDS arising out of or relating to its performance under the Agreement, whether based on an action or claim in contract, equity, negligence, tort or otherwise, for all events, acts or omissions shall not exceed in the aggregate an amount equal to two times the average of the monthly fees paid by the GM Contracting Party to EDS under the Agreement during the six (6) months immediately preceding the latest such event, act or omission. Additionally, the measure of damages for any such liability of EDS shall not include any amounts for damages which could have been avoided had GM complied with whatever procedures are reasonable under the circumstances to verify the data furnished by EDS before utilization thereof. A-47 Confidential treatment has been requested by EDS for the indicated portions of this page. (b) Neither GM nor EDS shall be liable for, nor will the measure of damages include, any indirect, incidental, special, consequential or punitive damages arising out of or relating to its performance under the Agreement. (c) [Confidential information has been omitted.] In connection with the conduct of any litigation with third parties relating to any liability of one Contracting Party to the other or to such third parties, each Contracting Party shall have all rights (including the right to accept or reject settlement offers and to participate in such litigation) which are appropriate to its potential responsibilities or liabilities. ARTICLE A-XII. SPECIAL PROVISIONS RELATING TO MSA SERVICES ---------------------------------------------------------- A12.1 GM's IT Strategy and Architecture. Unless otherwise mutually agreed by the Corporate Contract Managers, the Agreement shall be subject to, and the EDS Contracting Party will comply with, GM's IT strategy and architecture requirements published in accordance with the provisions of Section 3.2 of the MSA. A12.2 Competitiveness. Unless otherwise mutually agreed by the Corporate Contract Managers, the Agreement shall be subject to the provisions of Section 2.3 of the MSA regarding Competitiveness. A-48 Confidential treatment has been requested by EDS for the indicated portions of this page. A12.3 Market Testing and Resourcing. Unless otherwise mutually agreed by the Corporate Contract Managers, the Agreement shall be subject to the provisions of Article V of the MSA regarding Market Testing and Resourcing. All such market testing and resourcing activities pursuant to Article V of the MSA shall be coordinated through the GM Corporate Contract Manager. A12.4 Co-Negotiation. Unless otherwise mutually agreed by the Corporate Contract Managers, the Agreement shall be subject to the provisions of Section 3.7 of the MSA regarding Co-negotiation. All such co-negotiation activities pursuant to Section 3.7 of the MSA shall be coordinated through the GM Corporate Contract Manager. A12.5 Use of Independent Auditors. Unless otherwise mutually agreed by the Corporate Contract Managers, in any situation in which the GM Contracting Party has the right to review, inspect or audit the books, records or other information or materials of the EDS Contracting Party pursuant to Section 3.5 of the MSA, Section A7.3, A8.1, or A9.4 of this Exhibit A, Exhibit D to the MSA, Exhibit G to the MSA, or, unless otherwise mutually agreed by the Contracting Parties, any similar provision of the Agreement not set forth in the MSA or the Exhibits to the MSA, such audits will be performed by the GM Audit Staff or GM's public accounting firm unless the EDS Corporate Contract Manager reasonably and in good faith believes that disclosure of any information requested by GM or by its public accounting firm will result in the disclosure of confidential or proprietary information of EDS. In such event, the Contracting Parties shall mutually agree upon an alternative independent "big six" public accounting firm which will be engaged by the GM Contracting Party to perform such services, but which shall report its findings to both Contracting Parties. In this regard, such independent public accounting firm shall disclose only such information as may be necessary to verify and validate those findings and, to the extent reasonably possible, will do so in a way that will not disclose any confidential or proprietary information of EDS. The cost of such independent public accounting firm will be borne equally by both the GM Contracting Party and the EDS Contracting Party. Additionally, the parties mutually agree that, A-49 unless otherwise mutually agreed by the Corporate Contract Managers, the scope and breadth of the audit rights contemplated in Section 3.5 of the MSA, and Sections A7.3, A8.1 and A9.4 of this Exhibit A, and Exhibit G to the MSA shall be consistent with the specific description of audit rights in sub-Section D3.3(b) of Exhibit D to the MSA. The public accounting firm and each of the auditors performing the audit will execute a reasonable confidentiality agreement acceptable to GM and EDS in form and content. ARTICLE A-XIII. MISCELLANEOUS ----------------------------- A13.1 Binding Nature and Assignment. The Agreement shall be binding on the Contracting Parties and their respective successors and assigns, but neither Contracting Party may, or shall have the power to, assign the Agreement without the prior written consent of the Major Sector Contract Manager of the other, which consent shall not be unreasonably withheld. A13.2 Notices. Wherever under the Agreement one Contracting Party is required or permitted to give notice to the other, such notice shall be deemed given when delivered in hand or when mailed by a reliable national mail service, registered or certified mail, return receipt requested, postage prepaid, and addressed as follows: in the case of the EDS Contracting Party, to the EDS Unit Project Manager, with copies to the EDS Major Sector Contract Manager, to the EDS Corporate Contract Manager, and to: Electronic Data Systems Corporation 5400 Legacy Drive Plano, Texas 75024 Attention: President in the case of the GM Contracting Party, to the GM Unit Project Manager, with copies to the GM Major Sector Contract Manager, to the GM Corporate Contract Manager and to: A-50 General Motors Corporation 3044 West Grand Boulevard Detroit, Michigan 48202 Attention: President Either Contracting Party may from time to time change its address for notification purposes by giving the other prior written notice of the new address and the date upon which it will become effective. A13.3 Counterparts. The Agreement may be executed in one or more counterparts, all of which taken together shall constitute one single agreement between the Contracting Parties. A13.4 Headings. The Article and Section headings and the Table of Contents, if any, used in the Agreement are for reference and convenience and shall not enter into the interpretation of the Agreement. A13.5 Approvals and Similar Actions. Where agreement, approval, acceptance, consent or similar action by either Contracting Party is required by any provision of the Agreement, such action shall not be unreasonably delayed or withheld. A13.6 Force Majeure. Each Contracting Party shall be excused from performance under the Agreement for any period and to the extent that it is prevented from performing any services pursuant to the Agreement, in whole or in part, as a result of delays caused by the other Contracting Party (where such other Contracting Party is notified in writing of the impact of such delays) or an act of God, war, civil disturbance, court order, labor dispute, or other cause beyond its reasonable control, including failures or fluctuations in electrical power, heat, light, air conditioning or telecommunications equipment, and such nonperformance shall not be a default under the Agreement. A-51 A13.7 Severability. If any provision of the Agreement is declared or found to be illegal, unenforceable or void, then both Contracting Parties shall be relieved of all obligations arising under such provision, but only to the extent that such provision is illegal, unenforceable or void, it being the intent and agreement of the Contracting Parties that the Agreement shall be deemed amended by modifying such provision to the extent necessary to make it legal and enforceable while preserving its intent or, if that is not possible, by substituting therefor another provision that is legal and enforceable and achieves the same objective. If such illegal, unenforceable or void provision does not relate to the payments to be made under the Agreement and if the remainder of the Agreement shall not be affected by such declaration or finding and is capable of substantial performance, then each provision not so affected shall be enforced to the extent permitted by law. A13.8 Waiver. No delay or omission by either Contracting Party to exercise any right or power under the Agreement shall impair such right or power or be construed to be a waiver thereof. A waiver by either of the Contracting Parties of any of the covenants to be performed by the other or any breach thereof shall not be construed to be a waiver of any succeeding breach thereof or of any other covenant contained in the Agreement. All remedies provided for in the Agreement shall be cumulative and in addition to and not in lieu of any other remedies available to either party at law, in equity or otherwise. A13.9 Relationship of Parties. EDS, in furnishing services to GM under the Agreement, is acting only as an independent contractor. EDS does not undertake by the Agreement or otherwise to perform any obligation of GM, whether regulatory or contractual. EDS has the sole right and obligation to supervise, manage, contract, direct, procure, perform or cause to be performed, all work to be performed by EDS under the Agreement unless otherwise provided in the Agreement. Except as may be otherwise specifically agreed, EDS shall be solely responsible for all work done by its subcontractors and agents. A-52 A13.10 Services for Others. GM understands and agrees that EDS may perform data processing for others at any data center or information processing center that EDS may utilize for the processing of GM's data. A13.11 Hiring of Employees. The EDS and GM Contracting Parties each agree that, during the term of the Agreement and for three (3) years thereafter, it shall not, except with the prior consent of the other, offer employment to or employ any person employed then or within the preceding twelve months by the other. A13.12 Compliance With Laws. Each of the Contracting Parties shall comply with all laws, rules and regulations in all jurisdictions applicable to the Agreement, including but not limited to those governing the export or import of computer equipment, software or technical data. To the extent that the Agreement is applicable to MSA Services provided to the GM Contracting Party in connection with United States Government procurements, now or in the future, EDS agrees to (i) provide such information as is necessary to enable the GM Contracting Party to comply with the terms of such procurements, any contracts resulting therefrom, and applicable laws and regulations, and (ii) comply with all applicable laws and regulations. A13.13 Media Releases. All media releases, public announcements and public disclosures by either Contracting Party or its employees or agents relating to the Agreement or the subject matter of the Agreement, including without limitation promotional or marketing material, but not including any announcement intended solely for internal distribution at such Contracting Party or any disclosure required by legal, accounting or regulatory requirements beyond the reasonable control of such Contracting Party, shall be coordinated with and approved by the other Contracting Party prior to the release thereof, which approval shall not be unreasonably withheld. A13.14 Survival. Each Contracting Party's obligations under Articles A-IV, A-V, A-X and A-XI and Sections A7.5, A9.1, A9.2, A9.4, A9.5, A13.11, A13.13 and A13.14 hereof shall survive the termination or expiration of the Agreement. A13.15 Entire Agreement. The Agreement, including any schedules or exhibits referred to in the Agreement and attached to the Agreement, each of which is incorporated into the Agreement for all purposes, constitutes the entire agreement between the Contracting Parties with respect to the subject matter of the Agreement and there are no representations, understandings or agreements relative to the Agreement which are not fully expressed in, or incorporated by reference into, the Agreement. No change, waiver, or discharge of the Agreement shall be valid unless in writing and signed by an authorized representative of the Contracting Party against which such change, waiver, or discharge is sought to be enforced. A13.16 Amendment or Modification. The Agreement may be amended or modified upon mutual agreement of the Contracting Parties; provided, however, such amendment or modification shall only be effective if made in writing by the Major Sector Contract Managers or other authorized representatives of the Contracting Parties. A13.17 Good Faith and Fair Dealing. The Contracting Parties shall abide by a standard of good faith and fair dealing in all aspects of their business relationship and dealings with each other, including with respect to the performance of their respective obligations and the exercise of their respective rights under the Agreement. A-53 EXHIBIT B GM MAJOR SECTORS AS OF THE EFFECTIVE DATE ----------------------------------------- EXHIBIT B GM MAJOR SECTORS AS OF THE EFFECTIVE DATE ----------------------------------------- Allison Transmission Division Delphi Automotive Systems (North America) Delphi Automotive Systems Operations Outside of North America GM Locomotive Group Delco Electronics Corporation (Worldwide) General Motors Acceptance Corporation (U.S. and Canada) GMAC Operations Outside of U.S. and Canada General Motors International Operations, including: GM Europe GM's Latin American Operations GM's Asian Pacific Operations Motors Insurance Corporation North American Operations, including: GM's Central Office Staffs GM of Canada GM de Mexico Saturn Corporation B-1 EXHIBIT C MSA SERVICES AND MSA SCOPE DOCUMENTS ------------------------------------ EXHIBIT C MSA SERVICES AND MSA SCOPE DOCUMENTS ------------------------------------ GM Parent and EDS Parent have agreed upon the description of MSA Services contained in Section I of this Exhibit C and have agreed to develop MSA Scope Documents as discussed in Section II of this Exhibit C. I. MSA Services. It is the intention of the parties that EDS will be the principal supplier of current and future IT goods and services (including functional replacements), in accordance with GM's stated IT strategies, directions, architecture, and standards. The MSA Services set forth in this Section I are described by functional service categories so that changes in GM's business or in technology which replace existing processes or technologies within the scope of the MSA Services, but serve the same or comparable functions, will be within the scope of MSA Services. It is the mutual goal of GM and EDS to make information a strategic advantage to GM and provide, to the extent reasonably practicable, a consistent global IT infrastructure and common global application software. For the purposes of this Exhibit C, "participation" means that GM shall consult with EDS with respect to the applicable services, but shall not preclude GM from (i) performing such services internally, or (ii) obtaining such services from other external sources without EDS involvement. A. Inclusions. Consistent with Section 3.2 of the MSA and except as provided in Section I.B below, functional IT service categories within the scope of MSA Services are as follows: C-1 1. Infrastructure. (a) Scope. Except with respect to Plant Floor Services which are covered in Section I.A.5 below, the scope of the computing and communications infrastructure ("Infrastructure") is as follows: (1) Mainframe, super-computing, midrange and distributed computing hardware and system software. (2) Voice, data and video communications services and networks. However, the parties mutually agree that the videoconferencing products and services included in the above shall be limited to (i) those for which terms and pricing are specified in the Videoconferencing Terms and Pricing document, dated March 29, 1996, mutually developed by GM and EDS, and (ii) those being provided to GM by EDS as of the Effective Date to the extent that, prior to the Effective Date, they were mutually treated by the parties as within the scope of Section 1.3 of the Master Agreement. (3) End-user hardware (e.g., telephones, desktop PC's, Unix workstations, 3270/5080 terminals) connected to or using the computing or communications environment described in sub-Sections I.A.1(a)(1) and I.A.1(a)(2) hereof. (4) Replacements of any of the foregoing which serve the same or comparable functions as the foregoing. C-2 (b) Services. EDS shall be responsible for meeting GM's requirements, in accordance with GM's stated IT strategies, directions, architecture and standards, for the following services applicable to the Infrastructure functions described in sub-Section I.A.1(a) above: (1) Participation in the investigation of and planning for architecture and related Infrastructure technologies supporting GM's IT strategies and directions. (2) Development, implementation, and maintenance of Infrastructure architecture and standards for all computing and communications environments used by EDS to provide services to both GM and EDS' other customers ("Shared Infrastructure"). (3) Participation in the development and maintenance of Infrastructure architecture and standards relating to all computing and communications environments desired by GM which are not shared by EDS' other customers ("Dedicated Infrastructure"). (4) Infrastructure capability, capacity and configuration management for Shared Infrastructure. (5) Participation in Infrastructure capability and configuration and performance of Infrastructure capacity management for Dedicated Infrastructure. (6) Infrastructure integration, installation, and operations. C-3 (7) Infrastructure performance monitoring and improvements (without limiting GM's right to monitor performance as mutually agreed by the parties). 2. Application Software. (a) Scope. Except with respect to Plant Floor Services which are covered in Section I.A.5 below, EDS is responsible pursuant to sub-Section I.A.2(b) below for meeting GM's requirements for the development of application software and implementation of commercial off-the-shelf application software (with the "make or buy" decision being made by GM with input from EDS) to support the following GM business functions and processes (or their successors) and their related sub-functions and processes: (1) Business Planning. (2) Financial. (3) Human Resource Management. (4) Sales, Service, Marketing and Aftersales. (5) Engineering. (6) Purchasing. (7) Production Control and Logistics. (8) Production/Manufacturing. (9) Materials Management (e.g., ISP, GPS), excluding material handling conveyances. C-4 (10) Corporate Affairs and Legal. (b) Services. EDS shall be responsible for meeting GM's requirements, in accordance with GM's stated IT strategies, directions, architecture and standards, for the following services in connection with application software used to support the business functions and processes set forth in sub-Section I.A.2(a) above: (1) Participation in the investigation of new application software and application software technologies supporting GM's IT strategies and directions. (2) Participation in the development and maintenance of application architecture and standards. (3) Maintenance, change control, and enhancement of current and future application software. (4) Development and implementation of software interfaces. (5) Integration and operational support of current and future application software. (6) Troubleshooting and problem resolution. (7) Output distribution (e.g., on-line, print, plot, microfiche). (8) Performance tuning and run-time improvements. (9) Development (with the "make or buy" decision being made by GM with input from EDS) and implementation of new and replacement application software. C-5 (10) Help-desk support. (11) Timesharing services. 3. Data Management. (a) Scope. Except with respect to Plant Floor Services which are covered in Section I.A.5 below, EDS will be responsible for meeting GM's requirements for the management of data used by or for applications software used to support the various GM business functions described in sub-Section I.A.2(a) above. (b) Services. EDS shall be responsible for meeting GM's requirements, in accordance with GM's stated IT strategies, directions, architecture and standards, for the following data management services to support the business functions and processes set forth in sub-Section I.A.2(a) above: (1) Participation in the development and maintenance of GM data standards. (2) Participation in the development and maintenance of data architecture and technical standards. (3) Implementation and maintenance of databases shared within GM and data warehouses. (4) Participation in the investigation of and planning for new data/information technologies. 4. IT-Related Services. Except with respect to Plant Floor Services which are covered in Section I.A.5 below, EDS shall be responsible for meeting C-6 GM's requirements, in accordance with GM's stated IT strategies, directions, architecture and standards, for the following cross- functional services applicable to the business functions and processes set forth in sub-Sections I.A.1(a), I.A.2(a), and I.A.3(a) above: (a) Reports on: performance status, invoice detail, scope of work detail and other descriptions related to MSA Services. (b) Investigation, acquisition, required development, maintenance and use of IT-related methodologies and tools as requested by GM. (c) Implementation of IT security controls. (d) Compliance management with respect to EDS' delivery of MSA Services in accordance with GM's stated IT strategies, direction, architecture and standards. (e) Participation in planning for business continuity services. (f) Planning for IT disaster recovery services jointly with GM. (g) Delivery of IT disaster recovery and IT-related business continuity services. (h) Participation as requested by GM in IT planning, technology assessment and other data management activities. (i) NAO COe training for the term of the current NAO COe agreement, dated November 30, 1993. (j) Training in the use of EDS software and/or technologies custom-developed by EDS for GM. C-7 (k) Backup and quality control (without limiting GM's right to assess the quality of delivered MSA Services). 5. Plant Floor Services. EDS shall be responsible for plant floor services to the extent set forth in sub-Section 1.3(e) of the MSA ("Plant Floor Services"). B. Exclusions. In addition to the provisions of Section 1.3 of the MSA, MSA Services shall not include the following: 1. Any (i) plant floor services (except to the extent set forth in sub-Section 1.3(e) of the MSA), including plant floor services for Saturn Corporation, and (ii) Machine Control(s) as defined in the Plant Floor Systems Services Agreement, entered into as of ________, 1996, between GM and EDS. The services that are out of scope under the Memorandum of Agreement on Information Technology Services at Saturn between Saturn MFS and EDS dated April 22, 1994 (the "Saturn MOA") are excluded from the MSA Services for the term of the Saturn MOA, including extensions and renewals thereof, but excluding any expansion of scope of services with respect thereto. 2. Hardware, software and "firmware" embedded into GM Products, including embedded controls technology incorporated into vehicles or vehicle components (e.g., Engine Control Modules). 3. IT requirements of GM suppliers and dealers. 4. Training, other than (i) NAO COe training for the term of the current NAO COe agreement, dated November 30, 1993, and (ii) training in the use of EDS software and/or technologies custom- developed by EDS for GM. C-8 5. Consumable desktop and office supplies (e.g., paper, print cartridges, diskettes). 6. Engineering test equipment and direct embedded test controls technology, including computer-aided direct embedded test controls technology. 7. Personnel services for data entry. 8. Standalone non-data processing equipment (e.g., copiers, fax machines and audio visual equipment). 9. GM business publications. 10. Non-data processing personnel services. 11. Acquisition of commercially available business data. 12. Consulting services. 13. Determination of GM's business requirements for IT. 14. Customer Assistance Centers. 15. Roadside Assistance Centers. 16. Cellular Phones. 17. Pagers. 18. Videobroadcasting and videoconferencing (except to the extent set forth in sub-Section I.A.1(a)(2) of this Exhibit C). 19. Payment Processing Centers. C-9 20. Expense Report Processing. 21. Strategic Planning. 22. Items which are not (i) Infrastructure, or (ii) replacements of Infrastructure that serve the same or comparable functions as Infrastructure. 23. IT services for consortiums in which GM is a participant. 24. Determination of GM's IT Architecture, Strategy and Direction. 25. Additional exclusions applicable to GM Overseas User Organizations only: (a) Voice communications (including telephones). (b) Satellite communications for dealers and suppliers. (c) IT services that (i) were being performed as of August 1, 1995, by a third party under contract with GM, or internally by GM, but only if and to the extent that the scope of such services is not increased beyond that being performed by such third party or internally by GM as of August 1, 1995, or (ii) the Contracting Parties mutually agree in writing and document in an applicable Service Agreement will not be provided by EDS, in the case of each of (i) and (ii), for the duration of that third party contract or internal arrangement or that Service Agreement, including extensions or renewals thereof, but excluding any expansion of the scope of services with respect thereto and excluding any contract with a new or different third party with respect to such third party or internal GM services. C-10 Any services obtained by a GM User Organization from a third party, or provided internally by GM, under the exclusions set forth in this Section I.B shall not count against the annual or aggregate limitations on competitive bidding and resourcing contained in Article V of the MSA. II. MSA Scope Documents. The parties have agreed upon, and will continue to mutually agree upon, documents (each, an "MSA Scope Document") consisting of a description of (i) specific IT services that are then being performed by EDS for a particular GM Major Sector (or, if applicable, a group of GM Major Sectors or GM Overseas User Organizations) that are MSA Services, (ii) related services that are not MSA Services, and (iii) the roles and responsibilities of the parties relating thereto. The MSA Scope Documents are intended to assist in defining the specific detail content of a particular MSA Service. However, the general description of MSA Services contained in Section I of this Exhibit C will control any interpretation of whether a particular service is or is not an MSA Service, regardless of whether or not that service is then included in any applicable MSA Scope Document. There are numerous MSA Scope Documents which have been or will be prepared: . The North American Scope Document, dated __________, 1996, describes the specific MSA Services being delivered by EDS within the NAO, GMAC, and Delphi GM Major Sectors in North America as of the effective date of the MSA. It will soon be updated to include the other GM Major Sectors in North America as well. . With respect to the GM Overseas User Organizations, the parties will mutually agree upon MSA Scope Documents describing the specific MSA Services then being delivered by EDS within each applicable GM Major Sector, country, or unit, as mutually agreed. These MSA Scope Documents (the "GM Overseas User Organization Scope Documents") will be prepared in C-11 the same format as the North American Scope Document. However, in each case, the MSA Services will be determined on the basis of the description of MSA Services set forth in Section I of this Exhibit C. The MSA Scope Documents are intended to define, to the extent feasible, the roles and responsibilities of the parties with respect to the MSA Services described therein. The specific MSA Services to be provided by EDS pursuant to a Service Agreement are subject to the agreement of the Contracting Parties thereto and will be documented specifically for that Service Agreement as described in Section 2.1 of the MSA. C-12 EXHIBIT D PROCEDURES FOR NEGOTIATING SERVICE AGREEMENTS AND RESOLVING IMPASSES --------------------------------- EXHIBIT D PROCEDURES FOR NEGOTIATING SERVICE AGREEMENTS AND RESOLVING IMPASSES --------------------------------- ARTICLE D-I. DEFINITIONS ------------------------- D1.1 Definitions. In addition to the terms otherwise defined in the MSA, the following terms shall have the meanings set forth below whenever they are used in the provisions of this Exhibit D: (a) The term "Competitiveness Event" shall mean the negotiation or renegotiation by a GM User Organization and an EDS Service Organization of (i) a new or replacement Service Agreement, (ii) the terms and conditions applicable to a new or replacement MSA Service that is proposed to be provided under a then-current Service Agreement, or (iii) the pricing of any MSA Services when and to the extent that the negotiation or renegotiation of such pricing is contractually provided for in a then-current Service Agreement. (b) The term "Major Sector Negotiator" shall mean, for the negotiation of any Major Sector Service Agreement, the person(s) designated by the applicable GM Major Sector Contract Manager or the applicable EDS Major Sector Contract Manager, respectively, pursuant to Section D2.2 of this Exhibit D, who will have primary responsibility for the negotiation of the terms and conditions of that Major Sector Service Agreement. D-1 (c) The term "Major Sector Service Agreement" shall mean the primary Service Agreement between a GM Major Sector and the corresponding EDS Major Sector. (d) The term "Modified Cost-Plus Pricing Methodology" shall mean the cost- plus pricing methodology set forth in Section D3.3 of this Exhibit D. (e) The term "Modified EDS Cost" for any MSA Services shall mean the costs incurred by EDS in providing those MSA Services determined in accordance with sub-Sections D3.3(c) and D3.3(d) of this Exhibit D. (f) The term "Modified Markup Percentage" shall mean, for any MSA Services provided by EDS to any GM User Organization pursuant to the Modified Cost-Plus Pricing Methodology, the percentage computed in accordance with the calculation methodology set forth in a mutually agreed policy letter for that purpose, signed prior to the Effective Date by the GM and EDS Corporate Contract Managers. (g) The term "Negotiating Party" shall mean, for any Competitiveness Event, the GM User Organization and the EDS Service Organization that are participants in the negotiations with respect to that Competitiveness Event. (h) The term "Negotiator" shall mean, for any Competitiveness Event, the person designated by the applicable Unit Project Manager or Major Sector Contract Manager of the GM User Organization or the applicable EDS Service Organization, respectively, pursuant to Section D2.2 of this D-2 Exhibit D, who will have primary responsibility for the negotiation of an agreement with respect to that Competitiveness Event. (i) The term "Standing Neutral Mediator" shall mean the person jointly selected from time to time pursuant to Section D3.1 of this Exhibit D. (j) The term "Target Commencement Date" shall mean (i) for a new Service Agreement which replaces an existing Service Agreement, the expiration date of the existing Service Agreement, (ii) for a new Service Agreement which does not replace an existing Service Agreement, the anticipated effective date of the new Service Agreement, and (iii) for any other Competitiveness Event, the date upon which agreement with respect to that Competitiveness Event is reasonably required by GM. Other terms used in this Exhibit D are defined in the context in which they are used and, unless otherwise specified herein, shall have the meanings there indicated whenever they are used in this Exhibit D. ARTICLE D-II. NEGOTIATION PROCEDURES AND DEFAULT MECHANISMS ------------------------------------------------------------ D2.1 Good Faith and Fair Dealing. GM Parent and EDS Parent agree that all negotiations between GM and EDS with respect to any Competitiveness Event shall be governed by the fundamental principle of good faith and fair dealing as set forth in Section 1.6 of the MSA. The responsibility for concluding the negotiations relating to any Competitiveness Event shall be first and foremost the duty of the GM and EDS Negotiators for that Competitiveness Event. The Negotiators shall meet as often as they reasonably deem necessary in order to resolve all issues necessary to agree upon the price, terms and conditions relating to the Competitiveness Event. Upon the approval of the GM and EDS Corporate Contract Managers or their designated representatives, the Negotiators may use the services of the Standing Neutral Mediator to assist them in their negotiations. D-3 D2.2 Designation of Negotiators. In connection with the occurrence or anticipated occurrence of a Competitiveness Event, the Unit Project Manager or Major Sector Contract Manager, as applicable, for each applicable Negotiating Party shall designate a Negotiator for that Competitiveness Event in a timely manner and, in any event, within a reasonable period of time after receiving a written request for such designation. If the Competitiveness Event is the negotiation of a Major Sector Service Agreement, the Negotiators designated by the Negotiating Parties shall be the Major Sector Negotiators for that Competitiveness Event. D2.3 Major Sector Negotiation Procedures. The following procedures shall apply with respect to the negotiation of a Major Sector Service Agreement: (a) Negotiation Schedule. As soon as practical and reasonable, but no later than one year prior to the Target Commencement Date for the Major Sector Service Agreement, the EDS and GM Major Sector Negotiators for the negotiation of that Major Sector Service Agreement shall meet and agree upon a schedule that will be reduced to writing and sent to the GM and EDS Corporate Contract Managers. Unless the Major Sector Negotiators agree otherwise, the negotiation schedule shall include the following items: (1) The designation of GM and EDS staff who will participate in the negotiations. (2) The date when the GM Major Sector will provide a written description of the MSA Services that it requires. (3) The date when the EDS Major Sector will provide a written proposal for providing those MSA Services. (4) A schedule for subsequent meetings to conclude negotiations. (5) The deadline for the conclusion of negotiations by the Major Sector Negotiators, which shall not be later than sixty (60) days prior to the Target Commencement Date for the Major Sector Service Agreement. The negotiation schedule may also include D-4 interim deadlines for conclusion of negotiations on specific items in the Major Sector Service Agreement. (b) Reference to Corporate Contract Managers. In the event that the Major Sector Negotiators reasonably conclude that further negotiations by them will not result in resolution of all disputed issues, then the Major Sector Negotiators shall promptly notify the Corporate Contract Managers. At that time, but, in any event, no later than sixty (60) days prior to the Target Commencement Date for the Major Sector Service Agreement, the Corporate Contract Managers shall assume responsibility for the negotiations of the Major Sector Service Agreement. The Corporate Contract Managers may request the assistance and advice of other senior executives, including members of the group referred to in Section 3.1 of the MSA. In addition, the Corporate Contract Managers may at any time seek the assistance of the Standing Neutral Mediator to help them pursue negotiations and shall be obligated to seek such assistance (i) if they have been unable to resolve all disputed issues within thirty-seven (37) days prior to the Target Commencement Date for the Major Sector Service Agreement, and (ii) before any disputed issues may be referred to the Chief Executive Officers as described in sub-Section D2.3(c) of this Exhibit D. (c) Reference to Chief Executive Officers. At any time after the Corporate Contract Managers have assumed responsibility for the negotiations of the Major Sector Service Agreement, either Corporate Contract Manager may request that the Standing Neutral Mediator declare an impasse. If the Standing Neutral Mediator confirms that the Corporate Contract Managers have exhausted all reasonable efforts at negotiation and that further negotiation by the Corporate Contract Managers is not likely to result in resolution of all disputed issues, then the Standing Neutral Mediator shall declare an impasse by giving written notice thereof to both of the Corporate Contract Managers. At that time, but in any event no later than thirty (30) days prior to the Target Commencement Date for the Major Sector Service Agreement, the Chief Executive Officers of EDS Parent and GM Parent shall personally assume responsibility for the negotiations D-5 of the Major Sector Service Agreement. The Chief Executive Officers may at any time seek the assistance of the Standing Neutral Mediator. (d) Default Mechanism. If the Negotiating Parties are unable to reach agreement upon a Major Sector Service Agreement prior to the Target Commencement Date therefor, then: (1) With respect to any MSA Services that EDS is then providing for the applicable GM Major Sector, EDS shall in good faith continue to provide the same MSA Services, on the same terms and conditions (other than pricing), as then being provided by EDS unless and until the GM Major Sector, at its option and upon reasonable notice to EDS, directs EDS in writing to reasonably modify or discontinue such MSA Services in accordance with the provisions of Section A9.4 of Exhibit A to the MSA. (2) With respect to any MSA Services reasonably requested by the GM Major Sector that EDS is not then providing for the GM Major Sector, the GM Major Sector may, at its option and upon reasonable notice to EDS, direct EDS in writing to commence providing such MSA Services. In either such event, unless and until the Negotiating Parties reach agreement upon the Major Sector Service Agreement, (i) any such MSA Services shall be considered provided pursuant to the MSA, (ii) for purposes of Exhibit A to the MSA, the GM Major Sector and the EDS Major Sector shall be considered Contracting Parties and the business relationship between them shall be considered the Agreement, and (iii) EDS shall be compensated (x) for all UPR Items, at the then-current Uniform Published Rates for such UPR Items, (y) for all system development services and application services customarily performed on a cost-plus basis by EDS for GM, in accordance with the cost-plus pricing methodology set forth in Section A7.3 of Exhibit A to the MSA, and (z) for all other resources and services, in accordance with the Modified Cost-Plus Pricing Methodology. Notwithstanding the foregoing, with the approval of the Corporate Contract Managers, the Negotiating Parties may D-6 mutually agree upon a different compensation arrangement, such as escrowing disputed compensation or devising an interim compensation arrangement, pending the successful negotiation of the Major Sector Service Agreement. The Chief Executive Officers of GM Parent and EDS Parent or their designees shall continue to negotiate in good faith to reach agreement upon the Major Sector Service Agreement. D2.4 UPR Negotiation Procedures. The following procedures shall apply with respect to the negotiation of Uniform Published Rates for UPR Items that GM Parent and EDS Parent have mutually agreed to list in the UPR Catalog: (a) Negotiation. Whenever, in accordance with the provisions of Section A7.1 of Exhibit A to the MSA, GM Parent and EDS Parent initiate negotiation of the Uniform Published Rates for UPR Items, GM Parent and EDS Parent shall each designate a Negotiator and those Negotiators shall proceed expeditiously to successfully conclude the negotiations. (b) Default Mechanism. If either Negotiator reasonably concludes that further negotiations will not likely result in resolution of all disputed issues, then he or she may request that the applicable Corporate Contract Manager refer the disputed issues to arbitration as provided in Section D3.2 of this Exhibit D. D2.5 Procedures for System Development, Application and Other Services. The following procedures shall apply with respect to any Competitiveness Event relating to system development services and application services customarily performed on a cost-plus basis by EDS for GM: (a) Negotiation. The Negotiators for that Competitiveness Event may mutually agree upon a formal or informal negotiation schedule and may, with the prior approval of the Corporate Contract Managers, seek the assistance of the Standing Neutral Mediator pursuant to Section D3.1 of this Exhibit D. D-7 (b) Default Mechanism. If the Negotiating Parties are unable to reach agreement with respect to the Competitiveness Event prior to the Target Commencement Date, then: (1) With respect to any MSA Services that EDS is then providing for the applicable GM User Organization, EDS shall in good faith continue to provide the same MSA Services, on the same terms and conditions (other than pricing), as then being provided by EDS unless and until the GM User Organization, at its option and upon reasonable notice to EDS, directs EDS in writing to reasonably modify or discontinue such MSA Services in accordance with the provisions of Section A9.4 of Exhibit A to the MSA. (2) With respect to any MSA Services reasonably requested by the GM User Organization that EDS is not then providing for the GM User Organization, the GM User Organization may, at its option and upon reasonable notice to EDS, direct EDS in writing to commence providing such MSA Services. In either such event, unless and until the Negotiating Parties reach agreement with respect to the Competitiveness Event, (i) any such MSA Services shall be considered provided pursuant to the MSA, (ii) for purposes of Exhibit A to the MSA, the GM User Organization and the EDS Service Organization shall be considered Contracting Parties and the business relationship between them shall be considered the Agreement, and (iii) EDS shall be compensated (x) for all UPR Items, at the then- current Uniform Published Rates for such UPR Items, and (y) for all other resources and services, in accordance with the cost-plus pricing methodology set forth in Section A7.3 of Exhibit A to the MSA. D2.6 Procedures for Other Negotiations. The following procedures shall apply with respect to any Competitiveness Event not covered by the procedures set forth in Section D2.3, D2.4 or D2.5 of this Exhibit D: D-8 (a) Negotiation. The Negotiators for that Competitiveness Event may mutually agree upon a formal or informal negotiation schedule and may, with the prior approval of the Corporate Contract Managers, seek the assistance of the Standing Neutral Mediator pursuant to Section D3.1 of this Exhibit D. In the event that the Negotiators reasonably conclude that further negotiations by them will not result in resolution of all disputed issues, then the Negotiators shall promptly notify the applicable Major Sector Contract Managers. At that time, the Major Sector Contract Managers shall assume responsibility for the negotiations relating to the Competitiveness Event. The Major Sector Contract Managers may, with the prior approval of the Corporate Contract Managers, seek the assistance of the Standing Neutral Mediator pursuant to Section 3.1 of this Exhibit D. At any time after the Major Sector Contract Managers have assumed responsibility for the negotiations relating to the Competitiveness Event, either Major Sector Contract Manager may, but shall not be obligated to, refer the matter to the Corporate Contract Managers, in which event the Corporate Contract Managers shall assume responsibility for the negotiations relating to the Competitiveness Event. The Corporate Contract Managers may at any time seek the assistance of the Standing Neutral Mediator pursuant to Section D3.1 of this Exhibit D. (b) Default Mechanism. If the Negotiating Parties are unable to reach agreement with respect to the Competitiveness Event prior to the Target Commencement Date therefor, then: (1) With respect to any MSA Services that EDS is then providing for the applicable GM User Organization, EDS shall in good faith continue to provide the same MSA Services, on the same terms and conditions (other than pricing), as then being provided by EDS unless and until the GM User Organization, at its option and upon reasonable notice to EDS, directs EDS in writing to reasonably modify or discontinue such MSA Services in accordance with the provisions of Section A9.4 of Exhibit A to the MSA. D-9 (2) With respect to any MSA Services reasonably requested by the GM User Organization that EDS is not then providing for the GM User Organization, the GM User Organization may, at its option and upon reasonable notice to EDS, direct EDS in writing to commence providing such MSA Services. In either such event, unless and until the Negotiating Parties reach agreement with respect to such Competitiveness Event, (i) any such MSA Services shall be considered provided pursuant to the MSA, (ii) for purposes of Exhibit A to the MSA, the GM User Organization and the EDS Service Organization shall be considered Contracting Parties and the business relationship between them shall be considered the Agreement, and (iii) EDS shall be compensated (x) for all UPR Items, at the then-current Uniform Published Rates for such UPR Items, (y) for all system development services and application services customarily performed on a cost-plus basis by EDS for GM, in accordance with the cost-plus pricing methodology set forth in Section A7.3 of Exhibit A to the MSA, and (z) for all other resources and services, in accordance with the Modified Cost-Plus Pricing Methodology. Notwithstanding the foregoing, with the approval of the Corporate Contract Managers, the Negotiating Parties may mutually agree upon a different compensation arrangement, such as escrowing disputed compensation or devising an interim compensation arrangement, pending the successful negotiation of an agreement with respect to such Competitiveness Event. The Major Sector Contract Managers or, if applicable, the Corporate Contract Managers shall continue to negotiate in good faith to reach agreement with respect to such Competitiveness Event. D-10 ARTICLE D-III. DISPUTE RESOLUTION PROCEDURES --------------------------------------------- D3.1 Standing Neutral Mediator. The Standing Neutral Mediator will be a neutral third party jointly selected by GM Parent and EDS Parent whose duties will be to assist the Negotiating Parties in the resolution of disputes with regard to the negotiations relating to Competitiveness Events. The purpose of the mediation will be to arrive at a mutually acceptable resolution of the negotiations voluntarily, cooperatively and informally. The Standing Neutral Mediator will not have adjudicatory power over any dispute. The Negotiating Parties shall cooperate fully with the Standing Neutral Mediator to the full extent reasonably necessary to resolve the negotiations. (a) Selection of the Standing Neutral Mediator. Within thirty (30) days after the Effective Date, or within thirty (30) days after a prior Standing Neutral Mediator's services have been terminated pursuant to sub-Section D3.1(e) of this Exhibit D, GM Parent and EDS Parent shall jointly select a person to serve as the Standing Neutral Mediator until his or her services are terminated pursuant to sub-Section D3.1(e) of this Exhibit D. (b) Mediation Process. Following a request from either the Corporate Contract Managers or the Chief Executive Officers of GM Parent and EDS Parent, the services of the Standing Neutral Mediator may be utilized in any particular negotiation of a Competitiveness Event or any particular dispute arising in any such negotiation. After consultation with the Negotiating Parties, the Standing Neutral Mediator may request that each Negotiating Party submit written materials and/or a confidential statement setting forth key facts and arguments in support of its position and suggesting proposed resolutions. The information contained in the confidential statements shall not be shared with the other Negotiating Party by the Standing Neutral Mediator without the permission of the submitting Negotiating Party. The Standing Neutral Mediator may conduct preliminary, private, confidential meetings with the Negotiators for the Negotiating Parties. Thereafter, the Standing Neutral Mediator may conduct a joint mediation session at which the Negotiator for each of the Negotiating Parties may be expected to briefly present that Negotiating Party's positions on the disputed issues and respond to the other D-11 Negotiating Party's positions. After the summary presentations, the Standing Neutral Mediator may meet separately and together with the Negotiators for the Negotiating Parties to assist them in resolving disputed issues. If the disputed issues have not been settled after the joint mediation session, the Standing Neutral Mediator may continue individual discussions by telephone or in person. The Negotiators for the Negotiating Parties will make themselves reasonably available for further discussions and/or meetings after the joint mediation session. At all times during the mediation, the Negotiating Parties are free to engage in ex parte communications with the Standing Neutral Mediator. Upon the mutual consent of the Negotiating Parties and in consultation with the Standing Neutral Mediator, the process described in this sub-Section D3.1(b) may be modified to meet the requirements of a particular negotiation. (c) Confidentiality. All communications, statements made by the Negotiating Parties, documents or other information disclosed by the Negotiating Parties, statements made by or notes of the Standing Neutral Mediator, and impressions, opinions or recommendations of the Standing Neutral Mediator in connection with the mediation are confidential, privileged, non-discoverable, inadmissible and without prejudice in any litigation, arbitration, or subsequent proceeding; provided, however, that (i) evidence otherwise admissible shall not be rendered inadmissible because of its use in the mediation, and (ii) the Negotiating Parties may agree to disclose communications and documents (other than those of the Standing Neutral Mediator) to each other or to non-participants in the mediation. Upon request, the Standing Neutral Mediator shall sign a confidentiality agreement that is satisfactory to the Negotiating Parties. (d) Disqualification of Standing Neutral Mediator. The Standing Neutral Mediator and any person who assists him or her shall not be a necessary party in any arbitral or judicial proceeding relating to the mediation or to the subject matter of the negotiation. The Standing Neutral Mediator and any person who assists him or her may not be called as a witness or as an expert in any pending or subsequent litigation or arbitration involving the Negotiating Parties and relating to the negotiation. Moreover, the Standing Neutral Mediator and any person who assists him or her shall be D-12 disqualified as a witness or as an expert in any pending or subsequent litigation or arbitration relating to the negotiation. (e) Term. The Standing Neutral Mediator shall serve at the pleasure of GM Parent and EDS Parent. At any time, the services of the Standing Neutral Mediator may be terminated by (i) either Corporate Contract Manager providing written notice thereof to the other Corporate Contract Manager and the Standing Neutral Mediator, or (ii) the resignation of the Standing Neutral Mediator. (f) Compensation. EDS Parent and GM Parent shall jointly agree upon and share equally the compensation and expenses for the Standing Neutral Mediator. D3.2 Arbitration. Any dispute in connection with Uniform Published Rates for UPR Items which has not been resolved by negotiation as provided in sub- Section D2.4 of this Exhibit D shall be settled by arbitration pursuant to this Section D3.2. Except as otherwise provided herein, the arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. (S)(S) 1- 16. EDS Parent and GM Parent agree to abide by the decision of the arbitrators. In the event the arbitrators' decision is not voluntarily honored, GM Parent and EDS Parent agree that the arbitrators' decision may be enforced in any court having jurisdiction. The arbitrators are not empowered to award damages, and EDS and GM hereby irrevocably waive any right to recover such damages with respect to any dispute resolved by arbitration. (a) Commencement of Arbitration. Either Corporate Contract Manager may, by giving the other Corporate Contract Manager written notice thereof, refer a dispute with regard to the Uniform Published Rate for a UPR Item to arbitration pursuant to this Section D3.2, but only after (i) at least forty-five (45) days have elapsed since negotiations regarding the Uniform Published Rate for that UPR Item commenced, and (ii) the Standing Neutral Mediator has assisted the applicable Negotiators in negotiating such Uniform Published Rate and has confirmed that the Negotiators are not likely to resolve the dispute through further negotiations. Within seven (7) days after a dispute has been referred to arbitration pursuant to D-13 this Section D3.2, each Negotiating Party shall provide the other a Notice of Arbitration that shall include: (1) The names of the individuals representing the Negotiating Party in the arbitration proceeding. (2) A statement of the general nature of the dispute. (3) The remedy sought. (4) The name and address of the arbitrator appointed by the Negotiating Party. (b) Selection of Arbitrators. Unless the Negotiating Parties agree otherwise, the Arbitration Tribunal shall consist of an arbitrator appointed by each Negotiating Party and a "non-party" arbitrator, who shall chair the Arbitration Tribunal. As soon as possible after the exchange of the Notices of Arbitration and, in any event, within seven (7) days thereafter, the arbitrators appointed by the Negotiating Parties shall select the "non-party" arbitrator. (c) Place of Arbitration. The place of arbitration shall be Detroit, Michigan, unless the Negotiating Parties agree otherwise. (d) Conduct of Arbitral Proceedings. The arbitration proceedings shall be conducted in an expeditious manner. Each Negotiating Party shall submit a written statement setting forth the facts and arguments in support of its position to the Arbitration Tribunal within seven (7) days after the exchange of the Notices of Arbitration. Within seven (7) days thereafter, the Arbitration Tribunal shall hold a hearing at which time each Negotiating Party shall make an oral presentation in support of its position. The Arbitration Tribunal shall render a decision within fourteen (14) days after the conclusion of all oral testimony. (e) No Ex Parte Contact. No Negotiating Party or anyone acting on its behalf shall have any ex parte communication with the non-party arbitrator with D-14 respect to any matter of substance relating to the proceeding. A Negotiating Party and the arbitrator it appointed, however, may confer with regard to any matter. (f) Decision. Unless the Negotiating Parties agree otherwise, the Arbitration Tribunal shall issue a final written decision. No statement of reasons shall be required. The decision shall be made and signed by at least a majority of the arbitrators. Executed copies of the decision shall be delivered by the Arbitration Tribunal to the Negotiating Parties. Within seven (7) days after receipt of the decision, either Negotiating Party, with notice to the other Negotiating Party, may request that the Arbitration Tribunal correct any errors in computation, clerical or typographical errors, or errors of a similar nature. If no requests for corrections have been made or, in any event, within ten (10) days after issuing its decision, the Arbitration Tribunal shall certify its decision as final. (g) Confidentiality. The Negotiating Parties and the arbitrators shall treat the proceedings, any oral or written information provided to the Arbitration Tribunal, and the decision of the Arbitration Tribunal, as confidential, except in connection with a judicial challenge to, or enforcement of, the arbitrators' decision, and unless otherwise required by law. (h) Costs. Each Negotiating Party shall bear its own costs in connection with any arbitration proceedings pursuant to this Section D3.2. The Negotiating Parties shall share equally the compensation and expenses of the Arbitration Tribunal. D3.3 Modified Cost-Plus Pricing Methodology. With respect to any MSA Services provided by EDS to any GM User Organization for which Section D2.3 or D2.6 of this Exhibit D provides that EDS is to be compensated in accordance with the Modified Cost-Plus Pricing Methodology set forth in this Section D3.3, EDS will charge the applicable GM User Organization, and the applicable GM User Organization will pay EDS for those MSA Services, according to the following: D-15 (a) Payment Terms. The GM User Organization shall pay EDS monthly, according to the terms of Section A8.2 of Exhibit A of the MSA, the Modified EDS Cost for such MSA Services, plus a markup on the Modified EDS Cost equal to (i) the then-current Modified Markup Percentage for such MSA Services, multiplied by (ii) such Modified EDS Cost. (b) Inspection and Audit. Upon the reasonable request of the GM Corporate Contract Manager, GM will have the right to examine and audit relevant EDS records supporting payments and other provisions related to the Modified EDS Cost for the MSA Services provided pursuant to this Section D3.3, all in accordance with the following. (1) The term "records" means accounting records, written policies and procedures, general ledger records, records supporting payments to and credits from suppliers, vouchers, statements of cost and records necessary to evaluate and verify direct and indirect costs (including overhead and other allocations), EDS purchasing records, and any other records reasonably requested by GM's public accountant, as they may apply to costs and settlements associated with this Section D3.3, whether the records are in written form, in the form of computer data and files, or any other form required for audit. (2) GM will use its public accounting firm for the audit unless EDS reasonably and in good faith believes that disclosure of any information requested by GM, or by GM's public accounting firm, will result in the disclosure of confidential or proprietary information of EDS. In such event, GM and EDS will agree to an alternative independent "big six" public accounting firm which D-16 will be engaged by GM to perform such services, but will report its findings to both GM and EDS. In this regard, such independent public accounting firm shall disclose only such information as may be necessary to verify and validate those findings and, to the extent reasonably possible, will do so in a way that will not disclose any confidential or proprietary information of EDS. The cost of such independent public accounting firm will be borne equally by both GM and EDS. The public accounting firm and each of the auditors performing the audit will execute a reasonable confidentiality agreement acceptable to GM and EDS in form and content. (3) EDS shall make these records available at its offices at all reasonable times for examination, audit, or reproduction. The independent auditor shall have access to EDS facilities, shall be allowed to interview all current employees, and EDS will not prohibit GM's public accountant from interviewing former EDS employees, to discuss matters pertinent to this Section D3.3. The independent auditor shall have access to all necessary records, and shall be provided adequate and appropriate work space, in order to conduct audits in compliance with this provision. (4) Any payment to EDS may be (i) reduced by amounts, including interest at rates determined by the Secretary of the Treasury pursuant to Public Law 92-41 (85 stat. 97), found to be unallowable or not properly allocated to GM, or (ii) adjusted for prior overpayments and underpayments by GM. GM will have the right, in accordance with sub-Section D3.3(b)(2) of this Exhibit D, to audit relevant EDS records at the end of each calendar year and for a period of three years after payment of any amount pursuant to this Section D3.3. D-17 (c) Accounting Practices. The Modified EDS Cost for any MSA Services provided to the applicable GM User Organization pursuant to this Section D3.3 will be computed according to the following: (1) EDS shall follow consistently the accounting practices described below in accumulating and reporting costs. (2) All costs incurred for the same purposes, in like circumstances, are either direct costs only or indirect costs only with respect to final cost objectives. No final cost objective shall have allocated to it as an indirect cost any cost, if other costs incurred for the same purpose, in like circumstances, have been included as a direct cost of that or any other final cost objective. Further, no final cost objective shall have allocated to it as a direct cost any cost, if other costs incurred for the same purpose, in like circumstances, have been included in any indirect cost pool to be allocated to that or any other final cost objective. For purposes of this Section D3.3: (A) Direct cost means any cost which is identified specifically with a particular final cost objective. Direct costs are not limited to items which are incorporated in the end product. (B) Indirect cost means any cost not directly identified with a single final cost objective, but identified with two or more final cost objectives or with at least one intermediate cost objective. (C) Cost objective means a function, organizational subdivision, contract or other work unit for which cost data D-18 are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capitalized projects, etc. (3) With respect to overhead expenses, Modified EDS Cost will include that portion of EDS overhead expenses as is properly allocable to the applicable GM User Organization pursuant to the methodology used consistently throughout EDS, i.e., all expenses that cannot be reasonably charged to specific profit centers are allocated to all EDS profit centers on the basis of the ratio of the direct expenses charged to a particular profit center to the total direct expenses charged to all EDS profit centers. Changes in specific allocation methodologies may be periodically made by EDS provided that such methodologies are applied consistently and uniformly as they relate to all EDS customers. (4) Home office expense shall be allocated on the basis of the beneficial and causal relationship between supporting and receiving activities. Home office expense means the expense of an office responsible for directing or managing two or more, but not necessarily all, segments of an organization. EDS may have several intermediate home offices which report to a common home office. Home office expenses shall be allocated directly to the maximum extent practical. Expenses not directly allocated, if significant in amount and relation to total home office expense, shall be grouped in logical and homogeneous expense pools and allocated on a causal and beneficial relationship. D-19 Residual home office expense, that cost which is not allocated directly or not allocated on a causal and beneficial relationship, shall be allocated to EDS' profit centers on the basis of the ratio of the direct expenses charged to a particular profit center to the total direct expenses charged to all EDS profit centers. Changes in specific allocation methodologies may be periodically made by EDS provided that such methodologies are applied consistently and uniformly as they relate to all EDS customers. (5) EDS business unit general and administrative (G&A) expenses shall be allocated to business unit final cost objectives based on their beneficial or causal relationship. These expenses represent the cost of the management and administration of the business unit as a whole. Business unit G&A costs shall be grouped in a separate indirect cost pool which shall be allocated to final cost objectives by means of a cost input base representing the total activity of the business unit. (6) EDS shall have, and consistently apply, written statements of accounting policies and practices for accumulating the costs of material and for allocating costs of material to cost objectives. The cost of material used solely in performing indirect functions may be allocated to an indirect cost pool. Costs of a category of materials shall be accounted for in material inventory records. (7) EDS shall have a written statement of accounting policies and practices for classifying costs as direct or indirect which shall be consistently applied. Indirect costs shall be accumulated in indirect cost pools which are homogeneous. Pooled costs shall be allocated to cost objectives in reasonable proportion to the D-20 beneficial or causal relationship of the pooled costs to cost objectives. (8) Research and development (R&D) and bid and proposal (B&P) costs shall be allocated to cost objectives based on the beneficial or causal relationship between such costs and cost objectives. The R&D and B&P costs of a home office shall be allocated to segments on the basis of the beneficial or causal relationship between the R&D and B&P costs and the segments reporting to that home office. The R&D and B&P costs of a business unit shall be allocated to the final cost objectives of that business unit on the basis of the beneficial or causal relationship between the R&D and B&P costs and the final cost objectives. These practices shall be consistently applied. [Confidential information has been omitted.] D-21 Confidential treatment has been requested by EDS for the indicated portions of this page. [Confidential information has been omitted.] D-22 Confidential treatment has been requested by EDS for the indicated portions of this page. [Confidential information has been omitted.] D-23 Confidential treatment has been requested by EDS for the indicated portions of this page. [Confidential information has been omitted.] D-24 Confidential treatment has been requested by EDS for the indicated portions of this page. [Confidential information has been omitted.] D-25 Confidential treatment has been requested by EDS for the indicated portions of this page. EXHIBIT E GUIDELINES & METHODOLOGY FOR DETERMINING ACHIEVEMENT OF IT STRUCTURAL COST REDUCTION TARGETS --------------------------------------------------- EXHIBIT E GUIDELINES & METHODOLOGY FOR DETERMINING ACHIEVEMENT OF IT STRUCTURAL COST REDUCTION TARGETS --------------------------------------------------- Annual target adjustments and cost reductions pursuant to this Exhibit E will be calculated in accordance with the following: 1. The annual target will be adjusted according to the following: (a) At the beginning of each calendar year, to adjust for IT structural cost reductions resulting from GM-funded systems development (which will result in net cost reductions in that calendar year), the annual target will be reduced by a percentage equal to the percentage yielded by dividing (i) the previous calendar year's fixed billings for systems being eliminated during the current calendar year, as a result of GM-funded systems development, by (ii) the total aggregate fixed charges for ongoing base level MSA Services ("Baselevel Fixed Charges") for the prior calendar year. (b) To provide equity in the event of major changes in the Baselevel Fixed Charges which may be the result of major changes in GM business (e.g., plant closings or new plants and divestitures or acquisitions), the annual target may be adjusted by mutual agreement of the Corporate Contract Managers. 2. For calendar year 1996, carry over amounts of savings initially realized in 1996 from 1995 cost reduction efforts pursuant to the Performance Reduction Requirement provision of the NAO Service Agreement, and similar provisions of other Service Agreements, will be credited towards the achievement of the 1996 annual target in an amount equal to $17 million. E-1 3. Any reductions in billings under Service Agreements (excluding those cost reductions listed as exclusions in sub-Section 4.2(e) of the MSA and those cost reductions listed as exclusions in Section 5 of this Exhibit E) will be counted toward achievement of the annual target at the "net" amount of the reduction. The determination of the net amount will be subject to the following: (a) The net amount for products, systems or services which are specifically replaced will be determined by subtracting the annual billing amount for the equivalent replacement products, systems or services from the annual billing amount for the replaced products, systems and services. (b) Cost reductions occasioned by a specific project shall not be netted by additional authorized but unrelated MSA spending whether on a separate RISS, SDA or other like document or on the same document. In like manner, additional MSA spending occasioned by a specific cost savings effort shall not be excluded from netting against total savings by the use of a separate RISS, SDA or like document. (c) For purposes of the net calculation under this Section 3, any one-time expenses paid by GM in connection with the applicable products, systems or services (e.g., installation, purchase or license fees) will be amortized over a period of four years. In all cases GM and EDS will make a good faith effort to ensure that the counting of achievement against the annual target is equitable to both parties. Additional instructions, examples and clarifications necessary for the implementation of counting of achievement against the annual target will be issued by a policy letter to be mutually agreed upon by the Corporate Contract Managers. E-2 4. While increased functionality of products, systems and services will not count toward achievement of the annual target, GM and EDS recognize there is substantial value to GM when such functionality increases. Accordingly a report of major functionality increases will be issued in connection with any review of progress against the annual target. GM and EDS shall review such report in conjunction with the assessment of achievement against the annual target. 5. In addition to the exclusions to the calculation of cost reductions set forth in sub-Section 4.2(e) of the MSA, the calculation of cost reductions to be credited toward achievement of the annual targets pursuant to Section 4.2 of the MSA (as such targets may be adjusted pursuant to Section 1 of this Exhibit E) shall specifically exclude (i) reductions in plant floor services (as defined in sub-Section 1.3(e) of the MSA), except for reductions in such services which prior to the Effective Date were described in a scope of work for services under Section 1.3 of the Master Agreement, (ii) cost reductions attributable to GM-funded systems development, and (iii) amounts sourced or resourced to EDS or third parties pursuant to Article V of the MSA or the cost reductions therefrom. The above provision notwithstanding, with respect to any IT structural cost reductions which result from strategies, concepts and/or fully developed ideas that can verifiably and in good faith be shown to have been originated by EDS and communicated to GM prior to the commencement of competitive bidding of the underlying MSA Services, and then subsequently implemented as part of the sourcing or resourcing of such MSA Services, the net IT cost reductions therefrom shall be included in the calculation of cost reductions to be credited toward the achievement of applicable annual targets. E-3 EXHIBIT F TERMINATION UPON CHANGE OF CONTROL ---------------------------------- EXHIBIT F TERMINATION UPON CHANGE OF CONTROL ---------------------------------- 1. Termination Upon Change of Control. (a) In the event that a Change of Control occurs at any time or from time to time after the Effective Date and, within 90 days thereafter (subject to extension as provided in sub-Section 1(e) hereof), the Board of Directors of GM Parent reasonably and in good faith determines (a "GM Board Determination"): (1) that control of EDS has been acquired by a competitor of GMC in the manufacture, distribution or sale of passenger cars or trucks and that, after taking into account all relevant factors (including, without limitation, the nature and extent of any acquiring Person's competition with GMC), there is a reasonable likelihood of a significant competitive threat to GMC arising from such Change of Control; (2) that control of EDS has been acquired by a competitor of GMC and that, after taking into account all relevant factors (including, without limitation, the nature and extent of any acquiring Person's competition with GMC), there is a reasonable likelihood of a significant competitive threat to one or more significant GM User Organizations within GMC (the "Affected Organizations") arising from such Change of Control (provided, however, that a GM Board Determination shall only be made pursuant to this sub- Section 1(a)(2) with respect to a competitor of GMC as to which the Board of Directors of GM Parent determines reasonably and in good faith that it is not appropriate under the terms of sub- Section 1(a)(1) hereof to make a GM Board Determination based on control of EDS having been acquired by such competitor); or F-1 (3) that, as a result of such Change of Control, after taking into account all relevant factors (including, without limitation, the financial condition of EDS and the business reputation of any Person acquiring control of EDS), there is (i) substantial uncertainty as to EDS' continued ability to perform, in all material respects, its obligations under the MSA, including, without limitation, EDS' obligations under Section 2.3 of the MSA to the extent and at such times as such provisions are applicable in accordance with their terms, and the Service Agreements entered into in connection therewith, or (ii) any other significant threat to the business relationship between EDS and GMC. GM Parent may, by delivering written notice to EDS Parent ("Contract Notice") at any time within 30 days after the GM Board Determination (or at such other time as is provided in sub-Section 1(e) hereof), elect (A) in the case of a GM Board Determination specified in sub- Sections 1(a)(1) or 1(a)(3) hereof, to terminate the MSA as of a date specified in such notice, which date shall not be earlier than the six-month anniversary of the date of delivery thereof, or (B) in the case of a GM Board Determination specified in sub-Section 1(a)(2) hereof, to terminate the Service Agreements to which the Affected Organizations are parties as of a date specified in such notice and to exclude the Affected Organizations from the scope of the MSA as of such date. If (A) a Contract Notice has been delivered by GM Parent based on a GM Board Determination pursuant to sub-Section 1(a)(2) hereof, and (B) the Board of Directors of EDS Parent determines reasonably and in good faith that the revenues derived by EDS during the most recently completed calendar year from the Service Agreements to be terminated as a result of such GM Board Determination equal or exceed 60% of the annual aggregate revenue paid by GM for MSA Services performed during such calendar year, then EDS Parent shall have the F-2 right to elect to terminate the MSA within 30 days after receipt of notification of such GM Board Determination by delivering to GM Parent a written notice stating that it is terminating the MSA as of a date specified in such notice, which date shall not be earlier than the six-month anniversary of the date of delivery thereof. (b) Any Contract Notice sent to EDS Parent pursuant to this Exhibit F shall (i) identify the applicable Change of Control transaction, (ii) if applicable, identify the competitor of GMC or of an Affected Organization with which EDS consummated a Change of Control transaction specified in sub-Section 1(a)(1) or 1(a)(2) hereof, (iii) set forth, in reasonable detail, the basis upon which the GM Board Determination was made, and (iv) include as an attachment a certified copy of any resolution of the Board of Directors of GM Parent that evidences the GM Board Determination. (c) GM Parent agrees that any GM Board Determination shall be made in good faith, solely on the basis of one or more of the criteria referred to in sub-Section 1(a) hereof and shall not be made for the purpose of negotiating any modification or amendment of the MSA or any Service Agreement that does not relate directly to the basis on which the GM Board Determination is made. (d) From time to time after the date hereof (but not more frequently than once in any twelve-month period), EDS Parent may request in writing that the Board of Directors of GM Parent consider and determine whether a GM Board Determination would be made in connection with a proposed Change of Control transaction and, if a GM Board Determination would be made, whether such determination would be made pursuant to sub-Section 1(a)(1), 1(a)(2) or 1(a)(3) hereof (an "Advance Determination Request"). Any Advance Determination Request submitted to GM Parent shall be accompanied by: F-3 (1) A statement that EDS has a bona fide intention of entering into a Change of Control transaction and a summary, in reasonable detail, of the material terms of the proposed Change of Control transaction, including, without limitation, its proposed form and timing; (2) an identification of the Person or Persons with which EDS proposes to consummate such Change of Control transaction (the "Bidder") and an undertaking by the Bidder to cooperate in providing information, including access to its senior management personnel, to GM Parent in connection with its determination of whether to make a GM Board Determination; (3) any plans or proposals the Bidder may have, in connection with such Change of Control transaction, which relate to or would result in (i) any extraordinary corporate transaction such as a merger, reorganization or liquidation, involving EDS, (ii) a sale or transfer of assets of EDS that are material to the performance of its obligations under the MSA or any Major Sector Service Agreement, (iii) any change in the board of directors of EDS Parent, (iv) any material change in the capitalization of EDS, and (v) any other change in EDS' business or corporate structure that would be reasonably likely to have a material effect on the performance of its obligations under the MSA or any Major Sector Service Agreement; and (4) a good faith estimate by EDS Parent and the Bidder of the effect, if any, that the consummation of such Change of Control transaction would have on EDS' continued ability to perform, in all material respects, its obligations under the MSA or any Major Sector Service Agreement, including, without limitation, EDS' obligations under Section 2.3 of the MSA to the extent and at such times as such provisions are applicable in F-4 accordance with their terms, and the Service Agreements entered into in connection therewith. In addition, EDS Parent and the Bidder shall provide such other documentation and information as GM Parent may reasonably request in connection with such proposed Change of Control transaction or its determination of whether to make a GM Board Determination. If requested by GM, EDS Parent shall afford GM Parent an opportunity, prior to the making of any GM Board Determination, to meet and discuss with senior management of EDS Parent any factors relevant to whether a GM Board Determination should be made in response thereto. (e) In the event that a Change of Control occurs at any time after the Effective Date, EDS Parent shall promptly deliver to GM Parent a written notice (a "Change of Control Notice") stating that a Change of Control has occurred. If a GM Board Determination has been made with respect to a Change of Control in response to an Advance Determination Request, GM Parent may elect to terminate the MSA or one or more Service Agreements (as the case may be) in accordance with sub-Section 1(a) hereof by delivering a Contract Notice to EDS Parent at any time during the period between the occurrence of the Change of Control and the expiration of 30 days after the date of delivery to GM Parent of a Change of Control Notice with respect thereto, and no additional GM Board Determination shall be required after the occurrence of such Change of Control. In determining whether to make a GM Board Determination after the delivery of a Change of Control Notice, to the extent that GM Parent has not previously received information in connection with an Advance Determination Request, GM Parent shall be entitled to receive from EDS Parent and any Person acquiring control of EDS, and to rely on, the same information that would be required to be provided to GM Parent by EDS Parent or a Bidder pursuant to sub- Section 1(d) hereof, which information shall be provided to GM Parent as promptly as practicable and in any event within 30 days following the Change of Control. In the event that F-5 any such information is provided to GM Parent after occurrence of the Change of Control, the 90-day period referred to in sub-Section 1(a) hereof shall automatically be extended to a date 90 days after EDS Parent and the Person acquiring control of EDS certify to GM Parent that all such required information has been provided. (f) If requested by EDS Parent within 30 days after delivery of an Advance Determination Request or Change of Control Notice (as the case may be), GM Parent shall afford EDS Parent, prior to the making of any GM Board Determination, an opportunity to meet and discuss with senior management of GM Parent and the Board of Directors of GM Parent regarding such proposed Change of Control transaction, including any factors relating to the MSA or the determination by GM Parent of whether to make a GM Board Determination. Within 90 days after receipt of the Advance Determination Request or Change of Control Notice (as the case may be) and the information required by sub-Sections 1(d) or 1(e) hereof, GM Parent shall notify EDS Parent in writing whether a GM Board Determination has been made with respect to the proposed Change of Control transaction, together with the basis upon which any such determination was made. If (i) GM Parent notifies EDS Parent that a GM Board Determination will not be made with respect to such Change of Control transaction, or (ii) GM Parent fails to notify EDS Parent in writing within such 90-day period that the Board of Directors of GM Parent has made a GM Board Determination, then GM Parent may not subsequently make a GM Board Determination and terminate the MSA or any Service Agreement on the basis thereof unless EDS Parent or the Bidder and Person acquiring control of EDS (each, an "Information Provider") failed to provide GM Parent with all material information required pursuant to sub-Sections 1(d) or 1(e) hereof. The failure on the part of any Information Provider to provide, or cause to be provided, to GM Parent any information required pursuant to sub- Sections 1(d) or 1(e) hereof shall not itself constitute a sufficient basis for the making of a GM Board Determination unless specific F-6 information that is material to a GM Board Determination is identified and requested by GM Parent in writing and such information is not provided to GM Parent within 30 days after receipt by the applicable Information Provider of a request therefor. GM Parent shall keep confidential the fact that EDS has submitted to it any Advance Determination Request, as well as all information provided to it by any Information Provider pursuant to sub-Sections 1(d) or 1(e) hereof. (g) If the MSA or any Service Agreement is terminated in accordance with sub-Section 1(a) hereof, GM will pay to EDS all amounts owed to EDS for transition services [Confidential information has been omitted.] In addition, if the MSA or any Service Agreement is terminated as the result of a GM Board Determination made pursuant to sub-Section 1(a)(2) or 1(a)(3) hereof, GM will also pay to EDS (without duplication) an amount equal to the product of (i) all wind-down expenses and cancellation charges [Confidential information has been omitted.] multiplied by (ii) a percentage equal to: (1) [Confidential information has been omitted.] if the applicable GM Board Determination is made pursuant to sub-Section 1(a)(2) hereof. (2) [Confidential information has been omitted.] if the applicable GM Board Determination is made pursuant to sub-Section 1(a)(3) hereof prior to the fifth anniversary of the Effective Date. (3) [Confidential information has been omitted.] if the applicable GM Board Determination is made pursuant to sub-Section 1(a)(3) hereof on or after the fifth, but prior to the sixth, anniversary of the Effective Date. F-7 Confidential treatment has been requested by EDS for the indicated portions of this page. (4) [Confidential information has been omitted.] if the applicable GM Board Determination is made pursuant to sub-Section 1(a)(3) hereof on or after the sixth, but prior to the seventh, anniversary of the Effective Date. (5) [Confidential information has been omitted.] if the applicable GM Board Determination is made pursuant to sub-Section 1(a)(3) hereof on or after the seventh, but prior to the eighth, anniversary of the Effective Date. (6) [Confidential information has been omitted.] if the applicable GM Board Determination is made pursuant to sub-Section 1(a)(3) hereof on or after the eighth, but prior to the ninth, anniversary of the Effective Date. (7) [Confidential information has been omitted.] if the applicable GM Board Determination is made pursuant to sub-Section 1(a)(3) hereof on or after the ninth anniversary of the Effective Date. [Confidential information has been omitted.] 2. Definitions. In addition to the terms otherwise defined in the MSA, the following terms shall have the meanings set forth below whenever they are used in the provisions of this Exhibit F: (a) A Person shall be deemed the "Beneficial Owner" of, and shall be deemed to "'beneficially own," any securities: (i) that such Person, directly or indirectly is the "beneficial owner" of (as determined pursuant to Rule 13d-3 and Rule 13d-5 of the General Rules and Regulations under the Exchange Act as in effect on the Effective Date); provided, however, that a Person shall not be deemed the beneficial owner of any securities because of such Person's right to vote such F-8 Confidential treatment has been requested by EDS for the indicated portions of this page. stock if the agreement or arrangement to vote such securities arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten or more Persons pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act; or (ii) that such Person, directly or indirectly, has the right or obligation to acquire (whether such right or obligation is exercisable or effective immediately or only after the passage of time or the occurrence of an event), pursuant to any agreement or arrangement or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the beneficial owner of any securities tendered pursuant to a tender or exchange offer made by such Person until such tendered securities are accepted for purchase or exchange. (b) "Change of Control" means the occurrence (at any time after the Effective Date) of any of the following events: (1) Any Person (other than an Exempt Person) shall file (or be required to file) a Schedule 13D or 14D-1 under the Exchange Act disclosing that such Person has become the Beneficial Owner of a number of shares of Common Stock of EDS Parent which represent 50% or more of the aggregate voting power of the outstanding shares of Common Stock of EDS Parent; or (2) Any Person (other than an Exempt Person) (i) shall file (or be required to file) a Schedule 13D or 14D-1 under the Exchange Act disclosing that such Person has become the Beneficial Owner of a number of shares of Common Stock of EDS Parent which represent 30% or more of the aggregate voting power of the outstanding shares of Common Stock of EDS Parent, or (ii) commences a proxy solicitation with respect to the election or removal of members of the Board of Directors of EDS Parent F-9 at any annual or special meeting of EDS Parent security holders, which solicitation is subject to Rule 14a-11 of the General Rules and Regulations of the Exchange Act, and within 24 months after the date of such acquisition of beneficial ownership of Common Stock of EDS Parent or the date of such solicitation, as the case may be, individuals who, as of the date of such acquisition or solicitation, constituted the Board of Directors of EDS Parent (the "Incumbent Directors") cease for any reason to constitute at least a majority of the Board of Directors of EDS Parent; provided, however, that any individual becoming a director subsequent to such date whose election, or recommendation or nomination for election by the stockholders of EDS Parent, was approved by a vote of at least a majority of the directors then comprising the Incumbent Directors (acting separately or as part of any action taken by the Board of Directors of EDS Parent or any committee thereof) shall be considered as though such individual were an Incumbent Director, provided that such individual was not the nominee of the Person that acquires such beneficial ownership or commences such solicitation, as the case may be, or otherwise nominated or elected by or at the direction of such Person as part of any plan or arrangement regarding a change of control of EDS Parent; or (3) There shall be consummated any transaction (or series of related transactions) and, as a result thereof, a number of shares of Common Stock of EDS Parent (or any Surviving Company resulting from such transaction) which represent 50% or more of the aggregate voting power of the outstanding shares of Common Stock of EDS Parent (or such Surviving Company) shall be Beneficially Owned, directly or indirectly, by Persons who did not either (i) own such securities as Common Stock of EDS Parent immediately prior to the transaction, or (ii) receive such securities in respect of the conversion or exchange of Common Stock of EDS Parent in the transaction. F-10 (c) "Common Stock" means, as to any company, the shares of common stock or other securities of such company of any class or series the holders of which are entitled to vote generally in the election of directors of such company (excluding any class or series the holders of which would be entitled so to vote upon the occurrence of any contingency, so long as such contingency has not occurred). (d) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (e) "Exempt Person" means EDS Parent, any subsidiary of EDS Parent, any employee benefit plan of EDS Parent or any subsidiary of EDS Parent, and any Person organized, appointed or established by EDS Parent or any such subsidiary for or pursuant to the terms of any such plan. (f) "GMC" means General Motors Corporation and any functional entity, subsidiary, department, group or affiliate which is then-currently being provided MSA Services by EDS pursuant to the MSA or an applicable Service Agreement thereunder. (g) "Major Sector Service Agreement" means the primary Service Agreement between a GM Major Sector and the corresponding EDS Major Sector. (h) "Person" means any individual, firm, corporation, partnership, association, trust, unincorporated organization or other entity, and shall include any "group" within the meanings of Section 13(d)(3) of the Exchange Act or Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in effect on the Effective Date. (i) "Surviving Company" means the following: F-11 (1) in the case of a merger, consolidation or business combination, the Person that survives or results from such transaction; or (2) in the case of a sale, transfer or conveyance of all or substantially all of the properties and assets of EDS, the Person to which such properties and assets are sold, transferred or conveyed. Other terms used in this Exhibit F are defined in the context in which they are used and, unless otherwise specified herein, shall have the meanings indicated wherever they are used in this Exhibit F. F-12 EXHIBIT G CANCELLATION LOSSES ON THE DISPOSITION OF CAPITAL ASSETS AND LONG-TERM LEASES ----------------------------------- EXHIBIT G CANCELLATION LOSSES ON THE DISPOSITION OF CAPITAL ASSETS AND LONG-TERM LEASES ----------------------------------- The GM Contracting Party's obligation to pay EDS' losses (net unrecoverable costs) for disposal of capital assets and cancellation of long-term leases (i.e., leases with terms over one (1) year) entered into by EDS in connection with the MSA Services, in the event of the GM Contracting Party's cancellation of MSA Services under Section A9.4 of Exhibit A to the MSA (the GM Contracting Party's "Contingent Payment Obligation" or "CPO"), will be subject to the following: 1. Contingent Payment Obligation. (a) Capital Asset and Lease Termination Costs--General. Where the applicable Service Agreement utilizes a fixed-price or cost-plus pricing methodology and the applicable asset is not leased to the GM Contracting Party as described in sub-Section 1(b) of this Exhibit G, the CPO for these items will be determined, prior to any additional reduction pursuant to sub-Sections 3(a) and 3(b) of this Exhibit G, as follows: (1) Losses on any capital asset shall be EDS' purchase price for the capital asset, reduced by (i) the amount that the asset has depreciated, and (ii) its salvage value at the time of cancellation. (2) Losses on any long-term lease shall be the lease cancellation charges for that lease; provided, however, that the parties shall use all reasonable efforts to mitigate the amount of such charges. The amount a capital asset has depreciated according to sub-Section 1(a)(1) of this Exhibit G will be based upon a depreciation schedule which reasonably relates to the expected term of the Service Agreement under which the asset is provided to GM, G-1 unless such a depreciation schedule is inconsistent with U.S. Generally Accepted Accounting Principles in effect as of the effective date of the applicable Service Agreement ("GAAP"), in which case GAAP will be used. In the event that the asset has been depreciated in a manner which does not reasonably relate to the expected term of the Service Agreement, then, at the time of cancellation, if necessary, the Contracting Parties may mutually agree upon an equitable adjustment to the CPO to account for the difference between the depreciation schedule used and the depreciation schedule suggested by the foregoing. In those instances where the GM Contracting Party has made a substantial advance payment for the use of an asset provided under a fixed-price or cost-plus pricing methodology, the amount of the advance payment shall be considered in connection with the determination of the amount of the CPO in an equitable and fair manner. Except as otherwise provided above, the salvage value of capital assets and the mitigation of lease termination charges referred to above will include the amounts, if any, recovered by EDS in the sale, lease, sublease or alternate revenue producing use of the assets. Any calculation of a cancellation fee under this sub-Section 1(a) will be done in a manner which is reasonably designed to provide EDS with its expected "benefit of the bargain" up to the effective date of cancellation with respect to the asset according to the applicable Service Agreement. (b) Assets Provided under Lease to GM. In any case where the applicable assets under a Service Agreement are provided under a lease (operating or capital) to the GM Contracting Party, the amount of any cancellation fee shall be a lump sum equal to the net present value of the expected amount of the remaining lease payment stream for the then-current term of the lease, discounted at the ninety-day LIBOR rate published in The Wall Street Journal on or immediately prior to the date of cancellation. G-2 (c) Alternate Pricing Methodology. Where the Service Agreement provides for pricing on other than a fixed-price or cost-plus pricing methodology and pricing is based on use of the assets (in terms of a fixed charge per unit) which takes into consideration projected usage, then the parties may agree on additional or alternative determinations of the CPO that are related to actual usage up to the time of cancellation. (d) CPO for Partial Termination. Where a substantial part of the MSA Services being provided under the Service Agreement is cancelled, the CPO will be determined on an appropriate pro-rata basis that is agreed upon by the parties. 2. CPO Verification and Audit. EDS will provide GM with whatever information is in EDS' possession or that it can obtain from third parties if that information is reasonably requested by GM to enable it to verify the CPO. Where the CPO includes costs for capital assets that are partially complete at termination, and are being billed to EDS on a cost-plus or time and materials basis, EDS will for itself and GM incorporate into any agreement for the purchase of such capital assets, a provision substantially in the form of the following: "Supplier shall maintain records, including all pertinent ledgers, payroll data, books, records, correspondence, written instructions, drawings, receipts, vouchers and other documents, for a period of one (1) year beyond final payment under this Agreement, which adequately substantiate the applicability and accuracy of charges for services and related expenses to EDS ("Records") and shall, upon receipt of reasonable advance notice from EDS, produce such Records for audit by EDS or its designee, which shall include General Motors Corporation." The failure on the part of EDS to negotiate such an audit right on behalf of itself and GM shall negate any liability on the part of GM for the CPO on such assets. Also, EDS will G-3 permit the GM Central Office at its expense to audit the books and records of EDS to the extent necessary to allow GM to verify the CPO. 3. Shared Cost Assets. (a) GM. In those instances where the CPO includes costs for assets that are used in connection with other Service Agreements, then, unless otherwise provided in any applicable Service Agreement, after cancellation EDS will provide the GM Contracting Party with the CPO and recommend an appropriate apportionment of the CPO among the applicable GM Contracting Parties. If the GM Contracting Parties cannot agree upon an apportionment within a reasonable period of time, then EDS will be paid the CPO in full by the GM Contracting Party that EDS determines is responsible for all or the largest share of the CPO, and the proper apportionment will be done internally by GM. (b) Third Party Customers. In those instances where the CPO includes costs for assets that are used for third party customers of EDS, such use shall not in any manner disturb the obligations of either party under the Service Agreement, except that the CPO shall be reduced to the extent of such third party use. 4. Transfer of Title or Lease Assumption. On the effective date of cancellation under Section A9.4 of Exhibit A to the MSA, except (i) in the case of an operating lease under sub-Section 1(b) of this Exhibit G, (ii) if EDS does not own the assets, or (iii) if the assets are shared by third party customers of EDS, GM may elect to purchase the assets by paying EDS the CPO. If GM does not so elect to purchase the assets, then EDS will use all reasonable efforts to sell, lease, sublease or otherwise utilize the assets. In the event EDS is unable, after such reasonable efforts, to sell, lease, sublease or otherwise utilize the assets, then, except in the case of an operating lease under sub-Section 1(b) of this Exhibit G, GM will pay EDS the CPO, and, as consideration for GM's payment of the CPO, EDS shall, in the event it owns the assets, promptly transfer to GM title to and possession of the assets, or, in the event EDS G-4 leases the assets, EDS shall, to the extent permitted under the applicable lease, promptly grant to GM all the rights of EDS as lessee of the assets and, in either case, GM shall pay or reimburse EDS for all sales, use or other taxes based upon such transfer of title or grant of rights. G-5 EXHIBIT 10(C) 1996 ELECTRONIC DATA SYSTEMS CORPORATION STOCK PURCHASE PLAN WHEREAS, General Motors Corporation ("GM") established the 1984 Electronic Data Systems Stock Purchase Plan as a plan for the employees of Electronic Data Systems Corporation, a Texas corporation (the "Predecessor Company"), and certain of its subsidiaries to purchase at a discount under the requirements of Section 423 of the Internal Revenue Code shares of General Motors Corporation Class E Common Stock; and WHEREAS, in connection with the merger of the Predecessor Company into Electronic Data Systems Corporation, a Delaware Corporation ("EDS"), and the split-off of EDS from GM, the Board of Directors of EDS has determined it in the best interests of the employees of EDS and its subsidiaries to adopt and establish the Plan immediately after such split-off without lapse, suspension or interruption in participation. NOW, THEREFORE, effective as of the consummation of the split-off of EDS from GM, EDS hereby adopts and establishes this, the 1996 Electronic Data Systems Corporation Stock Purchase Plan. 1. Purpose of Plan. The purpose of the Plan is to provide employees of Electronic Data Systems Corporation, a Delaware corporation ("EDS"), and its subsidiaries (collectively, the "Company") with a strong incentive for individual creativity and contribution to ensure the future growth of the Company by enabling such employees to acquire shares of common stock, $.01 par value per share (the "EDS Stock"), of EDS, in the manner contemplated by the Plan. Rights to purchase EDS Stock offered pursuant to the Plan are a matter of separate inducement and not in lieu of any salary or other compensation for the services of any employee. The Plan is intended to qualify as an employee stock purchase plan within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Amount of Stock Subject to the Plan: Payment for Shares. The total number of shares of EDS Stock that may be issued pursuant to rights of purchase granted under the Plan shall not exceed 57,500 shares of the authorized EDS Stock. In the discretion of the Board of Directors of EDS (the "Board of Directors") or its delegate, such shares may be: (i) treasury shares, including shares acquired by EDS in open market transactions; or (ii) authorized but unissued shares. If a right of purchase under the Plan expires or is terminated unexercised for any reason, the shares as to which such right so expired or terminated again may be made subject to a right of purchase under the Plan. 3. Administration. The Compensation and Benefits Committee of the Board of Directors (the "Committee") shall appoint or engage any person or persons as an administrator (the "Administrator") of the Plan, who may be, but shall not be required to be, a member of the Committee. Any person engaged or delegated to be the Administrator who is not an employee of EDS, shall be required to be bonded and insured for errors and omissions insurance in such amounts and by such carrier as is deemed suitable and appropriate by the Committee. The Committee and the Administrator shall administer the Plan all as provided herein. The Committee shall hold meetings at such times and places as it may determine and may take action by unanimous written consent or by means of a meeting held by conference telephone call or similar communications equipment pursuant to which all persons participating in the meeting can hear each other. The Committee may request advice or assistance or employ such other persons as it deems necessary for proper administration of the Plan. Subject to the express provisions of the Plan and the requirements of applicable law, the Committee shall have authority, in its discretion, to determine when each offering hereunder of rights to purchase shares (hereinafter "offering") shall be made, the duration of each offering, the dates on which the purchase period for each offering shall begin and end, the total number of shares subject to each offering, the purchase price of shares subject to each offering and the exclusion of any classes of employees pursuant to Section 4(ii). Subject to the express provisions of the Plan, the Committee has authority (a) to construe offerings, the Plan and the respective rights to purchase shares, (b) to prescribe, amend and rescind rules and regulations relating to the Plan and (c) to make all other determinations necessary or advisable for administering the Plan. The determination of the Committee with respect to matters referred to in this Section 3 as within its province shall be conclusive, except that, to the extent required by law or by the Certificate of Incorporation or By-Laws of EDS, the terms of any offering shall be subject to ratification by the Board of Directors or the Committee prior to the effective date of such offering. 4. Eligibility. No right to purchase shares shall be granted hereunder to a person who is not an employee of EDS or a subsidiary corporation, now existing or hereafter formed or acquired. As used in the Plan, the terms "parent corporation" and "subsidiary corporation" shall have the meanings respectively given to such terms in Sections 424(e) and 424(f) of the Code. Each offering shall be made to all employees of EDS and to all employees of any subsidiary corporations as is designated by the Committee to participate in the Plan, excluding: (i) employees whose customary employment is 20 hours or less per week or not more than five months in any calendar year; (ii) in the discretion of the Committee, as specified in the terms of any offering, the following classes of employees: officers, highly compensated employees and employees whose principal duties consist of supervising the work of other employees; (iii) any employee who, immediately after the grant of a right to purchase stock pursuant to an offering, owns stock possessing 5% or more of the total combined voting power or value of all classes of stock of the employee's employer or of any subsidiary or parent corporation of the employee's employer (in determining stock ownership of an individual, the rules of Section 424(d) of the Code shall be applied; shares that the employee may purchase under outstanding rights of purchase and options shall be treated as stock owned by him; and the Committee and the Administrator may rely on representations of fact made to them by the employee and believed by them to be true); and (iv) directors and officers of EDS. 2 5. Offerings. The Committee may make grants to all eligible employees of EDS and to all eligible employees of any subsidiary corporation as is designated by the Committee to participate in the Plan of rights to purchase shares under the terms hereinafter set forth. The terms and conditions of each offering shall state its effective date, shall define the duration of such offering and the purchase period thereunder, shall specify the number of shares that may be purchased thereunder, shall specify the purchase price for such shares and shall specify what class of employees, if any, are excluded pursuant to Section 4(ii). During the purchase period specified in the terms of an offering (or during such portion thereof as an eligible employee may elect to participate), payroll deductions shall be made from such employee's compensation pursuant to Sections 6 and 7. Any stated purchase period shall end no later than 27 months from the effective date of any offering hereunder. The measure of an employee's participation in an offering shall be such employee's total compensation for the purchase period specified in such offering (or for such portion thereof as the employee is eligible to participate), subject to appropriate adjustments that would exclude items such as reimbursement of moving, travel, trade or business expenses. 6. Participation. An employee eligible on the effective date of an offering or thereafter during the offering may participate in such offering by enrolling through the Corporate Administrative System or, if unavailable to the eligible employee, then by completing a payroll deduction authorization form and forwarding it to the Administrator at any time prior to the beginning of the next payroll period in which payroll deductions will be made. The employee must authorize a regular payroll deduction from the employee's compensation and must specify the date on which such employee's deduction and participation in the Plan is to commence, which may not be retroactive. An employee shall be considered a "Participant" in the Plan as of the payroll date of the first payroll deduction. 7. Deductions. The Administrator will maintain a payroll deduction account for each participating employee. With respect to any offering made under the Plan, an employee may authorize a payroll deduction of any whole percentage up to a maximum of 10% of the total compensation receives during the purchase period specified in an offering (or during such portion thereof as he/she may be eligible or elect to participate). 8. Deduction Changes. At any time prior to the end of the applicable purchase period, a Participant may change or temporarily discontinue payroll deductions by filing a new payroll deduction authorization form. Notwithstanding, no participant shall be entitled to change a payroll deduction more than twice or to temporarily discontinue a payroll deduction more than once during any purchase period. In addition, no such change or discontinuance shall become effective sooner than the next payroll period after the Participant properly registered a change to the payroll deduction authorization information then on file with the Administrator. 9. Withdrawal of Funds. A Participant may at any time and for any reason withdraw the entire cash balance then accumulated in such Participant's payroll deduction account and thereby withdraw from participating in an offering. Upon withdrawal of the cash balance in a 3 payroll deduction account, such Participant shall cease to be eligible to participate in the offering pursuant to which the withdrawn funds were withheld. Partial withdrawals shall not be permitted. Any cash balance withdrawn in accordance with this Section 9 may not be transferred to any payroll deduction account maintained for the employee pursuant to another offering, whether under the Plan or under another such plan. 10. Right of Purchase--Option for a Maximum Number of Shares. The right of an employee to purchase stock pursuant to an offering under the Plan shall be an "option" (and an offering shall be the "grant" of such option) to purchase a maximum number of shares determined by dividing: (i) 15% of the employee's monthly base salary, determined as of the date of the offering or the commencement of such Participant's eligibility to participate in the offering, whichever is later, multiplied by the number of months in the purchase period or the number of months such Participant is eligible to participate in the offering, whichever is less; by (ii) the fair market value of a share determined as of the date of the offering in the manner set forth in Section 12. 11. Maximum Allotment of Rights of Purchase. Any right to purchase shares under the Plan shall be subject to the limitations of Section 423(b)(8) of the Code (generally limiting accrual of the right of any employee to purchase shares under all employee stock purchase plans of EDS and any subsidiary or parent corporation, qualified under Section 423 of the Code, to an annual rate of $25,000 in fair market value). 12. Purchase Price. The purchase price for each share under each right of purchase granted pursuant to an offering shall not be less than the lesser of: (i) an amount equal to 85% of the fair market value (defined below) of such share at the time the right of purchase is granted; or (ii) an amount which under the terms of the option is not less than 85% of the fair market value of such share at the time the right to purchase is exercised. The "fair market value" of a share of EDS Stock on any given date shall be the mean between the high and low sale prices on the New York Stock Exchange Composite Tape for EDS Stock, as reported by the Dow Jones News/Retrieval Service of Dow Jones and Company, Inc., on such date or on the date immediately prior thereto on which such prices for EDS Stock are so reported or, if not so reported, as reported in a newspaper of national circulation selected by the Committee or, in case no such sales take place on such date, the mean of the closing bid and asked prices (regular way) on the New York Stock Exchange Composite Tape on such date or, if the EDS Stock is not then listed or admitted to trading on the New York Stock Exchange, the mean between the high and low sale prices on such date or, in case no sales take place on such date, the mean of the closing bid and asked prices (regular way) on the largest principal national securities exchange on which such stock is then listed or admitted to trading, or if not listed or admitted to trading on any principal national securities exchange, then the last reported sales prices for such shares in the over- the-counter market, as reported on the National Association of Securities Dealers Automated Quotations System or, if such sale prices shall not be reported thereon, the mean of the closing bid and asked prices as reported thereon, or if such prices shall not be reported thereon, as the same shall be reported by the National Quotation Bureau Incorporated, or, in all other cases, the mean 4 of two appraisals of fair market value, each of which shall be furnished by a New York Stock Exchange member firm selected by the Committee for that purpose. In the event the funds in the payroll deduction account of a participating employee are in a currency other than United States dollars on any investment date (as defined below), for purposes of determining the maximum whole number of shares that may be purchased pursuant to Section 13, such funds shall be deemed to have been converted into United States dollars based upon the foreign exchange selling rates, as reported by the Dow Jones News/Retrieval Service of Dow Jones and Company, Inc., on such date, or if not so reported on such date, as reported on the next preceding date on which such rates are reported. 13. Method of Payment. As of the last Friday in each calendar month, except the last calendar month of a purchase period, and as of the last day of the purchase period (each of such dates being known as an "investment date"), the payroll deduction account of each Participant shall be totaled. If on an investment date, the payroll deduction account of a Participant has at least Three Hundred and 00/100 Dollars ($300.00) or an amount equal to the purchase price of ten (10) shares of EDS stock then, on such investment date such Participant shall purchase without any further action, the maximum whole number of shares (subject to the limitation provided in Section 10) possible at the then fair market value of such shares as determined in accordance with Section 12 together with any fees or charges associated with such purchase that can be purchased with the funds in such Participant's payroll deduction account, provided that fractional shares may not be purchased. The Participant's payroll deduction account shall be charged for the amount of the purchase and a stock certificate shall be issued for the benefit of the Participant as soon thereafter as practicable for the shares so purchased, which certificate may be issued in nominee name. Participant's payroll deduction account at the end of each purchase period shall be refunded to such Participant. All funds in payroll deduction accounts may be used by EDS for its general corporate purposes as the board of directors of EDS shall determine. However, the last purchase on the last investment date of a grant year shall be for the maximum whole number of shares (subject to the limitation provided in Section 10) possible that can be purchased with the funds available in such Participant's payroll deduction account, and all cash remaining in such Participant's payroll deduction account thereafter shall be returned to the Participant. 14. Issuance of Certificates and Payment of Expenses. Upon request and after expiration of applicable restrictions, certificates representing shares purchased under the Plan may be issued in the name of the employee or, if he/she so indicates on an appropriate form: (i) in such Participant's name jointly with a member of such Participant's family, with right of survivorship; (ii) in the name of a fiduciary for the employee (in the event the employee is under a legal disability to have certificates issued in such Participant's name); or (iii) in a manner giving effect to the status of such shares as community property in jurisdictions where applicable. Upon termination of employment, certificates representing both restricted and nonrestricted shares purchased under the Plan will be issued in the name of the employee and forwarded to such Participant's account address on file with the Plan's transfer agent of record. In the event of a final non-appealable court-ordered account 5 distribution, certificates representing both restricted and nonrestricted shares purchased under the Plan will be issued in the name and to the address specified in the court documents provided to the office of the Administrator. EDS shall pay all issue or initial transfer taxes of EDS with respect to the issuance or initial transfer of shares, as well as all fees and expenses necessarily incurred by EDS in connection with such issuance or initial transfer. 15. Rights as a Stockholder. A Participant shall have no rights as a stockholder with respect to any shares covered by a right of purchase until a stock certificate for such shares is issued to the benefit of such Participant, which stock certificate may be issued in nominee name. No adjustment will be made for dividends (ordinary or extraordinary, whether in cash or in other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 18. 16. Sale of Stock. Shares of stock purchased under the Plan may not be sold or transferred within two years of the date of purchase unless they are first offered to EDS (as designated by the Committee) at the lesser of: (i) the price originally paid for the shares; or (ii) the fair market value (as determined in accordance with Section 12) per share of EDS Stock on the date the shares are offered to EDS. EDS must accept or reject this offer at the office of the Administrator within five business days of receipt of the offer. Shares issued under the Plan will carry a restrictive legend to this effect. 17. Rights Not Transferable. Rights to purchase shares under the Plan are not transferable by a participating employee and may be exercised only by such Participant during such Participant's lifetime. 18. Adjustment of Shares. If any change is made in the number, class or rights of shares subject to the Plan or subject to any offering under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, split-up, combination of shares, exchange of shares, issuance of rights to subscribe or other change in capital structure), appropriate adjustments shall be made as to the maximum number of shares subject to the Plan and the number of shares and price per share subject to outstanding rights of purchase as shall be equitable to prevent dilution or enlargement of such rights; provided, however, that any such adjustment shall comply with the rules of Section 424(a) of the Code if the transaction is one described in said Section 424(a); provided further that in no event shall any adjustment be made that would render any offering other than an offering pursuant to an employee stock purchase plan within the meaning of Section 423 of the Code; and provided further that the issuance by EDS of up to 120,000,000 shares of the EDS Stock, either pursuant to or outside the ambit of the Plan, shall not require adjustment pursuant to this Section. 19. Retirement, Termination and Death. In the event of a Participant's retirement or termination of employment, the amount in any Participant's payroll deduction account shall be refunded to such Participant and the restricted and nonrestricted shares of stock held for such 6 Participant's benefit by the Plan shall be issued to such Participant, and in the event of such Participant's death, such amount and stock shall be paid and issued to such Participant's estate. 20. Amendment of the Plan. This Plan may be amended at any time by the Committee, provided that, without the approval of the stockholders of EDS entitled to vote thereon, no such amendment shall become effective if it would: (i) increase the number of shares reserved for rights of purchase under the Plan; or (ii) modify the requirements as to eligibility for participation in the Plan. 21. Termination of the Plan. The Plan and all rights of employees hereunder shall terminate: (i) on the investment date that participating employees become entitled to purchase a number of shares greater than the number of shares remain available for purchase under the Plan; or (ii) in the discretion of the Committee, upon the completion of any purchase period. In the event that the Plan terminates under circumstances described in (i) above, shares remaining available for purchase under the Plan as of the termination date shall be issued to Participants on a pro rata basis. Any cash balances remaining in Participants' payroll deduction accounts upon termination of the Plan shall be refunded as soon thereafter as practicable. The powers of the Committee provided by Section 3 to construe and administer any right to purchase shares granted prior to the termination of the Plan shall nevertheless continue after such termination. 22. Listing of Shares and Related Matters. If at any time the Committee shall determine, based on opinion of counsel, that the listing, registration or qualification of the shares covered by the Plan upon any national securities exchange or under any state or Federal law or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the sale or purchase of shares under the Plan, no shares will be sold, issued or delivered unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to counsel. 23. Third Party Beneficiaries. None of the provisions of the Plan shall be for the benefit of or enforceable by any creditor of a Participant. A Participant may not create a lien on any portion of the cash balance accumulated in such Participant's payroll deduction account or on any shares covered by a right to purchase before a stock certificate for such shares is issued for such Participant's benefit. 24. General Provisions. The Plan shall neither impose any obligation on EDS or on any subsidiary corporation to continue the employment of any Participant or eligible employee, nor impose any obligation on any Participant to remain in the employ of EDS or of any subsidiary corporation. For purposes of the Plan, an employment relationship shall be deemed to exist between an individual and a corporation if, at the time of the determination, the individual was an "employee" of such corporation within the meaning of Section 423(a)(2) of the Code and the regulations and rulings interpreting such Section. For 7 purposes of the Plan, the transfer of an employee from employment with EDS to employment with a subsidiary of EDS, or vice versa, shall not be deemed a termination of employment of the employee. Subject to the specific terms of the Plan, all employees granted rights to purchase shares hereunder shall have the same rights and privileges. 25. Governing Law. Except where jurisdiction is exclusive to the federal courts or except as governed by federal law, the Plan and rights to purchase shares that may be granted hereunder shall be governed by and construed and enforced in accordance with the laws of the State of Texas. 26. Effective Date. The Plan shall be deemed effective upon its approval by the Board of Directors; provided, however, that no purchase period under the Plan may begin until a Registration Statement under the Securities Act of 1993, as amended, covering the shares to be issued under the Plan has become effective. 27. Dividend Reinvestment. Any employee or any employee who, upon separation from EDS, was eligible for an early or normal retirement benefit from the EDS Retirement Plan ("Retiree"), and who, pursuant to Sections 6 and 28, has any shares to his benefit in the Plan for which certificates have not been issued pursuant to Section 14, may elect to have any and all dividends issued on such shares reinvested in additional shares at full fair market value. The Administrator shall establish and communicate all procedures necessary for employees or Retirees to reinvest dividends, including the charging of any reasonable fee to participating employees or Retirees for reinvesting dividends in accordance herewith. 28. Deposit of Certificated Shares. Any employee of EDS who holds EDS Stock certificates issued in any manner specified in Section 14(i)-(iii) representing shares of EDS Stock, may deposit the EDS Stock certificates into the Plan by transferring such shares into nominee name. Any such transfer of certificated shares shall be made pursuant to procedures established by the Administrator. Any employee who elects to transfer shares into nominee name pursuant to this Section is not required to participate pursuant to Plan Sections 6 and 7, but shall be eligible to invest dividends earned on such shares transferred pursuant to this Section in accordance with Section 27. 29. Retirees. Notwithstanding anything to the contrary in Section 14 or elsewhere in the Plan, Retirees who, by reason of Section 6 acquired shares pursuant to the Plan, may continue to hold such shares in nominee name and elect to invest the dividends earned therein in accordance with Section 27 but may not purchase any additional shares pursuant to Sections 6 and 7. 8 EXHIBIT 10(D) 1996 ELECTRONIC DATA SYSTEMS CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS PAGE ARTICLE I. ESTABLISHMENT AND PURPOSE 1.1 Establishment................................................................... 1 1.2 Purpose......................................................................... 1 ARTICLE II. DEFINITIONS AND CONSTRUCTION 2.1 Definitions..................................................................... 2 2.2 Qualified Plan References.......................................................11 2.3 Gender or Number................................................................11 2.4 Severability....................................................................11 2.5 Applicable Law..................................................................11 2.6 Contractual Obligations.........................................................11 ARTICLE III. PARTICIPATION 3.1 Participation...................................................................12 3.2 Ineligible Employees............................................................13 ARTICLE IV. TARGETED AGGREGATE PENSION LEVEL 4.1 Form of Benefit.................................................................13 4.2 Targeted Aggregate Pension Level for Executives.................................14 4.3 Targeted Aggregate Pension Level for Executives Reduced At Early Retirement ("Targeted Pension Reduced At Early Retirement")................................16 4.4 Targeted Aggregate Pension Level for Executives At Late Retirement..............16 4.5 EDS SERP Benefits At Normal Retirement..........................................16 4.6 EDS SERP Benefit At Early Retirement............................................17 4.7 EDS SERP Benefit At Late Retirement.............................................17 4.8 Pre-Retirement Survivor SERP Benefit............................................17 4.9 Payment.........................................................................18 4.10 Reduction Suspension or Elimination of Benefits................................18 4.11 Contingent Rights..............................................................19
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TABLE OF CONTENTS PAGE ---- ARTICLE V. ADMINISTRATION 5.1 Administration..................................................................19 5.2 Administration Committee........................................................19 5.3 Finality of Determination.......................................................19 5.4 Expenses........................................................................19 ARTICLE VI. MERGER, AMENDMENT, AND TERMINATION 6.1 Merger, Consolidation, or Acquisition...........................................19 6.2 Amendment and Termination.......................................................20 ARTICLE VII. MISCELLANEOUS PROVISIONS 7.1 Funding.........................................................................20 7.2 Tax Withholding.................................................................20 7.3 Other Plans.....................................................................20 7.4 Anti-assignment and Nontransferability..........................................20
ii 1996 ELECTRONIC DATA SYSTEMS CORPORATION SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN WHEREAS, Electronic Data Systems Corporation, a Texas corporation ("Predecessor Company"), established the Electronic Data Systems Corporation Supplemental Executive Retirement Plan effective as of January 1, 1992; WHEREAS, In connection with the split-off of the Predecessor Company from General Motors Corporation and the merger of the Predecessor Company with and into Electronic Data Systems Holding Corporation, a Delaware corporation renamed Electronic Data Systems Corporation at the time of such merger ("EDS"), EDS has determined it necessary to adopt and establish the Plan maintained by the Predecessor Company without any lapse in coverage, suspension of benefits, or interruption in participation and to make certain amendments to the Plan required in connection with such split-off; and NOW, THEREFORE, EDS hereby adopts and establishes this 1996 EDS Supplemental Executive Retirement Plan as a continuation of the Electronic Data Systems Corporation Supplemental Executive Retirement Plan effective as of the effective time of the merger of the Predecessor Company with and into EDS. ARTICLE I. ESTABLISHMENT AND PURPOSE 1.1 Establishment. EDS hereby establishes the 1996 Electronic Data Systems Corporation Supplemental Executive Retirement Plan (the "EDS SERP") as a continuation of the Electronic Data Systems Corporation Supplemental Executive Retirement Plan. The EDS SERP is intended to provide contingent Supplemental Executive Retirement Plan Benefits ("SERP Benefits") in accordance with the provisions herein for certain Bonus Eligible executive level employees of the Company whose benefits under the EDS Retirement Plan (the "Qualified Plan") are limited pursuant to the applicable provisions of the Code and the Treasury Regulations thereunder (the "Limitations"). 1.2 Purpose. This non-qualified EDS Supplemental Executive Retirement Plan will be subject to amendment or termination at any time. The EDS SERP is established as a unfunded non-tax-qualified mechanism which, by reason of the rights reserved herein to issue, revoke, suspend or eliminate SERP Benefits, may be used to enhance the Company's ability to retain the services of certain Employees and, subject to the discretion of the Chairman and the EDS Compensation and Benefits Committee, may be used to discourage any actions by Employees considered to be inimical or detrimental to the Company. The EDS SERP is intended to be an unfunded plan for a select group of management or highly compensated employees as defined in Section 201(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended. The EDS SERP has been designed to provide a supplemental executive retirement plan benefit ("SERP Benefit") for Employees who, on or after January 1, 1992, attain Early Retirement, Normal Retirement or Late Retirement pursuant to the terms and conditions herein. The Targeted Pension is a single life pension annuity calculated upon a different formula from the Qualified Plan formulas and upon the fictions that every Employee has never married, and that every Employee has elected to receive both the SERP Benefit and the Qualified Plan benefits in the form of a single life annuity. Because of the formula differences between the computational methodology used for calculating the Targeted Pension and the computational methodology used for calculating the Qualified Plan benefit and the fictions applied thereto, the SERP Benefit will not completely or necessarily offset the effect of the Limitations on the Qualified Plan benefit. In addition, to the extent an Employee elects a Qualified Plan benefit in a form other than the form in which he or she elects to receive his or her SERP Benefit, additional differences will occur between the amount of the SERP Benefit and the amount produced by the difference between the Targeted Pension Benefit and the benefit actually received from the Qualified Plan. Accordingly, notwithstanding anything to the contrary herein, the SERP Benefit will not, and is therefore not intended to, completely supplement the amount of Qualified Plan benefits which would otherwise be payable to an Employee but for the Limitations. Rather the SERP Benefit shall be the difference between the Targeted Pension and the Qualified Plan Benefit where both the Targeted Pension and the Qualified Plan Benefit are computed in the form of Joint and Fifty Percent (50%) Survivor Annuity benefits that are actuarially equivalent thereto as provided in Article IV hereof. Unless specifically indicated otherwise, any references to pension benefits based on the pension benefit computation formulas of the Qualified Plan shall refer to those Qualified Plan formulas which define the Qualified Plan benefits which could be payable commencing at the time of the Employee's Early Retirement, Normal Retirement or Late Retirement, as the case may be, under the EDS SERP, and from time to time thereafter. ARTICLE II. DEFINITIONS AND CONSTRUCTION 2.1 Definitions. Whenever the following terms are used in this EDS Supplemental Executive Retirement Plan, they shall have the meanings set forth below unless the context otherwise requires, and when the defined meaning is intended herein, the first letter of each word comprising the term will be capitalized. (a) Actuarially Equivalent means a benefit of equivalent value to the Targeted Pension, Targeted Pension Reduced At Early Retirement and Targeted Pension At Late Retirement, determined on the basis of the following interest and mortality assumptions. The mortality and interest rate assumptions which shall be used in the calculation of Actuarially Equivalent benefits under the EDS SERP shall be (i) a unisex mortality table derived from the 1971 Group Annuity Mortality Table assuming a group that is eighty percent (80%) male and twenty percent (20%) female; and, (ii) the applicable interest rate used by the Pension Benefit Guaranty Corporation ("PBGC") as of the first day of the Plan 2 Year preceding the determination date, taking into account the ages of both the Employee and his or her Eligible Spouse on the Employee's Retirement Date. (b) Administration Committee means the committee appointed by the Plan Administrator and empowered with those powers and authorized to perform those duties set forth herein. (c) Chairman shall mean the Chairman of the Board of Directors of EDS. (d) Code means the U.S. Internal Revenue Code of 1986, as amended. (e) Company means Electronic Data Systems Corporation and such other employers as provided for in the Retirement Plan or as otherwise authorized or excluded by the EDS Compensation and Benefits Committee. (f) Covered Compensation means the average of the Social Security Taxable Wage Bases for the thirty-five (35) calendar years ending with the calendar year in which the Employee attains Social Security Retirement Age. In determining an Employee's Covered Compensation for any Plan Year, it is assumed that the Social Security Taxable Wage Base in effect at the beginning of the Plan Year will remain the same for all future years. (i) An Employee's Covered Compensation for a Plan Year beginning before the thirty-five (35) year period described in this subsection is the Social Security Taxable Wage Base in effect as of the beginning of the Plan Year. An Employee's Covered Compensation for a Plan Year ending after the thirty-five (35) year period described in this subsection is the Covered Compensation for the Plan Year in which the Employee attained Social Security Retirement Age. (ii) An Employee's Covered Compensation shall be automatically adjusted each Plan Year. The Plan Administrator may rely upon Table II of Attachment I of IRS Notice 89-70 and subsequent applicable IRS publications in determining the Covered Compensation of an Employee. (iii) For purposes of determining the Targeted Pension, the Targeted Pension Reduced At Early Retirement and the Targeted Pension At Late Retirement as determined in accordance with Article IV of this EDS SERP, Covered Compensation is frozen at the date of the Employee's actual retirement. (g) Earliest Potential Retirement Age means, for any Employee, such Employee's age when he or she has at least attained age fifty-five and completed at least five (5) Years of Credited Benefit Service and when the sum of such Employee's age plus his or her Years of Credited Service is equal to or greater than seventy (70) years. 3 (h) Early Retirement shall mean retirement by an Employee who satisfies the SERP Benefits eligibility requirements of Article III and retires on the Early Retirement Date as consented to in writing by the Chairman. (i) Early Retirement Date shall be a date which is the first day of a month, on or after the Employee has attained his or her Earliest Potential Retirement Age, but before the Employee has reached his or her Normal Retirement Age. If an Employee, who has received the Company's consent to his or her request to retire prior to Normal Retirement, were then to decide to rescind his or her election to retire early on such Early Retirement Date, then any Company consent to the Employee's Early Retirement under the EDS SERP as may have given by the Chairman, shall immediately, automatically, and without notice, be deemed to have been withdrawn and cancelled. In the event that an Employee shall have so rescinded his or her Early Retirement in accordance herewith, and later decides that he or she wishes to retire early under the provisions of the EDS SERP, he or she must re-apply for the Chairman's written consent to his or her Early Retirement on a re-selected Early Retirement Date. Before a date may be treated as an Early Retirement Date for purposes of the EDS SERP, such date shall have been agreed to by the Employee and consented to in writing, by the Chairman on behalf of the Company, as the Employee's Early Retirement Date, provided, however, that the Chairman may not approve his own Early Retirement Date. Accordingly, if the Chairman wishes to retire early, then only the EDS Compensation and Benefits Committee shall have authority to give its written consent to the Chairman's Early Retirement Date on behalf of the Company. Nothing contained in the EDS SERP is to be construed as in any way obligating the Chairman or the EDS Compensation and Benefits Committee or the Company to giving consent to an Employee's request to retire early with an entitlement to a SERP Benefit from the EDS Supplemental Executive Retirement Plan. The Company reserves to the Chairman and to the EDS Compensation and Benefits Committee the right to deny any Employee requests to approve an Early Retirement Date for any Employee including, but not limited to, those whose continued services could be relevant to the continued success of the Company. (j) EDS Compensation and Benefits Committee means the Compensation and Benefits Committee which is a committee of the Board of Directors of EDS and duly appointed to serve in that capacity. (k) Effective Date shall be January 1, 1992. (l) Eligible Spouse. There are only two situations in which a spouse may be eligible to receive benefits under the EDS SERP. Accordingly, the term, Eligible Spouse, shall only have application in those two circumstances. 4 Case I - Eligible Spouse of a SERP Retiree. The first case involves Participants who have retired under the EDS SERP and who are receiving either a Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit Reduced At Early Retirement, a Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit At Normal Retirement, or a Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit At Late Retirement. In this case the term, Eligible Spouse, means the spouse to whom the Participant had been married (as documented by a valid marriage license) for a period of at least the twelve (12) consecutive months ending on the date of the Participant's retirement under the EDS SERP. Case II - Eligible Spouse of an Employee Who Dies in Service. The second case involves an Employee who has met the conditions of (i) or (ii), and the conditions of (iii) and (iv): (i) shall have attained his or her Earliest Potential Retirement Age before his or her death, or (ii) has received the consents required herein to continue employment beyond his or her Normal Retirement Date until a Late Retirement Date, and (iii) shall have died before having retired under the EDS SERP, and (iv) at the time of his or her death, shall have satisfied all of the conditions as a Participant eligible for receipt of SERP Benefits hereunder, provided however, that if the Employee shall have died needing the Chairman's consent to his or her Early or Late Retirement under the SERP in order to satisfy all of the conditions precedent to commencement of his or her receipt of SERP benefits beginning on the first of the month on or next following his or her death such Company consent shall be deemed to have been given by the Chairman, but all other conditions precedent to the Employee's receipt of SERP Benefits must have been satisfied. In Case II involving the death of an Employee in the above circumstances, the term, Eligible Spouse, means the spouse to whom the Employee had been married (as documented by a valid marriage license) for a period of at least the twelve (12) consecutive months ending on the date of the Employee's death. A spouse will not be deemed to be an Eligible Spouse in any case where an Employee died in service before having reached his or her Earliest Potential Retirement Age or after an Employee had given up the right to receive a SERP Benefit by continuing employment beyond (A) his or her Normal Retirement Date without having received the written consent of the Chairman to a SERP Benefit at Late Retirement; or, (B) his or her 5 Late Retirement Date without having received the written consent of the Chairman to a SERP Benefit at a Late Retirement Date determined in accordance with Section 2.1(w). (m) Employee means any executive level employee who is a participant in the EDS Executive Bonus Plan ("Bonus Eligible"), as designated by the EDS Compensation and Benefits Committee, at the time of his or her retirement under the EDS SERP; and, who, within the ten Plan Years immediately prior to such retirement, also had been the recipient of at least one EDS Executive Bonus Plan bonus award that was approved either, as an individual amount, or as a part of an aggregate amount, by the EDS Compensation and Benefits Committee in respect to one of such Plan Years. (n) Final Average FICA Compensation means the average of the Employee's annual earnings, as reported for purposes of FICA, from the Company for the three (3) consecutive complete calendar year period coincident with or immediately preceding the year the Employee retires hereunder. If an Employee's entire period of employment with the Company is less than three (3) consecutive calendar years, the Employee's Final Average FICA Compensation shall be determined by dividing the total earnings, as reported for purposes of FICA, received by the Employee from the Company by the Employee's entire period of employment (including fractional years). In determining an Employee's Final Average FICA Compensation within this subsection, annual earnings in any year in excess of the Social Security Taxable Wage Base in effect at the beginning of such year shall not be taken into account. The foregoing notwithstanding, no Employee shall be eligible to be a Participant in the EDS SERP unless his or her Years of Credited Service with the Company is greater than or equal to five (5) years. (o) Final Average Pay means the average of the Employee's Pensionable Pay during the highest consecutive five (5) Plan Years out of the ten (10) Plan Years immediately preceding the Employee's retirement under the EDS SERP. (p) Integration Level means the lesser of an Employee's Final Average FICA Compensation or Covered Compensation determined as of the date the Employee retires hereunder but in no case greater than the Social Security Taxable Wage Base in effect on the first day of the Plan Year within which the Employee retires hereunder. (q) Joint and Fifty Percent (50%) Survivor Annuity shall mean a monthly benefit for the life of the Participant and at the Participant's death, if the Participant's death precedes the death of the Participant's Eligible Spouse, a monthly benefit of fifty percent (50%) of the monthly amount being paid during Participant's life to the Participant's Eligible Spouse until such Eligible Spouse's death. 6 (r) Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit At Late Retirement is defined to be equal to the difference between (i) the Joint and Fifty Percent (50%) Survivor Annuity that is Actuarially Equivalent to the Targeted Pension At Late Retirement and (ii) the Qualified Plan Benefit which could be payable at Late Retirement in the actuarially equivalent benefit form of a Joint and Fifty Percent (50%) Survivor Annuity benefit that could be paid to the Participant and his or her spouse under the provisions of the Qualified Plan, and which may from time to time change as a result of the operation of the Limitations in the Qualified Plan. (s) Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit At Normal Retirement is defined to be equal to the difference between (i) the joint and fifty percent (50%) survivor annuity that is Actuarially Equivalent to the Targeted Pension and (ii) the Qualified Plan Benefit which could be payable at Normal Retirement in the actuarially equivalent benefit form of a Joint and Fifty Percent (50%) Survivor Annuity benefit that could be paid to the Participant and his or her spouse under the provisions of the Qualified Plan, and which may from time to time change as a result of the operation of the Limitations in the Qualified Plan. (t) Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit Reduced At Early Retirement is defined to be equal to the difference between (i) the Joint and Fifty Percent (50%) Survivor Annuity that is Actuarially Equivalent to the Targeted Pension Reduced At Early Retirement and (ii) the Qualified Plan Benefit which could be payable at Early Retirement in the actuarially equivalent benefit form of a Joint and Fifty Percent (50%) Survivor Annuity benefit that could be paid to the Participant and his or her spouse under the provisions of the Qualified Plan, and which may from time to time change as a result of the operation of the Limitations in the Qualified Plan. (u) Late Retirement means retirement by an Employee who has at least five (5) Years of Credited Benefit Service and satisfies the SERP eligibility requirements of Article III and retires on the Employee's Late Retirement Date, as consented to in writing by the Chairman. (v) Late Retirement Date, for purposes of paying a SERP Benefit, means a specified date occurring on the first day of a month after the Employee's Normal Retirement Date to which the Chairman has consented. Before a date may be treated as a Late Retirement Date for purposes of the EDS SERP, such date shall have been agreed to by the Employee and consented to in writing, by the Chairman on behalf of the Company, as the Employee's Late Retirement Date. However, once a Late Retirement Date is determined in accordance with the requirements herein, the Late Retirement Date may be an earlier or later date requested by the Employee and consented to by the Chairman, or otherwise specified by the Chairman, which is the first day of any month prior to or after a previously specified Late Retirement Date and after the Normal Retirement Date. In no event may the Chairman approve his own Late Retirement Date. Accordingly, if the Chairman wishes to 7 retire late, then only the EDS Compensation and Benefits Committee shall have authority to give its written consent to the Chairman's Late Retirement Date on behalf of the Company. Nothing contained in the EDS SERP is to be construed as in any way obligating the Chairman or the EDS Compensation and Benefits Committee or the Company to giving consent to an Employee's request to retire late with a benefit from the EDS SERP. The Company reserves to the Chairman and to the EDS Compensation and Benefits Committee the right to deny any requests to approve a Late Retirement Date for any Employee. Notwithstanding anything to the contrary herein, this EDS Supplemental Executive Retirement Plan is only to be construed as requiring the compulsory retirement of certain Employees, who (i) have attained sixty-five (65) years of age and who (ii) for the two-year period immediately before retirement are employed in a bona fide executive or high policymaking position, on either their respective Normal Retirement Date or Late Retirement Date (if a Late Retirement Date has been established for such Employee) as a precondition to the Employee's maintenance of eligibility for receipt of SERP Benefits on retirement under this EDS SERP provided each such Employee is entitled to an immediate nonforfeitable annual retirement benefit from a pension, profit-sharing, savings or deferred compensation plan or any combination of such plans, as may be provided by EDS and all other members of the controlled group of which Electronic Data Systems Corporation is a part, which equals in the aggregate, at least $44,000 or such other amount as is provided by statute at the time any such Employee reaches his or her respective Normal Retirement Date or Late Retirement Date, if a Late Retirement Date has been established for the Employee. (w) Normal Retirement shall mean retirement by an Employee who satisfies the SERP Benefit eligibility requirements of Article III and retires on the Employee's Normal Retirement Date. (x) Normal Retirement Age is the age of the Employee on the date on which the following three conditions are first all satisfied: (i) that the Employee shall have reached his or her sixty-fifth (65th) birthday and (ii) that the sum of the Employee's age plus the Employee's Years of Credited Service shall be equal to or greater than seventy (70) years; and (iii) that such Employee shall have at least five (5) Years of Credited Benefit Service. (y) Normal Retirement Date shall be a date which is the first day of the month that falls on or immediately after the date on which the Employee shall have attained his or her Normal Retirement Age. Notwithstanding anything to the contrary herein, this EDS Supplemental Executive Retirement Plan is ONLY to be construed as requiring the compulsory retirement of certain Employees, who (i) have attained sixty-five (65) years of age and who (ii) for the two-year period immediately before retirement are employed in a bona fide executive or high policymaking position, on either their respective Normal Retirement Date or Late 8 Retirement Date (if a Late Retirement Date has been established for such Employee) as a precondition to the Employee's maintenance of eligibility for receipt of SERP Benefits on retirement under this EDS SERP provided each such Employee is entitled to an immediate nonforfeitable annual retirement benefit from a pension, profit-sharing, savings or deferred compensation plan or any combination of such plans, as may be provided by EDS and all other members of the controlled group of which Electronic Data Systems Corporation is a part, which equals in the aggregate, at least $44,000 or such other amount as is provided by statute at the time any such Employee reaches his or her respective Normal Retirement Date or Late Retirement Date, if a Late Retirement Date has been established for the Employee. (z) Participant means an Employee who has retired under the EDS SERP and is eligible to participate pursuant to Section 3.1 hereof and is not ineligible to participate pursuant to Section 3.2. (aa) Pensionable Pay for any given Plan Year, Pensionable Pay is an amount equal to the sum of both the base salary paid in the Plan Year and the annual Executive Bonus Plan bonus that is awarded in respect of that Plan Year under the auspices of the EDS Compensation and Benefits Committee to certain Employees whose annual Executive Bonus Plan bonus awards are approved, either in individual amount or in aggregate amount by the EDS Compensation and Benefits Committee. Pensionable Pay shall not include any amounts paid from the EDS Stock Incentive Plan. (ab) Plan Administrator means EDS or such other person or entity as duly appointed by the EDS Compensation and Benefits Committee to act in such role. (ac) Plan Year means the 12-consecutive calendar month period ending December 31 of each year. (ad) Qualified Plan means the EDS Retirement Plan as adopted by the Company and amended from time to time. (ae) Qualified Plan Benefit shall mean the hypothetical single life annuity benefit that would be payable to the Participant during a twelve (12) consecutive month period from the Qualified Plan, assuming the Participant was never married and has no court order affecting his or her benefit, as further discussed below. For purposes of the EDS SERP, any reductions in the benefits payable from the Qualified Plan because the Participant may have actually elected to receive his or her benefit in a different form or because the benefit may be reduced on account of amounts which may be payable or are being paid to an alternate payee pursuant to Code Section 414(p), shall be ignored when computing the SERP Benefit, and shall not effect the amount of a Participant's Qualified Plan Benefit. Under no circumstances shall the payment of any benefit to an alternate payee pursuant to a qualified domestic relations order ("QDRO") work to increase or decrease any SERP Benefit to an amount other than that 9 which would be payable hereunder if there were not a benefit payable to such alternate payee. Subject to the foregoing, the Qualified Plan Benefit is to be calculated pursuant to the pension benefit computation formulas of the Qualified Plan, as such formulas are in effect either (a) at the time of the Participant's retirement under the EDS Supplemental Executive Retirement Plan; or, (b) at the Participant's death, in the event of the Employee's death before his or her retirement under the EDS SERP, provided such Participant had attained his or her Earliest Potential Retirement Age on or before his or her death, and as they may be in effect from time to time thereafter to the extent they would be determinative of the Qualified Plan benefit that could be payable from time to time to the Participant or Eligible Spouse. (af) Retirement Date means either the Early Retirement Date, Normal Retirement Date or the Late Retirement Date as the case may be. (ag) Social Security Retirement Age means age sixty-five (65) for Employees born before 1938, age sixty-six (66) for Employees born after 1937 and prior to 1955, and age sixty-seven (67) for Employees born after 1954. (ah) Social Security Taxable Wage Base means the contribution and benefit base in effect under Section 230 of the Social Security Act as of the first day in each Plan Year. (ai) Targeted Pension, sometimes hereinafter called Targeted Pension At Normal Retirement, is composed of the sum of the single life pension annuity benefits, as calculated in accordance with Section 4.2, that could be payable over a twelve (12) consecutive month period, from both the Qualified Plan and the EDS SERP, to an Employee who retires on his or her Normal Retirement Date under the assumptions that the Employee was never married, has no outstanding QDROs affecting his or her Qualified Plan benefits, and elects to receive his or her Qualified Plan benefits as a single life annuity. (aj) Targeted Pension Reduced At Early Retirement is composed of the sum of the single life pension annuity benefits, as calculated in accordance with Section 4.3, that could be payable over a twelve (12) consecutive month period, from both the Qualified Plan and the EDS SERP, to an Employee who retires on his or her Early Retirement Date with Company consent under the assumptions that the Employee was never married, has no outstanding QDROs affecting his or her Qualified Plan benefits, and elects to receive his or her Qualified Plan benefits as a single life annuity. (ak) Targeted Pension At Late Retirement is composed of the sum of the single life pension annuity benefits, as calculated in accordance with Section 4.4, that could be payable over a twelve (12) consecutive month period, from both the Qualified Plan and the EDS SERP to an Employee who retires on his or her Late Retirement Date with Company consent under the assumptions that the Employee was never married, has no outstanding QDROs affecting his or her Qualified Plan benefits, and elects to receive his or her Qualified Plan benefits as a single life annuity. 10 (al) Years of Credited Benefit Service shall mean the number of Years of Credited Benefit Service (but in no event more than a maximum of thirty (30) years of the Years of Credited Benefit Service) credited to the Employee pursuant to the provisions of the Qualified Plan as actually in effect on January 1, 1992. (am) Years of Credited Service means the number of "years of service" credited to an Employee for purposes of determining such Employee's eligibility for early or normal retirement pursuant to the provisions of the Qualified Plan as actually in effect on January 1, 1992, and reduced by one year for each year during which an Employee did not accrue a "year of service" under the Qualified Plan for reason of unemployment with the Company, long-term disability, an unpaid leave of absence, or any other inactive status. 2.2 Qualified Plan References. Any references herein to the Qualified Plan shall refer to the provisions of the EDS Retirement Plan as actually in effect as of January 1, 1992, except all references herein to the calculation or determination of Qualified Plan Benefits, and the definition of single life annuity and joint and fifty percent (50%) survivor annuity which could be payable therefrom, shall refer to the controlling provisions of the Qualified Plan as in effect at the time of the Participant's Early Retirement, Normal Retirement or Late Retirement as applicable, and as they may be in effect from time to time thereafter to the extent they would be determinative of the Qualified Plan benefit that could be payable from time to time to the Participants or Eligible Spouse. It is not intended that any Qualified Plan benefit that could be payable is to be calculated or determined in any method or manner other than as set forth in the controlling provisions of the Qualified Plan. 2.3 Gender or Number. Except when otherwise indicated by the context, any reference to the masculine gender shall also include the feminine gender, or vice versa, and the definition of any term is the singular shall also include the plural, or vice versa. 2.4 Severability. In the event that any provision of the EDS SERP shall be held invalid or illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the EDS SERP, but the EDS SERP shall be construed and enforced as if the illegal or invalid provision had never been inserted. The EDS Compensation and Benefits Committee shall have the right and opportunity to correct and remedy such questions of illegality or invalidity by amendment as provided herein. 2.5 Applicable Law. To the extent not controlled by the laws of the United States of America, this EDS Supplemental Executive Retirement Plan shall be governed and construed in accordance with the laws of the State of Texas. 2.6 Contractual Obligations. The EDS SERP is not an employment contract. It does not give to any person any rights to continued employment with the Company or to continued eligibility to participate in the EDS Executive Bonus Plan. The EDS SERP does not give any person any rights to gain or to maintain eligibility to participate in the EDS SERP at the Normal 11 Retirement Date or any other date. All Employees remain subject at all times to change of responsibility level, including, but not limited to, loss of Bonus Eligibility, change of job, change of salary, transfer, discipline, layoff, discharge and any other change of employment status without regard for the impact that any change in employment status might have upon an Employee's eligibility to be a Participant in the EDS SERP. ARTICLE III. PARTICIPATION 3.1 Participation. At any time after the Effective Date, the following requirements must all be simultaneously satisfied by any Employee in the month prior to commencement of an EDS SERP Benefit: (a) be a participant in the EDS Executive Bonus Plan; and (b) be in the active employment of the Company; and (c) be a participant in the EDS Retirement Plan who has met the eligibility requirements for receipt of benefits from the EDS Retirement Plan that will commence on his or her Retirement Date under the EDS SERP; and (d) have completed at least five (5) Years of Credited Benefit Service; and (e) have elected to retire from the employment of the Company no later than the Employee's Normal Retirement Date, or if consented to by the Chairman, then no later than the Late Retirement Date, or have foregone the EDS SERP benefits which are available only to those who do, unless such requirement to have retired by such date has been waived in writing and a Late Retirement Date established, in respect of such Employee by the Chairman as required herein; or (f) have attained Earliest Potential Retirement Age, on or before the Early Retirement Date for the EDS SERP that has been consented to in writing, on an apriori basis, by the Chairman as the Employee's Retirement Date; provided, however, that in the event the Employee were to die prior to his or her retirement under the terms of the EDS SERP and died leaving an Eligible Spouse, then if such Employee had attained the Earliest Potential Retirement Age on or before the date of the Employee's death, then the Chairman's written consent to the Employee's retirement under the terms of the EDS SERP on the first day of the month on or immediately following the date of the Employee's death shall not be withheld assuming the Employee would otherwise have satisfied all the qualifications for commencement of a SERP benefit. 12 3.2 Ineligible Employees. (a) No person who has retired from the Company prior January 1, 1992, the date that the EDS SERP became effective, shall be eligible to be a Participant in the EDS SERP and receive an EDS SERP Benefit. No person shall be made retroactively eligible to receive SERP Benefits, except any Employees who become eligible on or between the Effective Date and the date of adoption of the EDS SERP. (b) No person shall be deemed eligible to be a Participant in the EDS SERP unless he or she shall have been actively employed as an Employee of the Company until at least the month prior to the commencement of his EDS SERP Benefit. (c) No EDS SERP Benefit shall vest. Accordingly, no EDS SERP Benefit shall be available to any Employee as a deferred vested benefit, nor may any Employee or former Employee grow into eligibility for an EDS SERP Benefit while a retiree under the Qualified Plan nor while on layoff nor while on any other type of inactive status. (d) In addition to the rights reserved to the EDS Compensation and Benefits Committee pursuant to Section 4.10, notwithstanding the fact that an Employee may have satisfied the requirements for participation hereof regarding participation in the EDS SERP, such Employee or his or her Eligible Spouse may nevertheless be deemed to be ineligible to participate or to continue to participate in the EDS SERP and denied benefits hereunder if, upon consideration of the facts and circumstances and any advice or recommendation of the Company, the EDS Compensation and Benefits Committee finds that such Employee has (i) violated any Company policies, or (ii) has directly or indirectly competed against the Company (where indirect competition could include, but not be limited to, the Employee's having worked for or with others that compete against the Company or do work that the Company may otherwise have had the opportunity to compete for), or (iii) committed a crime or other offense, or (iv) acted in a way considered adverse to the Company, or (v) has taken any action, or has omitted to act in such a way, as is considered contrary to the Company's interests. ARTICLE IV. TARGETED AGGREGATE PENSION LEVEL FOR EXECUTIVES, SERP BENEFIT AND PAYMENT 4.1 Form of Benefit. The EDS SERP has been created to provide certain Employees with a level of single life pension annuity benefits that would be equal to a Targeted Aggregate 13 Pension Level for Executives ("Targeted Pension"). The Targeted Pension is to be calculated in accordance with Section 4.2 hereof, on the assumption that the Employee retires on his or her Normal Retirement Date with a single life annuity. On an exception basis, the Chairman may grant the Company's consent for an Employee who has reached his or her Earliest Potential Retirement Date to retire prior to the Normal Retirement Date with eligibility to receive a Targeted Aggregate Pension Level for Executives Reduced At Early Retirement ("Targeted Pension Reduced At Early Retirement"). The Targeted Pension Reduced At Early Retirement is to be calculated in accordance with Section 4.3 hereof. Like the Targeted Pension, the Targeted Pension Reduced At Early Retirement is also a single life pension annuity benefit but it is a reduced form of the Targeted Pension since it is payable before the Normal Retirement Date as a single life annuity. On an exception basis, the Chairman may grant the Company's consent for an Employee who is about to reach Normal Retirement Age to continue working for the Company past his or her Normal Retirement Date until a Late Retirement Date specified by the Chairman without the Employee automatically foregoing eligibility for EDS SERP Benefits hereunder. In such event, the Employee retiring on his or her Late Retirement Date may receive a single life pension annuity benefit that would be equal a Targeted Aggregate Pension Level for Executives At Late Retirement calculated in accordance with Section 4.4 hereof, on the assumption that the Employee retires on his or her Late Retirement Date with a single life annuity. If the Employee has an Eligible Spouse then, subject to Section 4.9, the Employee may elect payment in the form of a Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit At Normal Retirement, Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit At Late Retirement or Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit Reduced At Early Retirement. 4.2 Targeted Aggregate Pension Level for Executives at Normal Retirement, or Targeted Pension, is the total annualized EDS pension benefit that would be created by the addition of (i) a non-qualified SERP Benefit to (ii) the Employee's Qualified Plan Benefit that could be payable at Normal Retirement. Targeted Aggregate Pension Level for Executives - ----------------------------------------------- The Targeted Pension which shall be payable commencing at Normal Retirement Date in a single life annuity form shall be equal to (1) less (2) where (1) and (2) are: (1) 1.67% of the Employee's Final Average Pay multiplied by the Employee's Credited Benefit Service (not to exceed thirty (30)). (2) Twenty-two and five-tenths percent (22.5%) of the Employee's Final Average Pay not in excess of the Employee's Integration Level. If the Employee's Social Security Retirement Age is sixty-six (66), the twenty-two and five-tenths percent (22.5%) is 14 reduced to twenty-one percent (21%). If the Employee's Social Security Retirement Age is sixty-seven (67), the twenty-two and five-tenths percent (22.5%) is reduced to nineteen and five-tenths percent (19.5%). All multiplied by an amount equal to the Employee's Credited Benefit Service (not to exceed thirty (30)) divided by thirty (30). The amount of the Targeted Pension, as calculated pursuant to the above formula, shall in all events be subject to the following limitations: (a) The amount of the Targeted Pension, as determined by the above formula, shall be capped or limited, if and to the extent necessary, so that on an annualized basis, the Targeted Pension shall not exceed an amount equal to the highest annual base salary the Participant received in any Plan Year as an Employee of the Company during the ten (10) Plan Year period which immediately precedes the Participant's retirement under the EDS SERP; and (b) The Years of Credited Benefit Service, which are used in the above formula to calculate the Targeted Pension before the application of the aforementioned cap on the size of the Targeted Pension, shall in no event exceed 30 years. (c) The amount of any SERP Benefit which may be payable hereunder, shall be limited, if and as necessary, so that the sum of (i) all supplemental retirement plan benefits (including, but not limited to any SERP Benefit hereunder) and (ii) all benefits from a qualified defined benefit plan, together with any non-qualified excess plan benefits as are based upon a qualified plan's defined benefit formulas, that are payable to the Participant (in respect of service to all members of the controlled group) shall not exceed the Targeted Pension that would be payable under the EDS SERP under the assumption that all of the Participant's pensionable service to all members of the controlled group had been rendered, instead, to EDS alone (the "SERP Limitation Determination"). In making such SERP Limitation Determination, if any of such defined benefits, as are payable to the Participant by other members of the controlled group, are being paid in any form other than the same form as the Targeted Pension (i.e., in other than either a single pension annuity or a Joint and Fifty Percent (50%) Survivor Annuity) whichever has been used for calculating the EDS Serp Benefit payable hereunder, such defined benefits as are in payment from time to time by other members of the controlled group in different form shall be restated as an annuity payable in the same Actuarially Equivalent form as would be assumed payable under this EDS SERP before the above SERP Limitation Determination is made. Whenever an actuarial conversion is required in order to restate the form of the defined pension benefits actually being paid by other members of the controlled group as the Actuarially Equivalent annuity having the same form as the Targeted Pension that forms the basis for determination of the SERP Benefit in payment hereunder, the Actuarially Equivalent annuity shall be determined using the actuarial methodology prescribed in Section 2.1(a) hereof; provided, however, that if any defined benefits actually being paid to the Participant, or Eligible Spouse, by other members of the controlled group are being paid as either a single life pension annuity, when the EDS SERP Benefit is payable as the 15 difference between two single life annuities, or as a Joint and Fifty Percent (50%) Survivor Annuity, when the EDS SERP Benefit is payable as the difference between two Joint and Fifty Percent (50%) Survivor Annuities, no such actuarial conversion will be required prior to making the SERP Limitation Determination. 4.3 Targeted Aggregate Pension Level for Executives Reduced At Early Retirement ("Targeted Pension Reduced At Early Retirement").\\ When an Employee is permitted to retire early with SERP Benefit eligibility, the first step in the computational process which must be followed to determine the single life annuity benefit herein called the Targeted Pension Reduced At Early Retirement is to calculate the Targeted Pension which would be payable at the Employee's Normal Retirement Date, pursuant to the computational methodology of Section 4.2 hereof, with the Employee's service and compensation history with the Company to the Early Retirement Date being treated as if it were a service and compensation history to Normal Retirement Date. Once the Targeted Pension has been determined on this basis, the Targeted Pension Reduced At Early Retirement is to be calculated by reducing the Targeted Pension by 4% or a prorata fraction thereof, if any, for each year and fraction thereof, if any, that the Employee's Early Retirement Date, as consented to by the Chairman on behalf of the Company, is earlier than the Employee's Normal Retirement Date. Provided, however, that before the above described 4% reductions are applied to the Targeted Pension to determine the Targeted Pension Reduced At Early Retirement, the Targeted Pension will have been computed and capped, if necessary, as provided in Section 4.2, based upon the service, salary and bonus history that the Employee has as of his Early Retirement Date. 4.4 Targeted Aggregate Pension Level for Executives At Late Retirement. When an Employee is permitted to retire late with SERP Benefit eligibility, the computational methodology of Section 4.2 hereof shall be used to calculate the single life annuity benefit called the Targeted Pension At Late Retirement recognizing that the Employee is retiring under the EDS SERP on his or her Late Retirement Date with his or her Targeted Pension based upon his or her service and compensation history with the Company to the Late Retirement Date instead of to the Normal Retirement Date. Accordingly, the Targeted Pension At Late Retirement is computed pursuant to Section 4.2 with the sole substitution being the use of Late Retirement for each reference to Normal Retirement. 4.5 EDS SERP Benefits At Normal Retirement. Normal Retirement under the EDS SERP is retirement from the Company with SERP Benefit eligibility on the Employee's Normal Retirement Date. The SERP Benefit payable, if any, to an Employee upon Normal Retirement is a single life pension annuity that would be payable on the first of each month, beginning on the Employee's Normal Retirement Date, and continuing monthly thereafter for the remainder of the Employee's lifetime. The SERP Benefit, upon Normal Retirement, will be payable in a monthly amount equal to one-twelfth (1/12th) of the single life pension annuity benefit which is calculated as follows: Targeted Pension At Normal Retirement 16 (LESS) Qualified Plan Benefit payable commencing at Normal Retirement (EQUALS) SERP Benefit commencing at Normal Retirement The SERP Benefit commencing at Normal Retirement may from time to time change as a result of the operation of the Limitations in the Qualified Plan. 4.6 EDS SERP Benefit At Early Retirement. The SERP Benefit payable, if any, to a Participant upon Early Retirement is a single life pension annuity that would be payable on the first of each month, beginning on the Employee's Early Retirement Date, and continuing monthly thereafter for the remainder of the Employee's lifetime. The SERP Benefit upon Early Retirement will be payable in a monthly amount equal to one-twelfth (1/12th) of the single life pension annuity benefit which is calculated as follows: Targeted Pension Reduced At Early Retirement (LESS) Qualified Plan Benefit payable commencing at Early Retirement (EQUALS) SERP Benefit commencing at Early Retirement The SERP Benefit commencing at Early Retirement may from time to time change as a result of the operation of the Limitations in the Qualified Plan. 4.7 EDS SERP Benefit At Late Retirement. Late Retirement under the EDS SERP is retirement from the Company with SERP Benefit eligibility on the Employee's Late Retirement Date. The SERP Benefit payable, if any, to a Participant upon Late Retirement is a single life pension annuity that would be payable on the first of each month, beginning on the Employee's Late Retirement Date, and continuing monthly thereafter for the remainder of the Employee's lifetime. The SERP Benefit upon Late Retirement, will be payable in a monthly amount equal to one-twelfth (1/12th) of the single life pension annuity benefit which is calculated as follows: Targeted Pension at Late Retirement (LESS) Qualified Plan Benefit payable commencing at Late Retirement (EQUALS) SERP Benefit commencing at Late Retirement The SERP Benefit commencing at Late Retirement may from time to time change as a result of the operation of the Limitations in the Qualified Plan. 4.8 Pre-Retirement Survivor SERP Benefit. If a Participant dies while employed with the Company and has satisfied the eligibility requirements set forth in Section 3.1 and, but for dying before retiring, could be otherwise eligible to receive a SERP Benefit Reduced at Early Retirement, or SERP Benefit At Normal Retirement, or SERP Benefit At Late Retirement, then on 17 the first month following such Participants' death, the Eligible Spouse of such Participant shall receive a benefit hereunder equal to the fifty percent (50%) survivor portion of the Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit At Normal Retirement, Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit At Late Retirement or Joint and Fifty Percent (50%) Survivor Annuity SERP Benefit Reduced At Early Retirement, as applicable to which the Participant would have been entitled had such Participant retired with the consent of the Chairman in the case of Early Retirement or Late Retirement, as of the date of the Participant's death ("Pre-Retirement Survivor SERP Benefit"). A Pre-Retirement Survivor SERP Benefit shall be paid to the Participant's surviving Eligible Spouse in the form of a monthly annuity, as calculated in accordance with this Section, for the life of the Eligible Spouse commencing on the first day of the first month following the Participant's death. No payment shall be made to an Eligible Spouse in accordance with this Section if, as of the date of the Participant's death, such Participant would be deemed ineligible to participate in the Plan pursuant to Section 3.2. 4.9 Payment. Any SERP Benefit shall be payable only in the form of either a Joint and Fifty Percent (50%) Survivor Annuity as calculated in this Article IV, or a single life annuity as calculated in this Article IV. Either form of payment shall be subject to approval by the Plan Administrator. However, a Participant who is not married to an Eligible Spouse on his or her Early Retirement Date, Normal Retirement Date or Late Retirement Date, shall only receive SERP Benefits in the form of a single life annuity. Participants who may elect to receive a SERP Benefit from either of the two (2) payment options above shall make such election in accordance with the procedures and policies from time to time established by the Plan Administrator. Notwithstanding anything to the contrary herein, if the Qualified Plan Benefit which could be payable to a Participant or his or her Eligible Spouse is increased, or decreased, then the SERP Benefit payable hereunder shall be decreased or increased to such amount so that the SERP Benefit equals the then difference between the applicable Targeted Pension and the Qualified Plan Benefit. Any payment made hereunder shall be subject to the annual verification of the continued eligibility, and the payments hereunder may be suspended or terminated for failure to provide the information deemed necessary by the Plan Administrator for the verification process. The Plan Administrator shall provide the EDS Compensation and Benefits Committee with written certification of Participants' continuing eligibility at least once during each Plan Year. 4.10 Reduction Suspension or Elimination of Benefits. The EDS Compensation and Benefits Committee, in its sole discretion, may at any time reduce, suspend or eliminate any SERP Benefit otherwise payable to an Employee or Participant or an Eligible Spouse. Any such reduction, suspension or elimination of SERP Benefits payable hereunder to an Employee or Participant shall automatically apply to any benefits that would be payable hereunder to Participant's Eligible Spouse. However, any decision to reduce, suspend or eliminate a benefit for reason of a Participant's employment with a competitor of the Company or because of actions considered inimical or detrimental to the best interests of the Company, shall be made by the EDS Compensation and Benefits Committee after consideration of the facts and circumstances of the situation and any advice and recommendations received from the Chairman. 18 4.11 Contingent Rights. No Employee shall have a vested or future interest in, or entitlement to, any benefits from the Plan, nor are any benefits which might be payable hereunder guaranteed nor shall any benefits accrue on behalf of any Employee or Participant. As a non-qualified Plan, any benefit herefrom is made subject to the conditions precedent as set forth herein and to the rights reserved herein by the EDS Compensation and Benefits Committee to reduce, suspend, or eliminate benefits hereunder, to terminate or amend the Plan, and the EDS Compensation and Benefits Committee's discretionary authority to deem any Employee ineligible hereunder. ARTICLE V. ADMINISTRATION 5.1 Administration. EDS shall be the Plan Administrator. The Plan Administrator shall have the authority which is expressly stated in this Plan as being delegated and empowered to the Plan Administrator and shall have the authority to administer and interpret the Plan according to Plan provisions and as directed by the EDS Compensation and Benefits Committee. 5.2 Administration Committee. The Plan Administrator may appoint an Administration Committee to handle the day-to-day administration of the Plan. The Administration Committee shall have the authority of the Plan Administrator to the extent the Plan Administrator has delegated its authority to it. A majority of the members of the Administration Committee shall constitute a quorum and the acts of a majority of the members present, or acts approved in writing by a majority of the members without a meeting, shall be the acts of the Administration Committee. Members of the Administration Committee may resign with thirty (30) days' written notice to the Plan Administrator or may be removed by the Plan Administrator at any time, whereupon a successor Administration Committee member may be appointed by the Plan Administrator. 5.3 Finality of Determination. Determinations of the Plan Administrator as to any disputed questions arising under this Plan, including questions of construction and interpretation shall be final, binding, and conclusive upon persons. All determinations reserved for the EDS Compensation and Benefits Committee herein shall be final, binding and conclusive upon all persons. 5.4 Expenses. The expenses of administering the Plan shall be borne by the Company. ARTICLE VI. MERGER, AMENDMENT, AND TERMINATION 6.1 Merger, Consolidation, or Acquisition. In the event of a merger, consolidation, or acquisition where the Company is not the surviving corporation, unless the successor or acquiring corporation shall elect to continue and carry on the Plan, this Plan shall terminate and all benefits hereunder shall cease. 19 6.2 Amendment and Termination. The EDS Compensation and Benefits Committee may amend, modify, or terminate the Plan at any time, expressly including the making of retroactive amendments. In the event of an amendment or termination of the Plan pursuant to this Section, the EDS Compensation and Benefits Committee may provide that no benefit payments will be made to any Participant or Eligible Spouse after the effective date of such amendment or termination, or may provide that some or all of the benefits under the Plan shall continue to be an obligation of the Company to be paid as provided under Section IV (Payments). ARTICLE VII. MISCELLANEOUS PROVISIONS 7.1 Funding. Payments hereunder shall not be pre-funded by the Company and when benefits become payable shall be paid in cash from the general assets of the Company. No Participant, Employee, or any other person shall have any right, title, or interest whatsoever in or to, or any preferred claim in or to, any investment reserves, accounts, or funds that the Company may purchase, establish, or accumulate to aid in providing the payments described in this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust or a fiduciary relationship of any kind between the Company and a Participant, Employee, or any other person. 7.2 Tax Withholding. The Company may withhold or cause to be withheld from any benefit payment any withholding or other taxes required to be withheld with respect to such payment and such sum as the Company may reasonably estimate as necessary to cover any withholding or other taxes which may be due and owing as a result of any Plan benefit or the creation or maintenance of this Plan. In addition, the Company may withhold or cause to be withheld from any benefit payment any amounts payable to or through the Company, including, but not limited to, insurance premium charges. 7.3 Other Plans. No benefit payable hereunder shall be deemed compensation to the Participant for the purposes of computing benefits to which such Participant may be entitled under the Retirement Plan or any other plan or arrangement of the Company for the benefit of its employees. 7.4 Anti-assignment and Nontransferability. An Employee, Participant, Eligible Spouse or other person shall have no rights, by way of anticipation or otherwise, to assign or otherwise dispose of any interest under this Plan, nor shall rights be assigned or transferred by operation of law. No Plan benefits hereunder may be assigned or made subject to a qualified domestic relations order pursuant to Code Section 414(p). 20 IN WITNESS WHEREOF, the Company has caused this instrument to be executed and adopted by its duly authorized officers on this ____ day of ________, 1996. ELECTRONIC DATA SYSTEMS CORPORATION By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- AGREED AND ATTESTED: EDS COMPENSATION AND BENEFITS COMMITTEE - ---------------------------------- Secretary 21 EXHIBIT 10(E) ELECTRONIC DATA SYSTEMS CORPORATION DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS ARTICLE I PURPOSES OF PLAN AND DEFINITIONS 1.1 Purpose. Electronic Data Systems Holding Corporation, a Delaware corporation (which name shall be amended to Electronic Data Systems Corporation) (the "Company"), hereby establishes the Electronic Data Systems Corporation Deferred Compensation Plan for Non-Employee Directors (the "Plan") for the purpose of providing non-employee directors ("Directors") of the Company the opportunity to defer a portion of their Director Cash Compensation and to provide greater incentives for those Directors to attain and maintain the highest standards of performance, to attract and retain Directors of outstanding competence and ability, to stimulate the active interest of such persons in the development and financial success of the Company, to further the identity of interests of such Directors with those of the Company's stockholders generally, and to reward such Directors for outstanding performance. 1.2 Definitions. (a) "Applicable Annual Rate" will initially be 7.45% and will be adjusted as of January 1 of each year, commencing January 1, 1997, to that rate which is equal to 120% of the applicable federal long-term rate for the month of January of such year as published by the Internal Revenue Service pursuant to Section 1274(d) of the Code. (b) "Beneficiary" means the person or persons designated by the Participant, as provided in Section 4.5, to receive any payments otherwise due the Participant under this Plan in the event of the Participant's death. (c) "Board of Directors" or "Board" means the Board of Directors of the Company. (d) "Cash Compensation" means all of the cash compensation payable to a Participant, including annual, meeting and other fees. (e) "Code" means the Internal Revenue Code of 1986, as amended. (f) "Committee" means the committee of the Board as is designated by the Board to administer the Plan in accordance with Article II, but which shall initially be the Compensation and Benefits Committee of the Board. (g) "Common Stock" means the Common Stock, par value $.01 per share, of the Company. (h) "Company" means Electronic Data Systems Corporation (the name of which prior to Effective Date was Electronic Data Systems Holding Corporation). (i) "Deferred Interest Bearing Account" means the bookkeeping account maintained for each Participant to record certain amounts deferred by the Participant in accordance with Article III hereof. (j) "Determination Date" means the date on which payment of a Participant's deferred compensation is made or commences, as determined in accordance with Section 4.1. (k) "Effective Date" means the date upon which both the Reincorporation and the Split-Off have been consummated. (l) "Election Effective Date" means the date upon which a Participant's deferred compensation is credited to his Deferred Interest Bearing Account or his Phantom Stock Account pursuant to Section 3.3 of this Plan. (m) "Eligible Director" means each director of the Company who is not a full-time employee of the Company but who receives compensation for services as a director. -2- (n) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. (o) "Fair Market Value" of a share of Common Stock means, as of a particular date, (i) if shares of Common Stock are listed on a national securities exchange, the mean between the highest and lowest sales price per share of Common Stock on the consolidated transaction reporting system for the principal national securities exchange on which shares of Common Stock are listed on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, (ii) if shares of Common Stock are not so listed but are quoted on the Nasdaq National Market, the mean between the highest and lowest sales price per share of Common Stock reported by the Nasdaq National Market on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported or (iii) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by the Nasdaq Stock Market, or, if not reported by the Nasdaq Stock Market, by the National Quotation Bureau Incorporated. (p) "Participant" means an Eligible Director of the Company who elects to participate in the Plan. (q) "Phantom Stock Account" means the bookkeeping account maintained for each Participant to record certain amounts deferred by the Participant in accordance with Article III hereof. (r) "Phantom Stock Unit" means a unit equal to one share of Common Stock issued and outstanding as of the Effective Date of the Plan (as adjusted pursuant to Section 3.6), utilized for the purpose of measuring the benefits payable under Section 4.3. (s) "Reincorporation" means (i) the merger of Electronic Data Systems Intermediate Corporation, a Delaware corporation and direct wholly owned subsidiary of the Company, with and into the Company and (ii) the merger of Electronic Data Systems Corporation, a Texas corporation and indirect wholly owned subsidiary of the Company, with and into the Company. -3- (t) "Split-Off" means the issuance or delivery of shares of Common Stock upon conversion of all the shares of Class E Common Stock, par value $.10 per share, of General Motors Corporation, a Delaware corporation ("General Motors") as a result of the merger of GM Mergeco Corporation, a Delaware corporation and indirect wholly owned subsidiary of the Company, with and into General Motors, in accordance with the terms of the Merger Agreement to be entered into between General Motors and GM Mergeco Corporation. (u) "Valuation Date" means the Effective Date and the first day of each month thereafter, or in the event the Common Stock is traded or quoted on a national securities exchange or in the over-the-counter market, each day on which a sale or sales of the Common Stock is reported or a quotation for the Common Stock is available (as the case may be). ARTICLE II ADMINISTRATION OF THE PLAN 2.1 Committee. This Plan shall be administered by the Committee. The Committee shall consist of at least two members of the Board. 2.2 Committee's Powers. Subject to the provisions hereof, the Committee shall have full and exclusive power and authority to administer this Plan and to take all actions which are specifically contemplated hereby or are necessary or appropriate in connection with the administration hereof. The Committee shall also have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of this Plan. The Committee may, in its discretion, determine the eligibility of individuals to participate herein, determine the amount of Cash Compensation a Participant may elect to defer, or waive any restriction or other provision of this Plan; provided, however, that the Committee shall not waive any restriction or other provision of this Plan or take any other action that would cause any benefits provided to a Participant hereunder to be deemed "derivative securities" within the meaning of Section 16 of the Exchange Act or the rules and regulations promulgated thereunder (including, but not limited to, Rule 16a-1(c) or any successor rule). The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan in the manner and to the extent the Committee deems necessary or desirable to carry it into effect. -4- 2.3 Committee Determinations Conclusive. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. 2.4 Committee Liability. No member of the Committee or officer of the Company to whom the Committee has delegated authority in accordance with the provisions of Section 2.5 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by an officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute. 2.5 Delegation of Authority. The Committee may delegate to the Chief Executive Officer and to other senior officers of the Company its duties under this Plan pursuant to such conditions or limitations as the Committee may establish. ARTICLE III ACCOUNTS 3.1 Establishment of Accounts. The Company shall set up an appropriate record (hereinafter called the "Deferred Interest Bearing Account") which will from time to time reflect the name of each Participant and the amounts deferred by such Participant to an interest bearing account pursuant to Section 3.2. The Company shall also set up an appropriate record (hereinafter called the "Phantom Stock Account") which will from time to time reflect the name of each Participant, the number of Phantom Stock Units credited to such Participant pursuant to Section 3.2, and the Fair Market Value of that number of Phantom Stock Units credited to the Participant determined as of the Election Effective Date. 3.2 Amount of Deferral. A Participant may elect to defer receipt of all or any part of the Cash Compensation payable to the Participant for serving on the Company's Board of Directors for each calendar year (or, if applicable pursuant to Section 5.2, portion thereof) for which such deferral is elected. At the election of the Participant, the amount deferred shall be: (a) credited to his Deferred Interest Bearing Account; (b) credited to his Phantom Stock Account; or (c) a combination of both. If a Participant chooses to receive a credit to his Phantom Stock Account, a number of Phantom Stock Units (rounded up to the nearest whole number) having a Fair Market Value on the Election Effective Date equal to the dollar amount of fees the Participant elects to forego in the next year in exchange for Phantom Stock Units shall be credited to such account. A Participant -5- may only elect to defer Cash Compensation which is otherwise payable after an election to defer compensation is made pursuant to Section 5.1 hereof. 3.3 Crediting of Deferred Amounts. Any Cash Compensation credited to a Participant's Deferred Interest Bearing Account or Phantom Stock Account shall be credited to such account on the last day of the month in which the deferred Cash Compensation would otherwise have been paid. For example, if a Participant effectively elects to defer Cash Compensation to his Deferred Interest Bearing Account for a calendar year by notifying the Company in the manner provided in Section 5.1, the Cash Compensation which accrues for the month of January shall be credited to such Participant's Deferred Interest Bearing Account on January 31. 3.4 Interest on Deferred Interest Bearing Accounts. The amount of deferred compensation credited to a Participant's Deferred Interest Bearing Account will bear interest from but excluding the date so credited, to and including the Determination Date, at a rate per annum equal to the Applicable Annual Rate in effect from time to time, compounded annually, and such interest shall be credited to the Deferred Interest Bearing Account as of the last day of each calendar year (or, if applicable, the Determination Date). Thereafter, interest so credited shall similarly bear interest from but excluding the date so credited, to and including the Determination Date, at a rate per annum equal to the Applicable Annual Rate in effect from time to time, compounded annually and credited as of the last day of each calendar year (or, if applicable, the Determination Date). 3.5 Dividends. As of each date that dividends are paid with respect to Common Stock, a Participant who has any outstanding Phantom Stock Units credited to his Phantom Stock Account shall have an amount credited to his Deferred Interest Bearing Account with respect to such dividends and thereafter such amount shall bear interest as provided in Section 3.4. The amount credited in respect of dividends shall be equal to the dollar amount of the dividend per share of Common Stock multiplied by the number of Phantom Stock Units credited to the Participant's Phantom Stock Account as of the payment date of such dividend. 3.6 Adjustments. ----------- (a) Exercise of Corporate Powers. The existence of this Plan and any outstanding Phantom Stock Units credited hereunder shall not affect in any manner the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its -6- business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the Common Stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above. (b) Recapitalizations, Reorganizations and Other Activities. In the event of any subdivision or consolidation of outstanding shares of Common Stock, declaration of a dividend payable in shares of Common Stock or other stock split, then (i) the number of Phantom Stock Units and (ii) the appropriate Fair Market Value and other price determinations for such Phantom Stock Units shall each be proportionately adjusted by the Board to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Board shall make appropriate adjustments to (i) the number of Phantom Stock Units and (ii) the appropriate Fair Market Value and other price determinations for such Phantom Stock Units to give effect to such transaction; provided that such adjustments shall only be such as are necessary to preserve, without increasing, the value of such units. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board shall be authorized to issue or assume units by means of substitution of new units, as appropriate, for previously issued units or an assumption of previously issued units as part of such adjustment. -7- ARTICLE IV PAYMENTS 4.1 Period of Deferral. A Participant may elect that payment of the compensation deferred under the Plan be made or commence at (a) a date that is five years following the date of the termination of the Participant's status as a Director of the Company, or (b) termination of the Participant's status as a Director of the Company. If alternative (a) is elected by the Participant, payment will be made or will commence within sixty (60) days after the date that is five years after termination of the Participant's status as a Director of the Company. If alternative (b) is elected by the Participant, payment will be made or will commence within sixty (60) days after termination of the Participant's status as a Director of the Company. 4.2 Payment of Amounts in Deferred Interest Bearing Account. As of the Determination Date, the sum of the amounts theretofore credited to the Participant's Deferred Interest Bearing Account plus all interest accrued thereon to, and including, the Determination Date (the "Total Deferred Compensation Amount") shall be calculated. A Participant may elect to receive payment of the Total Deferred Compensation Amount in any manner consistent with Section 4.4. 4.3 Payment of Amounts in Phantom Stock Account. As of the Determination Date, the aggregate Fair Market Value on the Valuation Date coinciding with or immediately preceding the Determination Date of that number of Phantom Stock Units then credited to a Participant's Phantom Stock Account (the "Total Deferred Unit Amount") shall be calculated. A Participant may elect to receive payment of the Total Deferred Unit Amount in any manner consistent with Section 4.4. 4.4 Form of Payment. Payment to a Participant of amounts in his Deferred Interest Bearing Account and his Phantom Stock Account shall be made in cash. Payment to a Participant of amounts in both accounts shall be made by one of the following methods: (a) a lump sum, (b) three substantially equal consecutive annual installments, or (c) five substantially equal consecutive annual installments. The Total Deferred Compensation Amount and the Total Deferred Unit Amount shall then bear interest from, but excluding, the Determination Date to, and including, the date paid at the Applicable Annual Rate as in effect from time to time, compounded annually, and the payment of each annual installment shall be accompanied by payment of the amount of interest accrued thereon. -8- 4.5 Death Prior to Payment. In the event that a Participant dies prior to payment of all of the amounts payable pursuant to the Plan, any remaining amounts together with all interest accrued thereon, shall be paid to the Participant's designated Beneficiary in a lump sum within sixty (60) days following the Company's notification of the Participant's death. If no Beneficiary has been designated, such payment shall be made to the Participant's estate. A beneficiary designation, or revocation of a prior beneficiary designation, shall be effective only if it is made in writing on a form provided by the Company, signed by the Participant and received by the Committee. In the event that a Participant dies prior to payment of all of the amounts payable pursuant to the Plan, and the designated Beneficiary dies prior to payment of all the amounts payable pursuant to the Plan, payment shall be made to the Participant's estate in a lump sum within sixty (60) days of notification of the Beneficiary's death. 4.6 Payments to Minors and Incompetents. Should the Participant become incompetent or should the Participant designate a Beneficiary who is a minor or incompetent, the Company shall be authorized to pay such funds to a parent or guardian of such minor or incompetent, or directly to such minor or incompetent, whichever manner the Committee shall determine in its sole discretion. ARTICLE V ELECTING DEFERRALS 5.1 Manner of Electing Deferral. Each election made by a Participant to defer compensation under the Plan (i) shall take the form of a written document (provided by the Company) signed by the Participant and filed with the Committee, (ii) shall designate the calendar year for which, or commencing with which, deferral is elected, the account to which such deferral shall be credited, the period of deferral and the form and manner of payment and (iii) cannot be revoked or modified if either (a) the proposed revocation or modification applies to amounts deferred with respect to a calendar year which has already commenced at the time such revocation or modification is proposed to be effected or (b) the Committee determines in its sole discretion that the proposed revocation or modification could cause any benefits provided to a Participant hereunder to be treated as "derivative securities" within the meaning of Section 16 of the Exchange Act or the rules and regulations promulgated thereunder (including, but not limited to, Rule 16a-1(c) or any successor rule.) An election to defer may be made as to the Cash Compensation payable for a single calendar year (or portion thereof, if applicable) or period of years. -9- 5.2 Election by a New Director. An election to defer Cash Compensation under the Plan may be made by a new Director of the Company within thirty (30) days after election to the Company's Board of Directors and shall apply to Cash Compensation payable after the date of such election. ARTICLE VI MISCELLANEOUS 6.1 Unfunded Plan. Nothing contained herein shall be deemed to create a trust of any kind or create any fiduciary relationship. Insofar as it provides for rights to cash or Common Stock, this Plan shall be unfunded. Funds invested hereunder shall continue for all purposes to be part of the general funds of the Company. To the extent that a Participant acquires a right to receive payments from the Company under the Plan, such right shall not be greater than the right of any unsecured general creditor of the Company and such right shall be an unsecured claim against the general assets of the Company. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash or rights thereto under this Plan, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash or rights thereto, nor shall this Plan be construed as providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash or rights thereto to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to cash or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this Plan, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan. 6.2 Title to Funds Remains with Company. Amounts credited to each Participant's Deferred Interest Bearing Account and Phantom Stock Account shall not be specifically set aside or otherwise segregated, but will be combined with corporate assets. Title to such funds will remain with the Company and the Company's only obligation will be to make timely payments to Participants in accordance with the Plan. -10- 6.3 Statement of Account. A statement will be furnished to each Participant annually on or about February 15 of each year stating the balance of the Participant's Deferred Interest Bearing Account and Phantom Stock Account and accrued interest thereon as of the preceding December 31st. 6.4 Assignability. Except as provided in Section 4.5, no right to receive payment hereunder shall be transferable or assignable by a Participant except by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules thereunder. Any attempted assignment of any benefit under this Plan in violation of this Section 6.4 shall be null and void. 6.5 Amendment, Modification, Suspension or Termination. The Board may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that no amendment, modification or termination shall, without the consent of the Participant, impair the rights of any Participant to the balance in such Participant's Deferred Interest Bearing Account or Phantom Stock Account or the amount of interest accrued thereon as of the date of such amendment, modification or termination. The Board may at any time and from time to time delegate to the Committee any or all of this authority under this Section 6.5. 6.6 Governing Law. This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Delaware. 6.7 Effective Date. The Plan shall be effective as of the Effective Date. -11- ELECTRONIC DATA SYSTEMS CORPORATION DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS NOTICE OF ELECTION To the Committee: In accordance with the Deferred Compensation Plan for Non-Employee Directors (the "Plan"), I hereby elect to defer receipt of the cash portion of the compensation, including annual, meeting and other fees, payable to me indicated below for my services as a Director of Electronic Data Systems Corporation for (check one): [ ] [Available only to new Directors making an election pursuant to Section 5.2 of the Plan.] The remainder of this calendar year. [ ] The calendar year beginning January 1, 19__. [ ] The calendar year beginning January 1, 19__ and for each calendar year thereafter until ________________. [ ] I do not wish at this time to elect deferral. 1. THE AMOUNT OF COMPENSATION I ELECT TO DEFER IS ______________________ . 2. CREDIT MY DEFERRED COMPENSATION TO THE FOLLOWING ACCOUNT(S) (check one): [ ] 100% to my Deferred Interest Bearing Account only; or [ ] 100% to my Phantom Stock Account only; or -1- [ ] To both my Deferred Interest Bearing Account and my Phantom Stock Account in the proportion designated below (for a total of 100%): ___________% to my Deferred Interest Bearing Account; and ___________% to my Phantom Stock Account. 3. PERIOD OF DEFERRAL (check one): [ ] Until the termination of my service as a Director. [ ] Until the 5th calendar year following termination of my service as a Director. 4. MY DEFERRED COMPENSATION PLUS INTEREST ACCRUED THEREON AT CONCLUSION OF THE DEFERRAL PERIOD SHALL BE DISTRIBUTED AS FOLLOWS: [ ] Lump sum [ ] Three annual installments [ ] Five annual installments. I understand that in the event of my death prior to receipt of all amounts payable to me pursuant to the Plan, the balance shown in my Deferred Interest Bearing Account and my Phantom Stock Account will be paid in a lump sum to my designated Beneficiary or to my estate if I have not designated a Beneficiary or my Beneficiary dies prior to receiving such lump-sum payment. I understand further that upon commencement of the year for which this election applies, this election is irrevocable as to amounts deferred for that year and that no change in the timing or form of payment can be made thereafter. -2- I acknowledge that I have received a copy of the Plan and have read its provisions and agree to be bound by the terms contained therein. Signed: - -------------------- ------------------------- DATE DIRECTOR ELECTRONIC DATA SYSTEMS CORPORATION -3- ELECTRONIC DATA SYSTEMS CORPORATION DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS DESIGNATION OF BENEFICIARY To the Committee: In accordance with the Deferred Compensation Plan for Non-Employee Directors (the "Plan"), I hereby designate the following individual as my Beneficiary: Name of Individual: -------------------------------------------------------------------- First MI Last Social Security Number: -------------------------------------------------------------------- Address: -------------------------------------------------------------------- Street Address -------------------------------------------------------------------- City State Zip Code Relationship to Director: -------------------------------------------------------------------- I understand that in the event of my death prior to receipt of all amounts payable to me pursuant to the Plan, the balance shown in my Deferred Interest Bearing Account and my Phantom Stock Account will be paid in a lump sum to my designated Beneficiary or to my estate if I have not designated a Beneficiary or my Beneficiary dies prior to receiving such lump-sum payment. I acknowledge that I have received a copy of the Plan and have read its provisions and agree to be bound by the terms contained therein. This beneficiary designation revokes and supersedes any previous beneficiary designation made by me. Signed: - ----------------------- --------------------------- DATE DIRECTOR ELECTRONIC DATA SYSTEMS CORPORATION -1- EXHIBIT 10(F) ELECTRONIC DATA SYSTEMS HOLDING CORPORATION INDEMNIFICATION AGREEMENT THIS AGREEMENT is entered into as of [Date], 1996 ("Agreement"), between Electronic Data Systems Holding Corporation, a Delaware corporation (the "Company"), and [Name] ("Indemnitee"). BACKGROUND STATEMENT AND RECITALS Highly competent and experienced persons are becoming more reluctant to serve corporations as directors or in other capacities unless they are provided with adequate protection through insurance and adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation. The Board of Directors of the Company (the "Board") has determined that the inability to attract and retain such persons would be detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future. The Board has also determined that it is reasonable, prudent and necessary for the Company, in addition to purchasing and maintaining directors' and officers' liability insurance (or otherwise providing for adequate arrangements of self-insurance), contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereby agree as follows: -1- ARTICLE I CERTAIN DEFINITIONS As used herein, the following words and terms shall have the following respective meanings: "Change in Control" means a change in control of the Company occurring after the Public Status Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limiting the generality of the foregoing, a Change in Control shall be deemed to have occurred (irrespective of the applicability of the initial clause of this definition) if at any time after the Public Status Date (a) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, but excluding (i) any employee benefit plan of the Company or of any subsidiary of the Company, and (ii) any entity organized, appointed or established by the Company pursuant to the terms of any such plan) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities without the prior approval of at least two-thirds of the members of the whole Board in office immediately prior to such person attaining such percentage interest; (b) the Company is a party to a merger, consolidation, share exchange, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board in office immediately prior to such transaction or event constitute less than a majority of the whole Board thereafter; or (c) during any period of two consecutive years, individuals who at the beginning of such period constituted members of the Board (including for this purpose any new member whose election or nomination for election by the Company's stockholders was approved by at least two-thirds of the members of the whole Board then still in office who were members of the Board at the beginning of such period) cease for any reason to constitute a majority of the whole Board. Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred solely as a result of the General Motors Corporation Hourly Rate Employees Pension Plan becoming the beneficial owner of 20% or more of the combined voting power of the Company's then outstanding securities in a transaction in which it acquires securities of the Company from General Motors Corporation in exchange for, or as a distribution with respect to, securities of General Motors Corporation. "Claim" means an actual or threatened claim or request for relief. "Corporate Status" means the status of a person who is or was a director, nominee for director, officer, employee, agent or fiduciary of the Company (including any predecessors to the Company), Electronic Data Systems Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company. -2- "Disinterested Director," with respect to any request by Indemnitee for indemnification hereunder, means a director of the Company who neither is nor was a party to the Proceeding or subject to a Claim, issue or matter in respect of which indemnification is sought by Indemnitee. "DGCL" means the Delaware General Corporation Law and any successor statute thereto as either of them may be amended from time to time. "Expenses" means all attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or participating in (including on appeal), a Proceeding. "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither contemporaneously is, nor in the five years theretofore has been, retained to represent (a) the Company or Indemnitee in any matter material to either such party, (b) any other party to the Proceeding giving rise to a claim for indemnification hereunder or (c) the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding voting securities (other than, in each such case, with respect to matters concerning the rights of Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements). Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. "person" shall have the meaning ascribed to such term in Sections 13(d) and 14(d) of the Exchange Act. "Proceeding" means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative and whether or not based upon events occurring, or actions taken, before the date hereof (except any of the foregoing initiated by Indemnitee pursuant to Article VI or Section 7.8 to enforce his rights under this Agreement), and any inquiry or investigation that could lead to, and any appeal in or related to, any such action, suit, arbitration, alternative dispute resolution mechanism, hearing or proceeding. "Public Status Date" means the first date on which the Company has outstanding a class of equity securities registered under the Exchange Act. -3- ARTICLE II SERVICES BY INDEMNITEE Section 2.1 Services. Indemnitee agrees to serve, or continue to serve, as a director of the Company and, as the Company has requested or may request from time to time, as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. [Indemnitee agrees to serve, or continue to serve, as a director of the Company. Indemnitee may from time to time also agree to serve, as the Company may request from time to time, as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.]/1/ Indemnitee and the Company each acknowledge that they have entered into this Agreement as a means of inducing Indemnitee to serve, or continue to serve, the Company in such capacities. Indemnitee may at any time and for any reason resign from such position or positions (subject to any other contractual obligation or any obligation imposed by operation of law). The Company shall have no obligation under this Agreement to continue Indemnitee in any such position or positions. - -------------------- /1/ If this Agreement is to entered into between the Company and a new director, use the bracketed language in lieu of the immediately preceding sentence. ARTICLE III INDEMNIFICATION Section 3.1 General. The Company shall indemnify, and advance Expenses to, Indemnitee to the fullest extent permitted by applicable law in effect on the date hereof and to such greater extent as applicable law may thereafter from time to time permit. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the right to be indemnified and to have Expenses advanced in all Proceedings to the fullest extent permitted by Section 145 of the DGCL. The provisions set forth in this Agreement are provided in addition to and as a means of furtherance and implementation of, and not in limitation of, the obligations expressed in this Article III. Section 3.2 Proceedings Other Than by or in Right of the Company. Indemnitee shall be entitled to indemnification pursuant to this Section 3.2 if, by reason of his Corporate Status, he was, is or is threatened to be made, a party to any Proceeding, other than a Proceeding by or in the right of the Company. Pursuant to this Section 3.2, the Company shall indemnify Indemnitee against Expenses, judgments, penalties, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with any such Expenses, judgments, penalties, fines and amounts paid in settlement) actually and reasonably -4- incurred by him or on his behalf in connection with such Proceeding or any Claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. Nothing in this Section 3.2 shall limit the benefits of Section 3.1 or any other Section hereunder. Section 3.3 Proceedings by or in Right of the Company. Indemnitee shall be entitled to indemnification pursuant to this Section 3.3 if, by reason of his Corporate Status, he was, is or is threatened to be made, a party to any Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3.3, the Company shall indemnify Indemnitee against Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any Claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Notwithstanding the foregoing, no indemnification against such Expenses shall be made in respect of any Claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company if applicable law prohibits such indemnification; provided, however, that, if applicable law so permits, indemnification against such Expenses shall nevertheless be made by the Company in such event if and only to the extent that the Court of Chancery of the State of Delaware or other court of competent jurisdiction (the "Court"), or the court in which such Proceeding shall have been brought or is pending, shall so determine. Nothing in this Section 3.3 shall limit the benefits of Section 3.1 or any other Section hereunder. ARTICLE IV EXPENSES Section 4.1 Expenses of a Party Who Is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement to the contrary (except as set forth in Section 7.2(c) or 7.6), and without a requirement for any determination described in Section 5.2, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with any Proceeding to which Indemnitee was or is a party by reason of his Corporate Status and in which Indemnitee is successful, on the merits or otherwise. If Indemnitee is not wholly successful, on the merits or otherwise, in a Proceeding but is successful, on the merits or otherwise, as to any Claim, issue or matter in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf relating to each successfully resolved Claim, issue or matter. For purposes of this Section 4.1 and without limitation, the termination of a Claim, issue or matter in a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such Claim, issue or matter. Section 4.2 Expenses of a Witness or Non-Party. Notwithstanding any other provision of this Agreement to the contrary, to the extent that Indemnitee is, by reason of his Corporate Status, a witness or otherwise participates in any Proceeding at a time when he is not -5- a party in the Proceeding, the Company shall indemnify him against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. Section 4.3 Advancement of Expenses. The Company shall pay all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding, whether brought by or in the right of the Company or otherwise, in advance of any determination with respect to entitlement to indemnification pursuant to Article V within 15 days after the receipt by the Company of a written request from Indemnitee requesting such payment or payments from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee. Indemnitee hereby undertakes and agrees that he will reimburse and repay the Company for any Expenses so advanced to the extent that it shall ultimately be determined (in a final adjudication by a court from which there is no further right of appeal or in a final adjudication of an arbitration pursuant to Section 6.1 if Indemnitee elects to seek such arbitration) that Indemnitee is not entitled to be indemnified by the Company against such Expenses. ARTICLE V PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION Section 5.1 Request by Indemnitee. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary or an Assistant Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the members of the Board in writing that Indemnitee has requested indemnification. Section 5.2 Determination of Request. Upon written request by Indemnitee for indemnification pursuant to Section 5.1, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case as follows: (a) If a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee unless Indemnitee shall request that such determination be made by the Disinterested Directors, in which case in the manner provided for in clause (i) of paragraph (b) below; (b) If a Change in Control shall not have occurred, (i) by a majority vote of the Disinterested Directors, even though less than a quorum of the Board, or (ii) if there are no Disinterested Directors, or if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to the -6- Indemnitee, or (iii) if Indemnitee and the Company mutually agree, by the stockholders of the Company; or (c) As provided in Section 5.4(b). If it is so determined that Indemnitee is entitled to indemnification hereunder, payment to Indemnitee shall be made within 15 days after such determination. Indemnitee shall cooperate with the person or persons making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary for such determination. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person or persons making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification), and the Company shall indemnify and hold harmless Indemnitee therefrom. Section 5.3 Independent Counsel. If a Change in Control shall not have occurred and the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected by (a) a majority vote of the Disinterested Directors, even though less than a quorum of the Board or (b) if there are no Disinterested Directors, by a majority vote of the Board, and the Company shall give written notice to Indemnitee, within 10 days after receipt by the Company of Indemnitee's request for indemnification, specifying the identity and address of the Independent Counsel so selected. If a Change in Control shall have occurred and the determination of entitlement to indemnification is to be made by Independent Counsel, the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company, within 10 days after submission of Indemnitee's request for indemnification, specifying the identity and address of the Independent Counsel so selected (unless Indemnitee shall request that such selection be made by the Disinterested Directors, in which event the Company shall give written notice to Indemnitee, within 10 days after receipt of Indemnitee's request for the Disinterested Directors to make such selection, specifying the identity and address of the Independent Counsel so selected). In either event, (i) such notice to Indemnitee or the Company, as the case may be, shall be accompanied by a written affirmation of the Independent Counsel so selected that it satisfies the requirements of the definition of "Independent Counsel" in Article I and that it agrees to serve in such capacity and (ii) Indemnitee or the Company, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection. Any objection to selection of Independent Counsel pursuant to this Section 5.3 may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of the definition of "Independent Counsel" in Article I, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is timely made, the Independent Counsel so selected may not serve as Independent Counsel unless and until the Court has determined that such objection is without merit. In the event of a timely written objection to a choice of Independent Counsel, the party originally selecting the Independent -7- Counsel shall have seven days to make an alternate selection of Independent Counsel and to give written notice of such selection to the other party, after which time such other party shall have five days to make a written objection to such alternate selection. If, within 30 days after submission of Indemnitee's request for indemnification pursuant to Section 5.1, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court for resolution of any objection that shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Independent Counsel under Section 5.2. The Company shall pay any and all reasonable fees and expenses incurred by such Independent Counsel in connection with acting pursuant to Section 5.2, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 5.3, regardless of the manner in which such Independent Counsel was selected or appointed. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 6.1, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). Section 5.4 Presumptions and Effect of Certain Proceedings. (a) Indemnitee shall be presumed to be entitled to indemnification under this Agreement upon submission of a request for indemnification pursuant to Section 5.1, and the Company shall have the burden of proof in overcoming that presumption in reaching a determination contrary to that presumption. Such presumption shall be used by Independent Counsel (or other person or persons determining entitlement to indemnification) as a basis for a determination of entitlement to indemnification unless the Company provides information sufficient to overcome such presumption by clear and convincing evidence. (b) If the person or persons empowered or selected under this Article V to determine whether Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Company of Indemnitee's request for indemnification, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a knowing misstatement by Indemnitee of a material fact, or knowing omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with Indemnitee's request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating to such determination; provided further, that the 60- day limitation set forth in this Section 5.4(b) shall not apply and such period shall be extended as necessary (i) if within -8- 30 days after receipt by the Company of Indemnitee's request for indemnification under Section 5.1 Indemnitee and the Company have agreed, and the Board has resolved, to submit such determination to the stockholders of the Company pursuant to Section 5.2(b) for their consideration at an annual meeting of stockholders to be held within 90 days after such agreement and such determination is made thereat, or a special meeting of stockholders for the purpose of making such determination to be held within 60 days after such agreement and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel, in which case the applicable period shall be as set forth in clause (c) of Section 6.1. (c) The termination of any Proceeding or of any Claim, issue or matter by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not by itself adversely affect the rights of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith or in a manner that he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. Indemnitee shall be deemed to have been found liable in respect of any Claim, issue or matter only after he shall have been so adjudged by the Court after exhaustion of all appeals therefrom. ARTICLE VI CERTAIN REMEDIES OF INDEMNITEE Section 6.1 Indemnitee Entitled to Adjudication in an Appropriate Court. If (a) a determination is made pursuant to Article V that Indemnitee is not entitled to indemnification under this Agreement, (b) there has been any failure by the Company to make timely payment or advancement of any amounts due hereunder, or (c) the determination of entitlement to indemnification is to be made by Independent Counsel and such determination shall not have been made and delivered in a written opinion within 90 days after the latest of (i) such Independent Counsel's being appointed, (ii) the overruling by the Court of objections to such counsel's selection or (iii) expiration of all periods for the Company or Indemnitee to object to such counsel's selection, Indemnitee shall be entitled to commence an action seeking an adjudication in the Court of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the commercial arbitration rules of the American Arbitration Association. Indemnitee shall commence such action seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such action pursuant to this Section 6.1, or such right shall expire. The Company shall not oppose Indemnitee's right to seek any such adjudication or award in arbitration. Section 6.2 Adverse Determination Not to Affect any Judicial Proceeding. If a determination shall have been made pursuant to Article V that Indemnitee is not entitled to -9- indemnification under this Agreement, any judicial proceeding or arbitration commenced pursuant to this Article VI shall be conducted in all respects as a de novo trial or arbitration on the merits, and Indemnitee shall not be prejudiced by reason of such initial adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Article VI, Indemnitee shall be presumed to be entitled to indemnification or advancement of Expenses, as the case may be, under this Agreement and the Company shall have the burden of proof in overcoming such presumption and to show by clear and convincing evidence that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. Section 6.3 Company Bound by Determination Favorable to Indemnitee in any Judicial Proceeding or Arbitration. If a determination shall have been made or deemed to have been made pursuant to Article V that Indemnitee is entitled to indemnification, the Company shall be irrevocably bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Article VI and shall be precluded from asserting that such determination has not been made or that the procedure by which such determination was made is not valid, binding and enforceable, in each such case absent (a) a knowing misstatement by Indemnitee of a material fact, or a knowing omission of a material fact necessary to make a statement by Indemnitee not materially misleading, in connection with Indemnitee's request for indemnification or (b) a prohibition of such indemnification under applicable law. Section 6.4 Company Bound by the Agreement. The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Article VI that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. Section 6.5 Indemnitee Entitled to Expenses of Judicial Proceeding. If Indemnitee seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and the Company shall indemnify Indemnitee against, any and all expenses (of the types described in the definition of Expenses in Article I) actually and reasonably incurred by him in such judicial adjudication or arbitration but only if Indemnitee prevails therein. If it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses or other benefit sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be equitably allocated between the Company and Indemnitee. Notwithstanding the foregoing, if a Change in Control shall have occurred, Indemnitee shall be entitled to indemnification under this Section 6.5 regardless of whether Indemnitee ultimately prevails in such judicial adjudication or arbitration. -10- ARTICLE VII MISCELLANEOUS Section 7.1 Non-Exclusivity. (a) The rights of Indemnitee to receive indemnification and advancement of Expenses under this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation or Bylaws of the Company, any other agreement, vote of stockholders or a resolution of directors, or otherwise. No amendment or alteration of the Certificate of Incorporation or Bylaws of the Company or any provision thereof shall adversely affect Indemnitee's rights hereunder and such rights shall be in addition to any rights Indemnitee may have under the Company's Certificate of Incorporation, Bylaws and the DGCL or otherwise. To the extent that there is a change in the DGCL or other applicable law (whether by statute or judicial decision) that allows greater indemnification by agreement than would be afforded currently under the Company's Certificate of Incorporation or Bylaws and this Agreement, it is the intent of the parties hereto that the Indemnitee shall enjoy by virtue of this Agreement the greater benefit so afforded by such change. (b) The Company shall not amend the Bylaws of the Company in a manner that adversely affects Indemnitee's rights to indemnification thereunder existing as of the date hereof until the six-year anniversary of the Public Status Date. Section 7.2 Insurance and Subrogation. (a) To the extent the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise that such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee, agent or fiduciary under such policy or policies. (b) In the event of any payment by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (c) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee -11- has otherwise actually received such payment under the Company's Certificate of Incorporation or Bylaws or any insurance policy, contract, agreement or otherwise. Section 7.3 Certain Settlement Provisions. The Company shall have no obligation to indemnify Indemnitee under this Agreement for amounts paid in settlement of a Proceeding or Claim without the Company's prior written consent. The Company shall not settle any Proceeding or Claim in any manner that would impose any fine or other obligation on 12 Indemnitee without Indemnitee's prior written consent. Neither the Company nor Indemnitee shall unreasonably withhold their consent to any proposed settlement. Section 7.4 Duration of Agreement. This Agreement shall continue for so long as Indemnitee serves as a director, nominee for director, officer, employee, agent or fiduciary of the Company or, at the request of the Company, as a director, nominee for director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and thereafter shall survive until and terminate upon the latest to occur of (a) the expiration of 10 years after the latest date that Indemnitee shall have ceased to serve in any such capacity; (b) the final termination of all pending Proceedings in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Article VI relating thereto; or (c) the expiration of all statutes of limitation applicable to possible Claims arising out of Indemnitee's Corporate Status. Section 7.5 Notice by Each Party. Indemnitee shall promptly notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document or communication relating to any Proceeding or Claim for which Indemnitee may be entitled to indemnification or advancement of Expenses hereunder; provided, however, that any failure of Indemnitee to so notify the Company shall not adversely affect Indemnitee's rights under this Agreement except to the extent the Company shall have been materially prejudiced as a direct result of such failure. The Company shall notify promptly Indemnitee in writing, as to the pendency of any Proceeding or Claim that may involve a claim against the Indemnitee for which Indemnitee may be entitled to indemnification or advancement of Expenses hereunder. Section 7.6 Certain Persons Not Entitled to Indemnification. Notwithstanding any other provision of this Agreement to the contrary, Indemnitee shall not be entitled to indemnification or advancement of Expenses hereunder with respect to any Proceeding or any Claim, issue or matter therein, brought or made by Indemnitee against the Company or any affiliate of the Company, except as specifically provided in Article V or Article VI. Section 7.7 Indemnification for Negligence, Gross Negligence, etc. Without limiting the generality of any other provision hereunder, it is the express intent of this Agreement that Indemnitee be indemnified and Expenses be advanced regardless of Indemnitee's acts of negligence, gross negligence or intentional or willful misconduct to the extent that indemnification -12- and advancement of Expenses is allowed pursuant to the terms of this Agreement and under applicable law. Section 7.8 Enforcement. The Company agrees that its execution of this Agreement shall constitute a stipulation by which it shall be irrevocably bound in any court or arbitration in which a proceeding by Indemnitee for enforcement of his rights hereunder shall have been commenced, continued or appealed, that its obligations set forth in this Agreement are unique and special, and that failure of the Company to comply with the provisions of this Agreement will cause irreparable and irremediable injury to Indemnitee, for which a remedy at law will be inadequate. As a result, in addition to any other right or remedy he may have at law or in equity with respect to breach of this Agreement, Indemnitee shall be entitled to injunctive or mandatory relief directing specific performance by the Company of its obligations under this Agreement. Section 7.9 Successors and Assigns. All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators, legal representatives. The Company shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by written agreement in form and substance reasonably satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. Section 7.10 Amendment. This Agreement may not be modified or amended except by a written instrument executed by or on behalf of each of the parties hereto. Section 7.11 Waivers. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term only by a writing signed by the party against which such waiver is to be asserted. Unless otherwise expressly provided herein, no delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. Section 7.12 Entire Agreement. This Agreement and the documents expressly referred to herein constitute the entire agreement between the parties hereto with respect to the matters covered hereby, and any other prior or contemporaneous oral or written understandings or agreements with respect to the matters covered hereby are expressly superseded by this Agreement. -13- Section 7.13 Severability. If any provision of this Agreement (including any provision within a single section, paragraph or sentence) or the application of such provision to any person or circumstance, shall be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement or affect the application of such provision to other persons or circumstances, it being the intent and agreement of the parties that this Agreement shall be deemed amended by modifying such provision to the extent necessary to render it valid, legal and enforceable while preserving its intent, or if such modification is not possible, by substituting therefor another provision that is valid, legal and unenforceable and that achieves the same objective. Any such finding of invalidity or unenforceability shall not prevent the enforcement of such provision in any other jurisdiction to the maximum extent permitted by applicable law. Section 7.14 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given upon (a) transmitter's confirmation of a receipt of a facsimile transmission, (b) confirmed delivery of a standard overnight courier or when delivered by hand or (c) the expiration of five business days after the date mailed by certified or registered mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice): If to the Company, to: Electronic Data Systems Holding Corporation 5400 Legacy Drive, Mail Stop #H3-3D-05 Plano, Texas 75024 Attention: General Counsel Facsimile: (214) 605-5610 If to Indemnitee, to: -------------------------------- -------------------------------- -------------------------------- Facsimile: --------------------- Section 7.15 Certain Construction Rules. (a) The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. As used in this Agreement, unless otherwise provided to the contrary, (i) all references to days shall be deemed references to calendar days and (ii) any reference to a "Section" or "Article" shall be deemed to refer to a section or article of this Agreement. The words "hereof," "herein" and "hereunder" and words of similar import -14- referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." Unless otherwise specifically provided for herein, the term "or" shall not be deemed to be exclusive. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. (b) For purposes of this Agreement, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; references to "serving at the request of the Company" shall include any service as a director, nominee for director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, nominee, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement. Section 7.16 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to the conflicts of laws principles thereof. Section 7.17 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument, notwithstanding that both parties are not signatories to the original or same counterpart. -15- IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the date first above written. ELECTRONIC DATA SYSTEMS HOLDING CORPORATION By: ---------------------------------- Name: ----------------------------- Title: ---------------------------- INDEMNITEE [Signature] ------------------------------------- Name: [Printed Name] -------------------------------- -16- EXHIBIT 10(G) ================================================================================ ELECTRONIC DATA SYSTEMS CORPORATION AND TEXAS COMMERCE BANK NATIONAL ASSOCIATION Trustee ----------- INDENTURE Dated as of May 15, 1995 ----------- ================================================================================
TABLE OF CONTENTS ---------- Page ---- PARTIES............................................................ 1 RECITALS OF THE COMPANY............................................ 1 ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions........................................... 1 "Act"................................................. 2 "Affiliate"........................................... 2 "Attributable Debt"................................... 2 "Authenticating Agent"................................ 2 "Board of Directors".................................. 2 "Board Resolution".................................... 2 "Business Day"........................................ 2 "Commission".......................................... 2 "Company"............................................. 3 "Company Request" or "Company Order".................. 3 "Consolidated Net Tangible Assets".................... 3 "Corporate Trust Office".............................. 3 "Corporation"......................................... 3 "Debt"................................................ 3 "Defaulted Interest".................................. 3 "defeasance".......................................... 3 "Depositary".......................................... 3 "Direction"........................................... 3 "Exempt Securities"................................... 3 "Event of Default".................................... 3 "Funded Debt"......................................... 3 "Global Security"..................................... 4 "Global Security Registered Owner".................... 4 "Holder".............................................. 4 "Indenture"........................................... 4 "Interest"............................................ 4 "Interest Payment Date"............................... 4 "Maturity"............................................ 4 "Mortgage"............................................ 4 "Officer's Certificate"............................... 4
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Page ---- "Opinion of Counsel".................................. 4 "Original Issue Discount Security".................... 4 "Outstanding"......................................... 4 "Paying Agent"........................................ 5 "Person".............................................. 5 "Place of Payment".................................... 5 "Predecessor Security"................................ 5 "Real Property"....................................... 6 "Redemption Date"..................................... 6 "Redemption Price".................................... 6 "Regular Record Date"................................. 6 "Repurchase Date"..................................... 6 "Repurchase Price".................................... 6 "Responsible Officer"................................. 6 "Restricted Subsidiary"............................... 6 "Restricted Security"................................. 7 "Rule 144A Information"............................... 7 "Sale and Leaseback Transaction"...................... 7 "Securities".......................................... 7 "Securities Act"...................................... 7 "Security Register" and "Security Registrar".......... 7 "Special Record Date"................................. 7 "Stated Maturity"..................................... 7 "Subsidiary".......................................... 7 "Trustee"............................................. 7 "Trust Indenture Act"................................. 7 "U.S. Government Obligations"......................... 7 "Vice President"...................................... 8 "Voting Stock"........................................ 8 Section 102. Form of Documents Delivered to Trustee................ 8 Section 103. Acts of Holders; Record Dates......................... 8 Section 104. Notices, Etc., to Trustee and Company................. 10 Section 105. Notice to Holders; Waiver............................. 11 Section 106. Applicability of Trust Indenture Act.................. 11 Section 107. Effect of Headings and Table of Contents.............. 11 Section 108. Successors and Assigns................................ 11 Section 109. Separability Clause................................... 11 Section 110. Benefits of Indenture................................. 12 Section 111. Governing Law......................................... 12 Section 112. Legal Holidays........................................ 12 Section 113. Execution in Counterparts............................. 12
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Page ---- ARTICLE TWO Security Forms Section 201. Forms Generally................................................. 12 Section 202. Form of Trustee's Certificate of Authentication................. 13 ARTICLE THREE The Securities Section 301. Amount Unlimited; Issuable in Series............................. 13 Section 302. Denominations.................................................... 15 Section 303. Execution, Authentication, Delivery and Dating................... 16 Section 304. Temporary Securities............................................. 17 Section 305. Registration, Registration of Transfer and Exchange.............. 18 Section 306. Mutilated, Destroyed, Lost and Stolen Securities................. 20 Section 307. Payment of Principal and Interest; Interest Rights Preserved..... 20 Section 308. Persons Deemed Owners............................................ 22 Section 309. Cancellation..................................................... 22 Section 310. Computation of Interest.......................................... 22 ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture.......................... 23 Section 402. Application of Trust Money....................................... 24 ARTICLE FIVE Remedies Section 501. Events of Default................................................ 24 Section 502. Acceleration of Maturity; Rescission and Annulment............... 25 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee.. 27 Section 504. Trustee May File Proofs of Claim................................. 27 Section 505. Trustee May Enforce Claims Without Possession of Securities...... 28 Section 506. Application of Money Collected................................... 28 Section 507. Limitation on Suits.............................................. 28 Section 508. Unconditional Right of Holders to Receive Principal Premium and Interest......................................................... 29 Section 509. Restoration of Rights and Remedies............................... 29
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Page ---- Section 510. Rights and Remedies Cumulative.................................. 29 Section 511. Delay or Omission Not Waiver.................................... 29 Section 512. Control by Holders.............................................. 30 Section 513. Waiver of Past Defaults......................................... 30 Section 514. Undertaking for Costs........................................... 30 ARTICLE SIX The Trustee Section 601. Certain Duties and Responsibilities............................. 31 Section 602. Notice of Defaults.............................................. 32 Section 603. Certain Rights of Trustee....................................... 32 Section 604. Not Responsible for Recitals or Issuance of Securities.......... 33 Section 605. May Hold Securities............................................. 33 Section 606. Money Held in Trust............................................. 34 Section 607. Compensation and Reimbursement.................................. 34 Section 608. Disqualification; Conflicting Interests......................... 34 Section 609. Corporate Trustee Required; Eligibility......................... 38 Section 610. Resignation and Removal; Appointment of Successor............... 38 Section 611. Acceptance of Appointment by Successor.......................... 40 Section 612. Merger, Conversion, Consolidation or Succession to Business..... 41 Section 613. Compliance with Tax Laws........................................ 41 Section 614. Appointment of Authenticating Agent............................. 41 ARTICLE SEVEN Communications to Holders Section 701. Communications to Holders....................................... 43 ARTICLE EIGHT Consolidation, Merger, Conveyance or Transfer Section 801. Consolidations and Mergers of Company and Conveyances Permitted Subject to Certain Conditions................................... 44 Section 802. Rights and Duties of Successor Corporation...................... 44 Section 803. Officer's Certificate and Opinion of Counsel.................... 45 ARTICLE NINE
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Page ---- Supplemental Indentures Section 901. Supplemental Indentures Without Consent of Holders............... 45 Section 902. Supplemental Indentures with Consent of Holders.................. 46 Section 903. Execution of Supplemental Indentures; Opinions................... 47 Section 904. Effect of Supplemental Indentures................................ 47 Section 905. Conformity with Trust Indenture Act.............................. 48 Section 906. Reference in Securities to Supplemental Indentures............... 48 ARTICLE TEN Covenants Section 1001. Payment of Principal, Premium and Interest...................... 48 Section 1002. Maintenance of Office or Agency................................. 48 Section 1003. Money for Securities Payments to Be Held in Trust............... 49 Section 1004. Statement by Officers as to Default............................. 49 Section 1005. Limitation on Liens............................................. 50 Section 1006. Limitation on Sales and Leasebacks.............................. 51 Section 1007. Waiver of Certain Covenants..................................... 51 Section 1008. Delivery of Certain Information................................. 52 ARTICLE ELEVEN Redemption of Securities Section 1101. Applicability of Article........................................ 52 Section 1102. Election to Redeem; Notice to Trustee........................... 52 Section 1103. Selection by Trustee of Securities to Be Redeemed............... 52 Section 1104. Notice of Redemption............................................ 53 Section 1105. Deposit of Redemption Price..................................... 53 Section 1106. Securities Payable on Redemption Date........................... 54 Section 1107. Securities Redeemed in Part..................................... 54 ARTICLE TWELVE Sinking Funds Section 1201. Applicability of Article........................................ 54 Section 1202. Satisfaction of Sinking Fund Payments with Securities........... 55 Section 1203. Redemption of Securities for Sinking Fund....................... 55
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Page ---- ARTICLE THIRTEEN Defeasance Section 1301. Applicability of Article; Company's Option to Effect Defeasance. 55 Section 1302. Defeasance and Discharge........................................ 56 Section 1303. Covenant Defeasance............................................. 56 Section 1304. Conditions of Defeasance........................................ 56 Section 1305. Deposited Money and U.S. Government Obligations to Be Held in Trust; Miscellaneous............................................ 57 Section 1306. Reinstatement................................................... 58 ARTICLE FOURTEEN Repurchase of Securities at Option of Holders Section 1401. Applicability of Article........................................ 58 Section 1402. Notice of Repurchase Date....................................... 58 Section 1403. Deposit of Repurchase Price..................................... 59 Section 1404. Securities Payable on Repurchase Date........................... 59 Section 1405. Securities Repurchased in Part.................................. 59 ARTICLE FIFTEEN Corporate Obligation Only Section 1501. Indenture and Securities Solely Corporate Obligations........... 60 TESTIMONIUM................................................................... 61 SIGNATURES.................................................................... 61 ACKNOWLEDGMENTS............................................................... 62
- ------------- NOTE: This table of contents shall not, for any purpose, be deemed to be a part of the Indenture. (vi) INDENTURE INDENTURE, dated as of May 15, 1995, between Electronic Data Systems Corporation, a corporation duly organized and existing under the laws of the state of Texas (the "Company"), and Texas Commerce Bank National Association, a national banking association organized under the laws of the United States, as Trustee (the "Trustee"). RECITALS OF THE COMPANY A. The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (the "Securities"), to be issued in one or more series unlimited as to principal amount, to bear such rates of interest, to mature at such times and to have such other provisions as in this Indenture provided. B. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: That in order to declare the terms and conditions upon which the Securities are authenticated, issued and delivered, and in consideration of the premises and the purchase of the Securities by the Holders (as defined herein) thereof, the Company and the Trustee covenant and agree with each other, for the benefit of all Holders from time to time of the Securities or of any series thereof, as follows: ARTICLE ONE Definitions and Other Provisions of General Application Section 101. Definitions. For all purposes of this Indenture and of any Indenture supplemental hereto, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; (3) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (4) the word "or" joining two or more words or clauses may also mean the word "and" joining those same words or clauses; (5) the word "including" means including without limitation; and (6) words in the singular include the plural and words in the plural include the singular. "Act," when used with respect to any Holder, has the meaning specified in Section 103. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with the specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of that Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Attributable Debt" means, as to any particular Sale and Leaseback Transaction, at any date as of which the amount thereof is to be determined, the total amount determined by multiplying (i) the greater of (a) the fair value of the Real Property subject to such arrangement (as determined by any two of the Chairman of the Board or any Vice Chairman of the Company, its President, its Treasurer and its Controller) or (b) the net proceeds of the sale of such Real Property to the lender or investor by (ii) a fraction, the numerator of which is the number of months in the unexpired initial term of the lease of such Real Property and the denominator of which is the number of months in the full initial term of such lease; provided, however, that Sale and Leaseback Transactions with respect to Real Property financed by obligations issued by a state or local governmental unit (whether or not tax exempt pursuant to Section 103(b)(4)(F), 103(b)(4)(E) or 103(b)(6) of the Internal Revenue Code, or any successor provision thereof) shall not be included in any calculation of Attributable Debt. "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series. "Board of Directors" means either the board of directors of the Company, the Finance Committee of the board of directors of the Company, or any duly authorized committee or subcommittee thereof. "Board Resolution" means a copy of a resolution delivered to the Trustee that is certified by the Secretary, Assistant Secretary, Treasurer or Assistant Treasurer of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. "Business Day" when used with respect to any Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions in New York, New York, or Houston, Texas, and the Place of Payment are authorized or obligated by law or executive order to close. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the United States Securities Exchange Act of 1934. 2 "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Company Request" or "Company Order" means a written request or order delivered to the Trustee that is signed in the name of the Company by any of the following: its Chairman of the Board, its Vice Chairman of the Board, its President, any Vice President, its Treasurer, any Assistant Treasurer, its Controller, any Assistant Controller, its Secretary or any Assistant Secretary. "Consolidated Net Tangible Assets" means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any current liabilities for money borrowed having a maturity of less than 12 months but by its terms being renewable or extendible beyond 12 months from such date at the option of the borrower) and (b) all goodwill, trade names, trademarks, patents, unamortized debt discount and expense and other like intangibles, all as set forth on the most recent balance sheet of the Company and its consolidated subsidiaries and computed in accordance with generally accepted accounting principles. "Corporate Trust Office" means the office of the Trustee at which the corporate trust business of the Trustee shall, at any particular time, be principally administered, which office is, at the date as of which this Indenture is dated, located in Houston, Texas, except that with respect to the presentation of Securities for payment or for registration of transfer and exchange, such term shall also mean the office of the Trustee's agent in the Borough of Manhattan, the city and state of New York, at which at any particular time its corporate agency business shall be conducted. "Corporation" means a corporation, association, company, joint-stock company or business trust. "Debt" has the meaning specified in Section 1005. "Defaulted Interest" has the meaning specified in Section 307. "defeasance" has the meaning specified in Section 1302. "Depositary" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depositary by the Company pursuant to Section 301. "Direction" has the meaning specified in Section 103(c). "Exempt Securities" has the meaning given it in Section 1008. "Event of Default" has the meaning specified in Section 501. "Funded Debt" means all indebtedness for money borrowed having a maturity of more than 12 months from the date as of which the amount thereof is to be determined. "Global Security" means a Security evidencing all or part of a series of Securities, issued to the Depositary for such series or its nominee, and registered in the name of such Depositary or nominee. 3 "Global Security Registered Owner" has the meaning given it in Section 305. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. The term "Indenture" shall also include the terms of particular series of Securities established as contemplated by Section 301, whether or not a supplemental indenture is entered into with respect thereto. "Interest," when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date," when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Maturity," when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption, occurrence of any Repurchase Date or otherwise. "Mortgage" has the meaning specified in Section 1005. "Officer's Certificate" means a certificate delivered to the Trustee that is signed by any of the following officers of the Company: its Chairman of the Board, its Vice Chairman of the Board, its President, any Vice President, its Treasurer, any Assistant Treasurer, its Controller, any Assistant Controller, its Secretary or any Assistant Secretary. "Opinion of Counsel" means a written opinion of counsel from counsel for the Company (who may be an employee of the Company), or outside counsel for the Company. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding," when used with respect to any series of Securities, means, as of the date of determination, all Securities of that series which are authenticated and delivered under this Indenture, except: (i) Securities of that series previously cancelled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities of that series for whose payment or redemption money in the necessary amount has been previously deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and 4 (iii) Securities of that series which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities of any series have given any request, demand, authorization, direction, notice, consent or waiver hereunder, (A) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 502, (B) the principal amount of a Security denominated in one or more foreign currencies or currency units shall be the U.S. dollar equivalent, determined in the manner provided as contemplated by Section 301 on the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent on the date of original issuance of such Security of the amount determined as provided in (A) above) of such Security, and (C) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing clause (C), Securities so owned by the Company, such obligor, or such Affiliate that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities so long as the pledgee is not the Company or any other obligor upon the Securities or an Affiliate of the Company or of such other obligor. "Paying Agent" means initially the Trustee or the Trustee's agent in the Borough of Manhattan, the city and state of New York, and subsequently means any Person authorized by the Company to pay the principal of, premium (if any), or interest on any Securities on behalf of the Company. "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or any other entity or government or any agency or political subdivision thereof. "Place of Payment," when used with respect to the Securities of any series, means offices of the Paying Agent or the Trustee in the Borough of Manhattan, City of New York, or such other place or places where the principal of, premium (if any), and interest on the Securities of that series are payable as specified as contemplated by Section 301. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Real Property" means any real property, and any building, structure or other facility thereon, located in the United States (excluding its territories and possessions, but including Puerto Rico), owned or leased by the Company or any Subsidiary of the Company, the gross book value (without deduction of any depreciation reserves) of which on the date as of which the determination is being made exceeds 1% of 5 Consolidated Net Tangible Assets, other than any such real property, building, structure or other facility or portion thereof (i) that is financed by obligations issued by a state or local governmental unit (whether or not tax exempt pursuant to Section 103(b)(4)(F), 103(b)(4)(E) or 103(b)(6) of the Internal Revenue Code of 1954, or any successor provision thereof in the Internal Revenue Code of 1986), (ii) that consists of approximately 175.35 acres currently known as the Company's Forest Lane property located in Dallas, Texas, and more particularly described on Exhibit A hereto, (iii) that consists of approximately 381 acres and currently known as the Company's Plano headquarters property located in Plano, Texas, and more particularly described on Exhibit A hereto, or (iv) which if not owned or leased by the Company or its Subsidiaries, in the opinion of the Board of Directors of the Company, would not have a material adverse effect on the business conducted by the Company and its Subsidiaries as an entirety. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the fifteenth day (whether or not a Business Day) next preceding such Interest Payment Date or such other date with respect to Securities of any series specified as contemplated by Section 301. "Repurchase Date," when used with respect to any Security of any series to be repurchased, means the date, if any, fixed for such repurchase pursuant to Section 301. "Repurchase Price," when used with respect to any Security of any series to be repurchased, means the price, if any, at which such Security is to be repurchased pursuant to Section 301. "Responsible Officer," when used with respect to the Trustee, means the Chairman or Vice Chairman of the Board of Directors, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred at the Trustee's Corporate Trust Office because of that person's knowledge of and familiarity with the particular subject. "Restricted Subsidiary" means any Subsidiary that owns a Real Property, except a Subsidiary that is engaged primarily in financing the operations of the Company or its Subsidiaries, or both, outside the states of the United States, and (a) more than 50% of whose net sales and operating revenues during the preceding four calendar quarters was derived from, or more than 50% of whose operating properties is located in, the United States (excluding its territories and possessions, but including Puerto Rico), or (b) more than 50% of whose assets consists of securities of other Restricted Subsidiaries. "Restricted Security" means a Security that is a "restricted security" as defined in Rule 144(a)(3) under the Securities Act or any successor provision thereto or a Security that by its terms can only be sold pursuant to Regulation S, Rule 144, or Rule 144A under the Securities Act (or successor provisions thereto) or in a transaction exempt from the registration requirements of the Securities Act pursuant to Section 4 of the Securities Act; provided, however, that once the Security is sold pursuant to the provisions of Rule 144, including Rule 144(k), it will cease to be a Restricted Security. 6 "Rule 144A Information" means the information satisfying the requirements of Rule 144A(d)(4) under the Securities Act. "Sale and Leaseback Transaction" has the meaning specified in Section 1006. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities of any series authenticated and delivered under this Indenture. "Securities Act" means the Securities Act of 1933, as amended. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity," when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means a corporation, association, partnership or other entity of which more than 80% of the outstanding Voting Stock is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument is qualified under such act, to the extent required by law, as amended from time to time. "U.S. Government Obligations" means securities that are (x) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. 7 "Vice President" when used with respect to the Trustee means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president," and when used with respect to the Company means any vice president who is an officer of the Company, whether or not designated by a number or word or words before such title. "Voting Stock" means stock of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such corporation, association, partnership or other entity (irrespective of whether or not at the time stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency). Section 102. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, insofar as it relates to factual matters or information with respect to which is in the possession of the Company, upon a certificate or opinion of, or representations by, an officer or officers of the Company, unless such counsel knows that the certificate or opinion or representations with respect to such matters are erroneous. Any Opinion of Counsel may be stated to be based on the opinion of other counsel, in which event it shall be accompanied by a copy of such other opinion. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. Section 103. Acts of Holders; Record Dates. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is expressly hereby required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. Without limiting the generality of the foregoing, a Holder, including a Depositary that is a Holder of a Global Security, may make, give or take, by a proxy, or proxies, duly appointed in writing, any 8 request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted in this Indenture to be made, given or taken by Holders, and a Depositary that is a Holder of a Global Security may provide its proxy or proxies to the beneficial owners of interest in any such Global Security. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or a member of a partnership, acting on behalf of such corporation or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. Notwithstanding the foregoing, the fact and date of the execution of any such instrument or writing, and the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient. (c) Except as provided in the next paragraph of this subsection (c) or as specifically provided otherwise pursuant to Section 301 with respect to any series of securities, the Company may set any day as the record date for the purpose of determining the Holders of Securities of any series entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders of Securities of such series. With regard to any record date set pursuant to this subsection (c), the Holders of Outstanding Securities of the relevant series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to give or take the relevant action, whether or not such Holders remain Holders after such record date. With regard to any action that may be given or taken hereunder only by Holders of a requisite principal amount of Outstanding Securities of any series (or their duly appointed agents) and for which a record date is set pursuant to this subsection (c), the Company may, at its option, set an expiration date after which no such action purported to be given or taken by any Holder shall be effective hereunder unless given or taken on or prior to such expiration date by Holders of the requisite principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents). On or prior to any expiration date set pursuant to this subsection (c), the Company may, on one or more occasions at its option, extend such date to any later date. Nothing in this subsection (c) shall prevent any Holder (or any duly appointed agent thereof) from giving or taking, after any expiration date, any action identical to, or, at any time, contrary to or different from any action given or taken, or purported to have been given or taken, hereunder by a Holder on or prior to such date, in which event the Company may set a record date in respect hereof pursuant to this subsection (c). Notwithstanding the foregoing, upon receipt by the Trustee, with respect to Securities of any series, of (i) any Notice of Default pursuant to Section 501, (ii) any declaration of acceleration, or any rescission and annulment of any such declaration pursuant to Section 502, or (iii) any direction given pursuant to Section 512 (any such notice, declaration, rescission and annulment, or direction being referred to herein as a "Direction"), a record date shall automatically and without any other action by any Person be set for the purpose of determining the Holders of Outstanding Securities of such series entitled to join in such Direction, which record date shall be the close of business on the day the Trustee receives such Direction. The Holders of Outstanding Securities of such series on such record date (or their duly appointed agents), and only such Persons, shall be entitled to join in such Direction, whether or not such Holders remain Holders after such record date; provided that, unless such Direction shall have become effective by virtue of Holders of the requisite principal amount of Outstanding Securities of such series on such record date (or their duly appointed agents) having joined therein on or prior to the 90th day after such record date, such Direction shall automatically and without any action by any Person be cancelled and be of no further effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed agent thereof) from giving, before or after the expiration of such 90- day period, a Direction contrary to or different from, or, after the expiration of such period, 9 identical to, a Direction that has been cancelled pursuant to the proviso to the preceding sentence, in which event a new record date in respect thereof shall be set pursuant to this subsection (c). (d) The ownership of Securities shall be proved by the Security Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange thereof or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, any Security Registrar, any Paying Agent, any Authenticating Agent, or the Company in reliance thereon, whether or not notation of such action is made upon such Security. Section 104. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing (which includes by telecopy) to or with the Trustee at its Corporate Trust Office, 600 Travis, 8th Floor, Houston, Texas 77002, Attention: Vice President, Corporate Trust Department, or at such other address as previously furnished in writing to the Holders and the Company by the Trustee for such purpose, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, registered or certified mail postage prepaid, to the Company addressed to it at EDS Treasury Operations, H1-3F-35, 5400 Legacy Drive, Plano, Texas 75024, Attention: Manager Capital Markets, with a copy to EDS Legal Affairs, 5400 Legacy Drive, Plano, Texas 75024, Attention: General Counsel or at any other addresses previously furnished in writing to the Trustee by the Company for such purpose. Section 105. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Any notice mailed to the Holder in the manner herein prescribed shall be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. 10 Section 106. Applicability of Trust Indenture Act. This Indenture shall not be qualified under the Trust Indenture Act until such time as the Company, in its sole discretion, shall elect to so qualify this Indenture upon 30 day's prior written notice to the Trustee. When and if the Company qualifies this Indenture with the Commission under the Trust Indenture Act, the provisions of the Trust Indenture Act shall govern this Indenture and a supplemental indenture to this Indenture shall be executed which shall amend or replace all provisions herein that are not permitted under that act. Section 107. Effect of Headings and Table of Contents. The Article and section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 108. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. Section 109. Separability Clause. In case any provision in this Indenture or in the Securities of any series shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 110. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto, any Security Registrar, any Paying Agent, any Authenticating Agent, and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. Section 111. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 112. Legal Holidays. In any case where any Interest Payment Date, Redemption Date, Repurchase Date, sinking fund payment date or Stated Maturity or Maturity of any Security of any series or any date by which any report or other information is due pursuant to any provision of this Indenture shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of such Securities) payment of interest or principal (and premium, if any) or delivery of such report or information need not be made on or by such date, but may be made on the next succeeding Business Day with the same force and effect (a) with respect to any payment, as if made on the Interest Payment Date, Repurchase Date or Redemption Date, sinking fund payment date or at the Stated Maturity or Maturity, and (b) with respect to any such report or other information, as if delivered by the stated due date. No interest shall accrue for the period from and after such Interest Payment 11 Date, Redemption Date, Repurchase Date, sinking fund payment date or Stated Maturity or Maturity, as the case may be to such next succeeding Business Day. Section 113. Execution in Counterparts. This Indenture may be executed in any number of counterparts, each of which shall be an original; but such counterparts shall together constitute but one and the same instrument. ARTICLE TWO Security Forms Section 201. Forms Generally. The Securities of each series shall be in substantially the form as shall be established without the approval of any Holders by or pursuant to a Board Resolution in accordance with Section 301 or in one or more indentures supplemental hereto, in each case, including without limitation such appropriate legends, insertions, omissions, substitutions and other variations as are required or are not prohibited by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Indenture, or as necessary or appropriate to comply with any law or with any rule or regulation made pursuant thereto or with any rules or regulations of any securities exchange on which such series of Securities may be listed, or to conform to general usage, or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of such Securities. The definitive Securities of each series shall be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. Section 202. Form of Trustee's Certificate of Authentication. The Trustee's certificates of authentication shall be in substantially the following form: This is one of the Securities designated as [name of series], which is a series referred to in the within-mentioned Indenture. TEXAS COMMERCE BANK NATIONAL ASSOCIATION, As Trustee By ---------------------------------------- Authorized Signatory 12 ARTICLE THREE The Securities Section 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities of all series which may be issued, executed, authenticated, delivered and Outstanding under this Indenture is unlimited. The Securities may be issued in one or more series. There shall be established, without the approval of any Holders, by or pursuant to authority granted by one or more Board Resolutions and, subject to Section 303, there shall be set forth in an Officer's Certificate, or established in one or more indentures supplemental hereto, prior to the issuance of Securities of any series, any or all of the following, as applicable: (1) the title of the Securities of the series (which shall distinguish the Securities of such series from all other series of Securities); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities of the series authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906, 1107 or 1405 and except for any Securities of the series which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder); (3) if other than the Trustee, the identity of each Security Registrar and Paying Agent; (4) the date or dates, or the method by which such date or dates are determined or extended, on which the principal and premium (if any) of the Securities of the series shall be payable; (5) the rate or rates (which may be fixed or variable) at which the Securities of the series shall bear interest, or the method by which such rates will be determined, if any, the date or dates from which such interest shall accrue, the Interest Payment Dates on which any such interest shall be payable, or the method by which such date will be determined, and the basis upon which interest shall be calculated if other than that of a 360-day year of twelve thirty-day months; (6) If other than the fifteenth day next preceding an Interest Payment Date, the Regular Record Date with respect to an Interest Payment Date; (7) the place or places, if any, other than or in addition to the Corporate Trust Office, where the principal of, premium (if any), and interest on Securities of the series shall be payable; (8) the period or periods within which, the price or prices at which, and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company if the Company is to have such option; (9) the obligation, if any, of the Company to redeem, repay or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and 13 the period or periods within which, the price or prices at which, and the terms and conditions upon which Securities of the series shall be redeemed, repaid, or purchased, in whole or in part, pursuant to such obligation; (10) if other than denominations of $250,000 and integral multiples of $1,000 in excess thereof, the denominations in which Securities of the series shall be issuable; (11) if other than the currency of the United States of America, the currency, currencies or currency units in which payment of the principal, premium (if any), and interest on any Securities of the series shall be payable and the manner of determining the equivalent thereof in the currency of the United States of America for purposes of the definition of "Outstanding" in Section 101; (12) if the amount of payments of principal of, premium (if any), or interest on any Securities of the series may be determined with reference to an index, the manner in which such amounts shall be determined; (13) if the principal of, premium (if any), or interest on any Securities of the series is to be payable, at the election of the Company or a Holder thereof, in one or more currencies or currency units other than that or those in which the Securities are stated to be payable, the currency, currencies or currency units in which payment of the principal of, premium (if any), and interest on Securities of such series as to which such election is made shall be payable, and the periods within which and the terms and conditions upon which such election is to be made; (14) if other than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502 or provable in bankruptcy pursuant to Sections 503 and 504; (15) the application, if any, of either or both of Section 1302 and Section 1303 to the Securities of the series; (16) any addition to or change in the Events of Default with respect to the Securities of the series and any change in the right of the Trustee or the Holders to declare the principal of, premium (if any), and interest on, such Securities due and payable; (17) the applicability of, and any addition to or change in the covenants and definitions currently set forth in this Indenture or in the terms currently set forth in Article Eight or Article Ten; (18) if and as applicable, that the Securities of the series shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the Depositary or Depositaries for such Global Security or Global Securities and any circumstances other than those set forth in Section 305 in which any such Global Security may be transferred to, and registered and exchanged for Securities of the series registered in the name of, a Person other than the Depositary for such Global Security or nominee thereof, and in which any such transfer may be registered; and (19) any other terms of the series (which terms shall not be prohibited by the provisions of this Indenture, except as permitted by Section 901(4)). 14 All Securities of any one series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to the Board Resolution referred to above and (subject to Section 303) set forth, or determined in the manner provided, in the Officer's Certificate referred to above or in any such indenture supplemental hereto. All Securities of any one series need not be issued at the same time. Unless otherwise provided, Securities within a single series may have different terms and a series may be reopened, without the consent of the Holders, for issuance of additional Securities of such series. If any of the terms of the series are established by action taken by or pursuant to one or more Board Resolutions, a copy of an appropriate record of such action(s) shall be certified by the Secretary or any Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officer's Certificate setting forth the terms of the Securities of such series. Section 302. Denominations. Unless other denominations and amounts shall be fixed from time to time by or pursuant to one or more Board Resolutions, the Securities of each series shall be issued in registered form without coupons in such denominations as shall be specified as contemplated by Section 301. In the absence of any contrary provisions with respect to the Securities of any series pursuant to Section 301, the Securities of such series shall be issuable in denominations of $250,000 and integral multiples of $1,000 in excess thereof. Section 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board of Directors, its President, any of its Vice Presidents, the Chief Financial Officer, the Treasurer or any Assistant Treasurer and attested by its Secretary or any of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time properly serving as such officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities as provided in this Indenture. In authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, (a) a copy of the Board Resolutions pertaining to such Securities; (b) an executed supplemental indenture, if any; (c) an Officer's Certificate, if there is no supplemental indenture; and (d) an Opinion of Counsel stating: 15 (1) that the form of such Securities has been established in conformity with the provisions of this Indenture; (2) that the terms of such Securities have been established in conformity with the provisions of this Indenture; and (3) that such Securities have been duly authorized and, when executed, authenticated, issued and delivered in accordance with the terms of this Indenture, and assuming due authentication thereof by the Trustee, and when such Securities are delivered and paid for by the purchaser thereof, will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance or transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; provided, however, that such Opinion of Counsel need express no opinion as to whether a court in the United States would render a money judgement in a currency other than that of the United States and the counsel rendering such Opinion of Counsel shall be entitled to assume for purposes of such Opinion of Counsel that the internal laws of any state other than the state of Texas are the same as the internal laws of the state of Texas. If such form and terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under such Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Notwithstanding the provisions of Section 301 and of the preceding paragraph, if all Securities of any series are not to be originally issued at one time, it shall not be necessary to deliver the Board Resolution and the Officer's Certificate or supplemental indenture otherwise required pursuant to Section 301 or a Company Order or an Opinion of Counsel otherwise required pursuant to such preceding paragraph at or prior to the time of authentication of each Security of such series if such documents are delivered at or prior to the authentication upon original issuance of the first Security of such series to be issued. Each Security shall be dated and issued as of the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee or its Authenticating Agent by manual signature, and such certificate upon any such Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. Notwithstanding the foregoing, if any such Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. Section 304. Temporary Securities. Pending the preparation of definitive Securities of any series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities of that series which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, 16 substantially of the tenor of the definitive Securities of that series in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in the form of Global Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable, subject to Section 305 hereof, for definitive Securities of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor one or more definitive Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. Section 305. Registration, Registration of Transfer and Exchange. The Company may act as, or may appoint an agent or the Trustee to act as, the depository for the safekeeping of certificated Securities, issuing agent of the Securities, and registrar for the registration of Securities and transfers of Securities (the "Security Registrar)" pursuant to Section 301. The Company shall cause to be kept a register (the register maintained by the Trustee, any agent, or in any other office or agency of the Company in a Place of Payment being herein sometimes collectively referred to as the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. Unless the Company or another agent is designated as the Security Registrar with respect to any series of Securities pursuant to Section 301, the Trustee is hereby appointed "Security Registrar" of each series of Securities for the purpose of registering Securities and transfers of Securities on such Security Register as herein provided at the Corporate Trust Office in the Borough of Manhattan, The City of New York. The Security Register shall contain such information as is necessary to ensure that the Securities are registered as to principal and interest as required by United States federal tax laws. Upon surrender for registration of transfer of any Security of any series at the office or agency in a Place of Payment for that series, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor bearing a number not contemporaneously outstanding. No Security to be issued upon exchange of an Outstanding Security shall be issued in a denomination less than $250,000 unless otherwise specified pursuant to Section 301. At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denomination or denominations and of a like aggregate principal amount and denomination or tenor, upon surrender of such Securities to be exchanged at such office or agency, and upon payment of any taxes or governmental charges as hereinafter provided. Whenever any such Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. 17 All Securities of any series issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities of the same series surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company or the Trustee shall require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of such Securities, other than exchanges pursuant to Section 304, 906, 1107 or 1405 not involving any transfer. The Company shall not be required (i) to issue, register the transfer of, or exchange Securities of any series during a period beginning at the opening of business 15 days before any selection of Securities of that series to be redeemed and ending at the close of business on the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 1104, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any such Security being redeemed in part, or (iii) to register the transfer of or exchange any Security during a period beginning five days before the date of Maturity with respect to such Securities and ending on such date of Maturity. Notwithstanding the foregoing and except as otherwise specified or contemplated by Section 301, no Global Security shall be exchangeable pursuant to this Section 305 or Sections 304, 906, 1107 and 1405 for Securities registered in the name of, and no transfer of a Global Security of any series may be registered to, any Person other than the Depositary for such Security or its nominee unless (1) such Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or if the Company determines that the Depositary is unable to continue as Depositary and the Company thereupon fails to appoint a successor Depositary, (2) the Company executes and delivers to the Trustee a Company Order that such Global Security shall be so exchangeable and the transfer thereof so registerable, (3) the Company provides for such exchange pursuant to Section 301, or (4) there shall have occurred and be continuing an Event of Default, or an event which after notice or lapse of time would be an Event of Default, with respect to the Securities evidenced by such Global Security. Upon the occurrence in respect of any Global Security of any series of any one or more of the conditions specified in clauses (1), (2), (3) or (4) of the preceding sentence or such other conditions as may be specified as contemplated by Section 301 for such series, such Global Security may be exchanged for Securities of the same series registered in the names of, and the transfer of such Global Security may be registered to, such Persons (including Persons other than the Depositary with respect to such series and its nominees) as such Depositary shall direct. Notwithstanding any other provisions of this Indenture, any Security of any series authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, any Global Security of that series shall also be a Global Security and shall bear the legend specified in the Officer's Certificate or supplemental indenture specified in Section 201 except for any Security of that series authenticated and delivered in exchange for, or upon registration of transfer of, a Global Security pursuant to the preceding sentence. In the event that a Global Security is deposited upon issuance with a Depositary, it will be registered in the name of the Depositary or a nominee of the Depositary (the "Global Security Registered Owner"). Payments in respect of the principal of and interest on any Securities registered in the name of the 18 Global Security Registered Owner will be payable to the Global Security Registered Owner in its capacity as the registered owner of such Global Security. The Company and the Trustee may treat the person in whose names the Securities, including the Global Security, are registered as the owner thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. None of the Company, the Trustee, the Security Registrar, the Paying Agent or any agent of the Company or the Trustee will have any responsibility or liability for (i) any aspect of the records relating to or payments made on account of the beneficial ownership interests of the Global Security by the Depositary or any of its participants, or for maintaining, supervising or reviewing any records of the Depositary or any of its participants relating to the beneficial ownership interests of the Global Security, (ii) the payments to the beneficial owners of the Global Security of amounts paid to the Global Security Registered Owner, or (iii) for any other matter relating to the actions and practices of the Depositary or any of its participants. Neither the Company nor the Trustee will be liable for any delay by the Global Security Registered Owner or the Depositary or any of its participants in identifying the beneficial owners of the Securities, and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Security Registered Owner or the Depositary for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Securities to be issued). Section 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee or the Company, together with such security, bond or indemnity as may be required by the Company or the Trustee to save each of them and any agent of either of them harmless, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security, bond or indemnity in a form satisfactory to both of them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. Notwithstanding the provisions of the previous paragraphs of this Section 306, in case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company or the Trustee shall require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee), if any, connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security of the same series shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. A new Security shall have such legends as are on the old Security, unless the Company provides otherwise. 19 The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. Section 307. Payment of Principal and Interest; Interest Rights Preserved. Principal, premium (if any), and interest due on a Security at Maturity or upon redemption or repurchase will be paid by wire transfer in immediately available funds against presentation and surrender of the Security by the Holder thereof at the office of the Paying Agent, but only if appropriate wire transfer instructions have been received in writing (or such other means as deemed acceptable by the Paying Agent) by the Paying Agent not less than 15 days before Maturity or the Redemption Date or repayment date. In the event such instructions are not received by such 15th day, such principal, premium (if any), and interest due will be paid by check against such presentation and surrender. Except as otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest. All interest payments on any Security (other than interest due at Maturity or on redemption or repayment) will be made by mailing a check for such interest, payable to or upon the written order of the Person entitled thereto pursuant to Section 301, to the address of such Person as it appears on the Security Register. Notwithstanding the foregoing, the Holder of Securities in an aggregate principal amount in excess of $10,000,000 may elect to receive payments of interest (other than interest payable on the Stated Maturity or on redemption or repayment) via wire transfer in immediately available funds to a bank in the United States of America by making arrangements therefor in writing (or such other means as deemed acceptable by the Paying Agent) with the Paying Agent not later than the Regular Record Date immediately preceding the applicable Interest Payment Date. Any interest on any Security of any series which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date for Securities of such series (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in clause (1) or (2) below: (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment (which date of proposed payment shall be not less than 25 days after the receipt by the Trustee of the notice of proposed payment), and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit on or prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly 20 notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of such series in respect of which interest is in default are listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Section 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of, premium (if any), and (subject to Sections 305 and 307) any interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and none of the Company, the Trustee, or any agent of the Company or the Trustee shall be affected by notice to the contrary. Notwithstanding the foregoing, with respect to any Global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by any Depositary, as a Holder, with respect to such Global Security or impair, as between such Depositary and owners of beneficial interests in such Global Security, the operation of customary practices governing the exercise of the rights of such Depositary (or its nominee) as Holder of such Global Security. Section 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all such Securities so delivered shall be promptly cancelled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section. The Trustee is hereby directed by the Company to destroy all cancelled Securities held by the 21 Trustee or hold such Securities in accordance with the Trustee's standard retention policy, and the Trustee shall provide the Company with a certificate of a Responsible Officer certifying as to the destruction or retention of such Securities, all in accordance with the Trustee's customary procedures. Section 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year consisting of twelve 30-day months. No interest will accrue with respect to the 31st day of any month. ARTICLE FOUR Satisfaction and Discharge Section 401. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect with respect to any series of Securities specified in a Company Request (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities of such series theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid for as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all Securities of such series not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal, premium (if any), and interest to the date of such deposit (in the case of such Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be; 22 (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (3) the Company has delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to such series have been complied with. Notwithstanding the satisfaction and discharge of this Indenture with respect to a series of Securities, the obligations of the Company and the Trustee to the Holders of Securities of other series not so satisfied and discharged, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614, and, if money shall have been deposited with the Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003 shall survive. Section 402. Application of Trust Money. Subject to provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities of each series and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, for all sums due or to become due thereon for principal, premium (if any), and interest. ARTICLE FIVE Remedies Section 501. Events of Default. "Event of Default," wherever used herein with respect to Securities of any series, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of that default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security of that series when it becomes due and payable at its Maturity; or (3) default in the deposit of any sinking fund payment, when due by the terms of a Security of that series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture with respect to any Security of that series (other than a covenant or warranty a default in the performance of which or the breach of which is elsewhere in this Section specifically dealt with or that has expressly been included in this Indenture solely for the benefit of series of Securities other than that series), and continuance of that default or breach for a period of 90 days after there has been 23 given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying the default or breach and requiring it to be remedied and stating that the notice is a "Notice of Default" hereunder; or (5) if an event of default as defined in any mortgage, indenture, bonds, debentures, notes or instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness of the Company for money borrowed, whether such indebtedness now exists or shall hereafter be created, shall happen and shall result in more than $50,000,000 (or its equivalent in any other currency) in principal amount of such indebtedness becoming or being declared due and payable before the date on which it would otherwise become due and payable, and that acceleration shall not be rescinded or annulled, or that indebtedness shall not have been discharged, within a period of 10 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities of that series a written notice specifying the event of default and requiring the Company to cause the acceleration to be rescinded or annulled or to cause that indebtedness to be discharged and stating that the notice is a "Notice of Default" hereunder; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of all or substantially all of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of all or substantially all of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (8) any other Event of Default provided with respect to Securities of that series. Section 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Securities of any series at the time Outstanding occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in 24 aggregate principal amount of the Outstanding Securities of that series may declare the principal amount (or, if any of the Securities of that series are Original Issue Discount Securities, such portion of the principal amount of such Securities as may be specified in the terms thereof) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified amount), plus any interest accrued on the Securities of such series to the date of declaration, shall become immediately due and payable. Upon payment (i) of (A) such principal amount and (B) such interest and (ii) of interest on any overdue principal and overdue interest at the rate or rates prescribed therefor in the Securities (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of principal of and interest on the Securities of such series shall terminate. At any time after such a declaration of acceleration with respect to Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences (and the particular event on which the declaration of acceleration is based shall no longer be grounds for a declaration of acceleration) if both (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue installments of interest on all Outstanding Securities of that series, (B) the principal of (and premium, if any, on) any Outstanding Securities of that series which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate or rates prescribed therefor or in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of (or premium, if any) or interest on Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. 25 Section 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if: (1) default is made in the payment of any installment of interest on any Security of any series when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security of any series at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of Securities of such series, the whole amount then due and payable on such Securities for principal, premium (if any), and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal, premium (if any), and any overdue interest, at the rate or rates prescribed therefor in such series of Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. Section 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, adjustment, composition or other judicial proceeding relative to the Company (or any other obligor upon the Securities of any series), its property or its creditors, the Trustee (irrespective of whether the principal of the Securities of any series shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal, premium, (if any), or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, to (i) file and prove a claim for the whole amount, or such lesser amount as may be provided for in the Securities of such series, of principal, premium (if any), and interest (if any) owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (ii) collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder of Securities of such series to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or 26 composition affecting the Securities of any series or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or any of the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. Section 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premium (if any), or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; SECOND: To the payment of the amounts then due and unpaid for principal of, premium (if any), and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal, premium (if any), and interest, respectively; and THIRD: To the payment of the remainder, if any, to the Company or any other Person or Persons entitled thereto. Section 507. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that same series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that same series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and 27 (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that same series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. Section 508. Unconditional Right of Holders to Receive Principal Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of, premium (if any), and (subject to Section 307) any interest on such Security on the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on the Redemption Date or, in the case of repurchase at the option of the Holder, on the Repurchase Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Section 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. Section 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of Securities of any series to exercise any right or remedy accruing upon any Event of Default with respect to such series of Securities shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. 28 Section 512. Control by Holders. The Holders of a majority in aggregate principal amount of the applicable Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the applicable Outstanding Securities of such series, provided that (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Section 513. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of any series may on behalf of the Holders of all the Securities of such series waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of, premium (if any), or interest on any Security of such series when due (other than amounts due and payable solely upon acceleration pursuant to Section 502) unless theretofore paid in full and cured in accordance with the terms of this Indenture, or (2) in respect of a covenant or provision hereof which under Section 902 cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. Section 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder by his acceptance of Securities shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit other than the Trustee of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of, premium (if any), or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). ARTICLE SIX 29 The Trustee Section 601. Certain Duties and Responsibilities. (a) With respect to Securities of any series, except during the continuance of an Event of Default with respect to the Securities of such series, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon statements, certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) With respect to Securities of any series, in case an Event of Default with respect to the Securities of such series has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own wilful misconduct, except that (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it with respect to Securities of any series in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities of such series, determined as provided in and subject to Section 512, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities of such series; and (4) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 30 (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. Section 602. Notice of Defaults. Within 90 days after the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit by mail to all Holders of Securities of such series, as their names and addresses appear in the Security Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of, premium (if any), or interest on any Security of such series or in the payment of any sinking fund installment with respect to Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders of Securities of such series; and provided, further, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 90 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. Except with respect to an Event of Default pursuant to Section 501(1), (2) or (3), the Trustee shall not be charged with knowledge of any default or Event of Default hereunder unless written notice thereof shall have been given to a Responsible Officer at the Corporate Trust Office by the Company, a Paying Agent, any Holder or an agent of any Holder. Section 603. Certain Rights of Trustee. Subject to the provisions of Section 601: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order, and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate; (d) the Trustee may consult with counsel, and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Securities of any series pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security 31 or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company pertaining to the Securities, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Section 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder. Neither the Trustee nor any Authenticating Agent shall be accountable for the use or application by the Company of the Securities or the proceeds thereof. Section 605. May Hold Securities. The Trustee, any Paying Agent, any Authenticating Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Section 608, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Authenticating Agent, Security Registrar or such other agent. Section 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company. Section 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time such compensation for all services rendered by it hereunder as has been agreed upon in writing prior to the performance of such services (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); 32 (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence, willful misconduct or bad faith on its own part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 501(6) or (7) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any bankruptcy, insolvency, reorganization or other similar law. Section 608. Disqualification; Conflicting Interests. (a) If the Trustee has or shall acquire any conflicting interest, as defined in this Section, with respect to the Securities of any series, it shall, within 90 days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign with respect to the Securities of that series in the manner and with the effect hereinafter specified in this Article. (b) In the event that the Trustee shall fail to comply with the provisions of Subsection (a) of this Section with respect to the Securities of any series, the Trustee shall, within 10 days after the expiration of such 90- day period, transmit by mail to the Company and all Holders of Securities of that series, as their names and addresses appear in the Security Register, notice of such failure. (c) For the purposes of this Section, the Trustee shall be deemed to have a conflicting interest with respect to the Securities of any series if the Securities of such series are in default (as determined in accordance with the provisions of Section 501, but exclusive of any period of grace or requirement of notice) and (1) the Trustee is trustee under this Indenture with respect to the Outstanding Securities of any series other than that series or is trustee under another indenture under which any other securities or certificates of interest or participation in any other securities of the Company are outstanding, unless such other indenture is a collateral trust indenture under which the only collateral consists of Securities issued under this Indenture; (2) the Trustee or any of its directors or executive officers is an obligor upon the Securities or an underwriter for the Company; (3) the Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with the Company or an underwriter for the Company; (4) the Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee, or representative of the Company, or of an underwriter (other than the Trustee itself) for the Company who is currently engaged in the business of underwriting, except that (i) one 33 individual may be a director or an executive officer, or both, of the Trustee and a director or an executive officer, or both, of the Company but may not be at the same time an executive officer of both the Trustee and the Company; (ii) if and so long as the number of directors of the Trustee in office is more than nine, one additional individual may be a director or an executive officer, or both, of the Trustee and a director of the Company, and (iii) the Trustee may be designated by the Company or by any underwriter for the Company to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent or depositary, or in any other similar capacity, or, subject to the provisions of paragraph (1) of this Subsection, to act as trustee, whether under an indenture or otherwise; (5) 10% or more of the voting securities of the Trustee is beneficially owned either by the Company or by any director, partner or executive officer thereof, or 20% or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or 10% or more of the voting securities of the Trustee is beneficially owned either by an underwriter for the Company or by any director, partner or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons; (6) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this Subsection defined), (i) 5% or more of the voting securities, or 10% or more of any other class of security, of the Company not including the Securities issued under this Indenture and securities issued under any other indenture for which the Trustee is also trustee, or (ii) 10% or more of any class of security of an underwriter for the Company; (7) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this Subsection defined), 5% or more of the voting securities of any person who, to the knowledge of the Trustee, owns 10% or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Company; (8) the Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default (as hereinafter in this Subsection defined), 10% or more of any class of security of any person who, to the knowledge of the Trustee, owns 50% or more of the voting securities of the Company; or (9) the Trustee owns, on May 15 in any calendar year, in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of 25% or more of the voting securities, or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraph (6), (7) or (8) of this Subsection. As to any such securities of which the Trustee acquired ownership through becoming executor, administrator or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply, for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed 25% of such voting securities or 25% of any such class of security. Promptly after May 15 in each calendar year, the Trustee shall make a check of its holdings of such securities in any of the above- mentioned capacities as of such May 15. If the Company fails to make payment in full of the principal of, premium (if any), or interest on any of the Securities of any series when and as the same becomes due and payable, and such failure continues for 30 days thereafter, the Trustee shall make a prompt check of its holdings of such securities in any of the above-mentioned capacities as of the date of the expiration of such 30-day period, and after such date, notwithstanding 34 the foregoing provisions of this paragraph, all such securities so held by the Trustee, with sole or joint control over such securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee for the purposes of paragraphs (6), (7) and (8) of this Subsection. The specification of percentages in paragraphs (5) to (9), inclusive, of this Subsection shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of paragraphs (3) or (7) of this Subsection. For the purposes of paragraphs (6), (7), (8) and (9) of this Subsection only, (i) the terms "security" and "securities" shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies or banking firms, or any certificate of interest or participation in any such note or evidence of indebtedness; (ii) an obligation shall be deemed to be "in default" when a default in payment of principal shall have continued for 30 days or more and shall not have been cured; and (iii) the Trustee shall not be deemed to be the owner or holder of (A) any security which it holds as collateral security, as trustee or otherwise, for an obligation which is not in default as defined in clause (ii) above, or (B) any security which it holds as collateral security under this Indenture, irrespective of any default hereunder, or (C) any security which it holds as agent for collection, or as custodian, escrow agent or depositary, or in any similar representative capacity. (d) For the purposes of this Section: (1) The term "underwriter," when used with reference to the Company, means every person who, within three years prior to the time as of which the determination is made, has purchased from the Company with a view to, or has offered or sold for the Company in connection with, the distribution of any security of the Company outstanding at such time, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking, but such term shall not include a person whose interest was limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors' or sellers' commission. (2) The term "director" means any director of a corporation or any individual performing similar functions with respect to any organization, whether incorporated or unincorporated. (3) The term "person" means an individual, a corporation, a partnership, an association, a joint-stock company, a trust, an unincorporated organization or a government or political subdivision thereof. As used in this paragraph, the term "trust" shall include only a trust where the interest or interests of the beneficiary or beneficiaries are evidenced by a security. (4) The term "voting security" means any security presently entitling the owner or holder thereof to vote in the direction or management of the affairs of a person, or any security issued under or pursuant to any trust, agreement or arrangement whereby a trustee or trustees or agent or agents for the owner or holder of such security are currently entitled to vote in the direction or management of the affairs of a person. (5) The term "Company" means any obligor upon the Securities of any series. 35 (6) The term "executive officer" means the president, every vice president, every trust officer, the cashier, the secretary and the treasurer of a corporation, and any individual customarily performing similar functions with respect to any organization whether incorporated or unincorporated, but shall not include the chairman of the board of directors. (e) The percentages of voting securities and other securities specified in this Section shall be calculated in accordance with the following provisions: (1) A specified percentage of the voting securities of the Trustee, the Company or any other person referred to in this Section (each of whom is referred to as a "person" in this paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person. (2) A specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding. (3) The term "amount," when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares and the number of units if relating to any other kind of security. (4) The term "outstanding" means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition: (i) securities of an issuer held in a sinking fund relating to securities of the issuer of the same class; (ii) securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise; (iii) securities pledged by the issuer thereof as security for an obligation of the issuer not in default as to principal or interest or otherwise; and (iv) securities held in escrow if placed in escrow by the issuer thereof; provided, however, that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise voting rights thereof. (5) A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges; provided, however, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture. 36 Section 609. Corporate Trustee Required; Eligibility. The Company shall at all times maintain a Security Registrar and an office or agency (which in each case shall be the Trustee unless otherwise specified pursuant to Section 301 or by Company Order) in the Borough of Manhattan, the City of New York, for the payment of principal, premium (if any), and interest on the Securities. There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States or of any state of the United States which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority. Such Trustee shall have a combined capital and surplus of at least $50,000,000 and maintain a Corporate Trust Office in the Borough of Manhattan, The City of New York. If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Section 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving not less than 30 days prior written notice to the Company specifying its intention to resign, the reason therefor, and specifying the date on which the resignation shall become effective. Notwithstanding the foregoing, unless the reason for such resignation is a conflict pursuant to Section 608, then such Trustee must resign with respect to all Securities if the Trustee resigns with respect to any series of Securities. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by the Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. (d) The Trustee may be removed with respect to any or all series of Securities at any time upon 30 days' notice by the filing with it of an instrument in writing signed on behalf of the Company by a duly authorized officer of the Company specifying such removal and the date on which it is to become effective. (e) If at any time: (1) the Trustee shall fail to comply with Section 608 after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security of any series for at least six months, or 37 (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder who has been a bona fide Holder of a Security of any series at least six months, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by or pursuant to a Board Resolution may remove the Trustee with respect to any series of Securities or all Securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security of any series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee with respect to such series of Securities or all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by or pursuant to a Board Resolution, shall appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give or cause to be given notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series to all Holders of Securities of such series in the manner provided in Section 105. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. Section 611. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of 38 the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments reasonably necessary for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) or (b) of this Section, as the case may be. (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 612. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. In case any Securities shall not have been authenticated by such predecessor Trustee, any successor Trustee may authenticate and deliver such Securities in either its own name or that of its predecessor Trustee, with full force and effect which this Indenture provides for the certificate of authentication of the Trustee. 39 Section 613. Compliance with Tax Laws. The Trustee hereby agrees to comply with all U.S. Federal income tax information reporting and withholding requirements with respect to payments of principal, premium (if any) and interest on the Securities, whether acting as Trustee, Security Registrar, Paying Agent or otherwise with respect to the Securities. Section 614. Appointment of Authenticating Agent. At any time when any of the Securities remain Outstanding, the Trustee may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 306, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Any such appointment shall be evidenced by an instrument in writing signed by a Responsible Officer of the Trustee, a copy of which instrument shall be promptly furnished to the Company. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by federal or state authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent for any series of Securities may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee for such Securities may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first-class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if 40 originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 607. If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities designated as [name of series], which is a series referred to in the within-mentioned Indenture. TEXAS COMMERCE BANK NATIONAL ASSOCIATION, As Trustee By: ------------------------------ As Authenticating Agent By: ------------------------------ Authorized Signatory ARTICLE SEVEN Communications to Holders Section 701. Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. (b) If three or more Holders (herein referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Indenture or under the Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five business days after the receipt of such application, at its election, either (i) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 701(a), or 41 (ii) inform such applicants as to the approximate number of Holders whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 701(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 701(a) a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interest of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. (c) Every Holder, by receiving and holding Securities, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 701(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 701(b). ARTICLE EIGHT Consolidation, Merger, Conveyance or Transfer Section 801. Consolidations and Mergers of Company and Conveyances Permitted Subject to Certain Conditions. The Company shall not consolidate with, or sell or convey all or substantially all of its assets to, or merge with or into any other person or entity unless (i) either the Company shall be the continuing corporation, or the successor shall be a corporation organized and existing under the laws of the United States of America or a state thereof and the successor corporation shall expressly assume the due and punctual payment of the principal of and interest on all the Debentures and the due and punctual performance and observance of all of the covenants and conditions of the Company under this Indenture by supplemental indenture satisfactory to the Trustee, executed and delivered to the Trustee by such corporation; (ii) the Company or the successor corporation, as the case may be, shall not, immediately after the merger or consolidation, or the sale or conveyance, be in default in the performance of any such covenant or condition; and (iii) after giving effect to the transaction, no event which, after notice or lapse of time, would become an Event of Default shall have occurred or be continuing. Section 802. Rights and Duties of Successor Corporation. In case of any such consolidation, merger, sale or conveyance and upon any such assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the party of the first part, and the predecessor corporation shall be relieved of any further obligation under this Indenture and the Securities. Such successor 42 corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and, upon the order of such successor corporation, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such successor corporation thereafter shall cause to be signed and delivered to the Trustee for that purpose. All the Securities of any series so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities of that series theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale or conveyance such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate. Section 803. Officer's Certificate and Opinion of Counsel. The Trustee, subject to the provisions of Sections 601 and 603, may receive an Officer's Certificate and an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption, complies with the provisions of this Article Eight. ARTICLE NINE Supplemental Indentures Section 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by or pursuant to one or more Board Resolutions, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee and the Company, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Company; or (3) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities of any series in bearer form, registrable or not registrable as to principal, and with or without interest coupons, or to permit or facilitate the issuance of Securities of any series in uncertificated form; or (4) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities; provided, however, that any such addition, change or elimination (i) shall neither (A) apply to any Security of any series created prior to the execution of such supplemental 43 indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Security with respect to such provision or (ii) shall become effective only when there is no such Security Outstanding; or (5) to secure the Securities of any series; or (6) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; or (7) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); or (8) to cure any ambiguity or defect in and to correct or supplement any provision in this Indenture or any Security of any series that may be inconsistent with any other provision in this Indenture or in the Security of such series, or to make any other provisions with respect to matters or questions arising under this Indenture; provided, however, that any such action pursuant to this clause (8) shall not adversely affect the interests of the Holders of Securities of any series in any material respect; or (9) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect qualification of this Indenture under the Trust Indenture Act and to add to this Indenture such other provisions as may be expressly permitted by the Trust Indenture Act; or (10) to amend or supplement the restrictions on and procedures for resale, attempted resale and other transfers of any series of Securities (whether or not Outstanding) to reflect any change in applicable law or regulation (or interpretation thereof) or in practices relating to the resale or transfer of Restricted Securities generally. Section 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Securities of all series at the time Outstanding affected by such supplemental indenture (voting as one class), by the Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security of each series affected thereby, (1) extend the Stated Maturity of the principal of, or any installment of principal of or interest on, any such Security, or reduce the principal amount thereof or the rate of interest thereon or premium (if any), payable upon the redemption thereof, or reduce the obligation of the Company to pay principal amounts, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any such Security of such series or any principal, premium (if any), or interest thereon is payable, or impair 44 the right to institute suit for the enforcement of any such payment on or after the due date thereof (or, in the case of redemption, on or after the Redemption Date), or (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any modifications or amendments to this Indenture or to the terms and conditions of that series of securities, or to approve any supplemental indenture, or the consent of whose Holders is required for any waiver with respect to such series (of compliance with certain provisions of this Indenture or of certain defaults hereunder and their consequences) provided for in this Indenture, or (3) modify the obligation of the Company pursuant to Section 609 and otherwise to maintain a registrar or an office or agency in the Borough of Manhattan, The City of New York, for the payment of principal, premium (if any), and interest on the Securities, or (4) modify any of the provisions of this Section, Section 513 or Section 1007, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided, however, that this clause shall not be deemed to require the consent of any Holder with respect to changes in the references to the "Trustee" and concomitant changes in this Section and Section 1007, or the deletion of this proviso, in accordance with the requirements of Sections 611(b) and 901(7). A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. Section 903. Execution of Supplemental Indentures; Opinions. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and, in connection with the original issuance of any series, stating the items enumerated in Section 303(d)(1), (2) and (3). The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. 45 Section 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act if at that date the Indenture shall then be qualified under the Trust Indenture Act. Section 906. Reference in Securities to Supplemental Indentures. Securities of any series authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Company, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. ARTICLE TEN Covenants Section 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of and premium (if any), and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. Section 1002. Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of each such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. 46 Section 1003. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of any Securities, it will, on or before each due date of the principal of, premium (if any), or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium (if any), or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, on or before each due date of the principal of, premium (if any), or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay such amount, such sum to be held as provided in the following paragraph, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will (i) hold all sums held by it for the payment of the principal of, premium (if any), or interest on any Securities of that series in trust for the benefit of the Holders of such Securities of that series until such sums shall be paid to such Holders or otherwise disposed of as herein provided; (ii) give the Trustee notice of any default by the Company (or any other obligor upon any Securities of that series) in the making of any payment of principal, premium (if any), or interest; and (iii) during the continuance of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment in respect of the Securities of that series, and upon the written request of the Trustee, forthwith pay to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Securities of that series. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or direct the Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, the Company and such Paying Agent shall be released from all further liability with respect to such sums. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of or any premium (if any), or interest on any Security of any series and remaining unclaimed for one year after such principal, premium (if any), or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such deposited money, and all liability of the Company as trustee thereof, shall thereupon cease. Section 1004. Statement by Officers as to Default. The Company will deliver to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, a statement signed by the President, any Vice President, the Treasurer, or any Assistant Treasurer of the Company stating that in the course of the performance by the signer of such officer's duties as an officer of the Company such officer would normally obtain knowledge of 47 any default by the Company in the performance or fulfillment of any covenant, agreement or condition contained in this Indenture, and stating whether such officer has obtained knowledge of any such default, and, if so, specifying each such default of which the signer has knowledge and the nature thereof. Section 1005. Limitation on Liens. The Company will not itself, and will not permit any Restricted Subsidiary to, incur, issue, assume or guarantee any notes, bonds, debentures or other similar evidences of indebtedness for money borrowed (notes, bonds, debentures or other similar evidences of indebtedness for money borrowed being hereinafter called "Debt") secured by pledge of, or mortgage or other lien on, any Real Property of the Company or any Restricted Subsidiary, or any shares of stock or Debt of any Restricted Subsidiary (pledges, mortgages and other liens being hereinafter called "Mortgage" or "Mortgages"), without effectively providing that the Securities (together with, if the Company shall so determine, any other Debt of the Company or that Restricted Subsidiary then existing or thereafter created that is not subordinate to such Securities) shall be secured equally and ratably with (or prior to) such secured Debt (for the purpose of providing such equal and ratable security the principal amount of such Securities shall mean and shall not be less than that principal amount which could be declared to be due and payable pursuant to Section 502 on the date of the making of such effective provision and the extent of such equal and ratable security shall be adjusted, to the extent permitted by law, as and when that principal amount changes over time pursuant to Section 502 and any other provision hereof), so long as such secured Debt shall be so secured, unless, after giving effect thereto, the aggregate amount of all such secured Debt plus all Attributable Debt of the Company and its Restricted Subsidiaries in respect of Sale and Leaseback Transactions (other than such Sale and Leaseback Transactions the proceeds of which are applied to reduce indebtedness under clause (2) of Section 1006) would not exceed 10% of Consolidated Net Tangible Assets; provided, however, that this Section shall not apply to, and there shall be excluded from secured Debt in any computation under this Section, Debt secured by: (1) Mortgages existing as of the date of this Indenture; (2) Mortgages on property of, or on any shares of stock (or other interest in) or Debt of, any corporation, association, partnership or other entity existing at the time such entity becomes a Restricted Subsidiary or an obligor under this Indenture; (3) Mortgages in favor of the Company or any Restricted Subsidiary by a Restricted Subsidiary; (4) Mortgages (including the assignment of moneys due or to become due thereon) in favor of the United States of America or any state thereof, or any agency, department or other instrumentality thereof, to secure progress, advance or other payments pursuant to any contract or provision of any statute; (5) Mortgages on property, shares of stock or Debt existing at the time of acquisition thereof (including acquisition through merger or consolidation) or to secure the payment of all or any part of the purchase price, construction cost, or development cost thereof or to secure any Debt incurred prior to, at the time of, or within 360 days after, the acquisition of such property or shares or Debt or the completion of any such construction or development for the purpose of financing all or any part of the purchase price or construction cost or development cost thereof; and 48 (6) any extension, renewal or refinancing (or successive extensions, renewals or refinancings), as a whole or in part, of any Mortgage referred to in the foregoing clauses (1) to (5), inclusive; provided, however, that (i) such extension, renewal or refinancing Mortgage shall be limited to all or a part of the same property, shares of stock or Debt that secured the Mortgage extended, renewed or refinanced (plus improvements on such property) and (ii) the principal amount of Debt secured by such Mortgage at such time is not increased in an amount exceeding 105% thereof. Section 1006. Limitation on Sales and Leasebacks. The Company will not itself, and it will not permit any Restricted Subsidiary to, enter into any arrangement with any bank, insurance company or other lender or investor (not including the Company or any Restricted Subsidiary) or to which any such lender or investor is a party, providing for the leasing by the Company or any such Restricted Subsidiary for a period, including renewals, in excess of three years of any Real Property that has been or is to be sold or transferred, more than 360 days after the completion of construction and commencement of full operation thereof, by the Company or any such Restricted Subsidiary to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such Real Property (herein referred to as a "Sale and Leaseback Transaction") unless either: (1) the Company or such Restricted Subsidiary could create Debt secured by a Mortgage pursuant to Section 1005 on the Real Property to be leased back in an amount equal to the Attributable Debt with respect to such Sale and Leaseback Transaction without equally and ratably securing the Securities, or (2) the Company or such Restricted Subsidiary within 120 days after the sale or transfer shall have been made by the Company or by any such Restricted Subsidiary, applies an amount equal to the net proceeds of the sale of the Real Property sold and leased back pursuant to such arrangement to the retirement of Securities or Funded Debt of the Company or any of its Restricted Subsidiaries. Section 1007. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1005 and 1006 with respect to the Securities of any series if before or after the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities of such series shall, by the Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. Section 1008. Delivery of Certain Information. 49 At any time when the Company is not subject to Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, for the benefit of Holders from time to time of any of the Securities which are not registered under the Securities Act ("Exempt Securities"), upon request of a Holder of Exempt Securities, the Company will furnish or cause to be furnished at its expense Rule 144A Information to that Holder or to a prospective purchaser of the Exempt Security designated by that Holder, as the case may be, unless at that time (1) the Commission shall have waived such requirement in writing or otherwise taken the position that subsection 144A(d)(4)(i) does not apply to the Company or (2) the provision of such information shall no longer be required by law to effect resales under Rule 144A under the Securities Act or otherwise to effect resales without registration under the Securities Act. As used in this Section 1008 only, "Holder" shall include a holder of interest in a Global Security which is an Exempt Security and prospective purchaser of an Exempt Security shall include a prospective purchaser of an interest represented by a Global Security which is an Exempt Security. ARTICLE ELEVEN Redemption of Securities Section 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. Section 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by a Board Resolution. In case of any redemption at the election of the Company of less than all the Securities of any series, the Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of such Redemption Date, of the principal amount of Securities of such series to be redeemed, the Redemption Price, the place or places of payment, that payment will be made upon presentation and surrender of such Securities, that such redemption is pursuant to the mandatory or optional sinking fund, or both, if such be the case, that interest, if any (or, in the case of Original Issue Discount Securities, original issue discount) accrued to the date fixed for redemption will be paid as specified in such notice, and that on and after that date interest, if any, thereon or on the portions thereof to be redeemed (or, in the case of Original Issue Discount Securities, original issue discount) will cease to accrue. In the case of any redemption of such Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities, the Company shall furnish the Trustee with an Officer's Certificate evidencing compliance with such restriction. Section 1103. Selection by Trustee of Securities to Be Redeemed. If fewer than all the Securities of any series are to be redeemed (unless all of the Securities of such series issued on the same day with the same terms are to be redeemed), the particular Securities of such series to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of that series or any integral multiple 50 thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. The Trustee shall promptly notify the Company and the Security Registrar (if other than the Trustee) in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any such Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. Section 1104. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at his address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if fewer than all the Outstanding Securities of any series are to be redeemed, the identification (and, in the case of partial redemption of any Securities, the principal amounts) of the particular Securities to be redeemed, (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, and (6) that the redemption is for a sinking fund, if such is the case. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Section 1105. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay on the Redemption Date the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. 51 Section 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any such Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal and premium (if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in such Security. Section 1107. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at a Place of Payment therefor (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. ARTICLE TWELVE Sinking Funds Section 1201. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series, if such sinking fund is established pursuant to Section 301, except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment," and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment." If provided for by the terms of any Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. 52 Section 1202. Satisfaction of Sinking Fund Payments with Securities. The Company (1) may deliver Outstanding Securities of a series (other than any previously called for redemption) and (2) may apply as a credit Securities of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities so delivered or applied as a credit have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the applicable Redemption Price specified in such Securities for redemption through operation of the sinking fund, and the amount of such sinking fund payment shall be reduced accordingly. Such Securities shall first be applied to the sinking fund payment next due, and any excess shall be applied to the following sinking fund payments in the order they are due. Section 1203. Redemption of Securities for Sinking Fund. Not less than 60 days prior to each sinking fund payment date for any series of Securities, the Company will deliver to the Trustee an Officer's Certificate specifying the amount of the next ensuing sinking fund payment for that series pursuant to the terms of that series, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of that series pursuant to Section 1202 and will also deliver to the Trustee any Securities to be so delivered and credited. Not less than 30 days before each such sinking fund payment date, the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given, the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. ARTICLE THIRTEEN Defeasance Section 1301. Applicability of Article; Company's Option to Effect Defeasance. If pursuant to Section 301 provision is made for either or both of (a) defeasance of the Securities of a series under Section 1302 or (b) covenant defeasance of the Securities of a series under Section 1303, then the provisions of such Section or Sections, as the case may be, together with the other provisions of this Article Thirteen, shall be applicable to the Securities of such series, and the Company may at its option by or pursuant to Board Resolution, at any time, with respect to such Securities of any series, elect to have either Section 1302 or Section 1303 applied to the Outstanding Securities of such series upon compliance with the conditions set forth in this Article Thirteen. Section 1302. Defeasance and Discharge. Upon the Company's exercise of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities of such series on the date the conditions set forth in Section 1304 are satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means that the Company shall be 53 deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities of such series and to have satisfied all its other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of such Outstanding Securities to receive, solely from the trust fund described in Section 1304 and as more fully set forth in such Section, payments in respect of the principal of, premium (if any), and interest on such Securities when such payments are due, (B) the Company's obligations with respect to such Securities under Sections 304, 305, 306, 1002, 1003 and Article Fourteen and with respect to the Trustee under Section 607, (C) the rights, powers, trusts, duties, and immunities of the Trustee hereunder including pursuant to Section 607 hereof and (D) this Article Thirteen. Subject to compliance with this Article Thirteen, the Company may exercise its option under this Section 1302 notwithstanding the prior exercise of its option under Section 1303 with respect to such Securities. Section 1303. Covenant Defeasance. Upon the Company's exercise of the above option applicable to this Section with respect to any Securities of or within a series, the Company shall be released from its obligations under Sections 501(5), 1005 and 1006 and, if specified pursuant to Section 301, its obligations under any other covenant, with respect to the Outstanding Securities of such series on and after the date the conditions set forth below are satisfied (hereinafter, "covenant defeasance") and such Securities shall thereafter be deemed to be not "Outstanding" for the purpose of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with Sections 501(5), 1005 and 1006 or such other covenants, but shall continue to be deemed Outstanding for all other purposes hereunder. For this purpose, such covenant defeasance means that, with respect to the Outstanding Securities of such series, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or such other covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document and such omission to comply shall not constitute a default or an Event of Default under Sections 501(4), 501(5), 501(8) or otherwise, as the case may be, but, except as specified above, the remainder of this Indenture and such Securities shall be unaffected thereby. Section 1304. Conditions of Defeasance. The following shall be the conditions to application of either Section 1302 or Section 1303 to the Outstanding Securities of or within a series: (1) the Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 609 who shall agree to comply with the provisions of this Article Thirteen applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Securities, (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest, if any, in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment of principal of, premium (if any), and interest, if any, on such Securities, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge, (i) the principal of, premium (if any), and each installment of principal of, premium (if any) and interest, if any, on the 54 Outstanding Securities of such series on the stated Maturity of such principal or installment of principal or interest and (ii) any mandatory sinking fund payments or analogous payments applicable to the Outstanding Securities of such series on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities. (2) No Event of Default or event which with notice or lapse of time or both would become an Event of Default under Subsections 501(6) and (7) with respect to any other series of Securities, at any time during the period ending on the 123rd day after the date of such deposit or, if longer, ending on the day following the expiration of the longest preference period applicable to the Company in respect of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period). (3) Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company is a party or by which it is bound. (4) In the case of an election under Section 1302, the Company shall have delivered to the Trustee an Opinion of Counsel stating that the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred. (5) In the case of an election under Section 1303, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such covenant defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance has not occurred. (6) The Company delivers to the Trustee an Officer's Certificate stating that all conditions precedent to the defeasance and discharge of the Securities of such series as contemplated by this Article Thirteen have been satisfied. Section 1305. Deposited Money and U.S. Government Obligations to Be Held in Trust; Miscellaneous. Subject to the provisions of the last paragraph of Section 1003, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively, for purposes of this Section 1305, the "Trustee") pursuant to Section 1304 in respect of the Outstanding Securities of such series shall be held in trust and applied by the Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal, premium (if any), and interest (if any), but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 1304 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities of such series. 55 Anything in this Article Thirteen to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 1304 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance. Section 1306. Reinstatement. If the Trustee or any Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article Thirteen by reason of any legal proceeding or by reason of any order or judgment of any court or government authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities of the defeased series shall be revived and reinstated as though no deposit had occurred pursuant to this Article Thirteen until such time as the Trustee or any Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article Thirteen. ARTICLE FOURTEEN Repurchase of Securities at Option of Holders Section 1401. Applicability of Article. Securities of any series which are repurchasable before their Stated Maturity at the option of the Holders shall be repurchasable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. Section 1402. Notice of Repurchase Date. Notice of any Repurchase Date with respect to Securities of any series shall, unless otherwise specified by the terms of the Securities of any series, be given by the Company not less than 45 nor more than 60 days prior to such Repurchase Date to each Holder of Securities of such series in accordance with Section 105. The notice as to Repurchase Date shall state: (1) the Repurchase Date; (2) the Repurchase Price; (3) the place or places where such Securities are to be surrendered for payment of the Repurchase Price and the date by which Securities must be so surrendered in order to be repurchased; (4) a description of the procedure which a Holder must follow to exercise a repurchase right; and (5) that exercise of the option to elect repurchase is irrevocable. 56 No failure of the Company to give the foregoing notice shall limit any Holder's right to exercise a repurchase right. Section 1403. Deposit of Repurchase Price. On or prior to the Repurchase Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money sufficient to pay the Repurchase Price of and (unless the Repurchase Date shall be an Interest Payment Date) accrued interest, if any, on all of the Securities of such series which are to be repurchased on that date. Section 1404. Securities Payable on Repurchase Date. The form of option to elect repurchase having been delivered as specified in the form of Security for such series as provided in Section 201, the Securities of such series so to be repurchased shall, on the Repurchase Date, become due and payable at the Repurchase Price applicable thereto and from and after such date (unless the Company shall default in the payment of the Repurchase Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for repurchase in accordance with said notice, such Security shall be paid by the Company at the Repurchase Price together with accrued interest to the Repurchase Date; provided, however, that installments of interest whose Stated Maturity is on or prior to such Repurchase Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 307. If any such Security shall not be paid upon surrender thereof for repurchase, the principal (and premium, if any) shall, until paid, bear interest from the Repurchase Date at the rate prescribed therefor in such Security. Section 1405. Securities Repurchased in Part. Any Security which by its terms may be repurchased in part at the option of the Holder and which is to be repurchased only in part shall be surrendered at any office or agency of the Company designated for that purpose pursuant to Section 1002 (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Security so surrendered. 57 ARTICLE FIFTEEN Corporate Obligation Only Section 1501. Indenture and Securities Solely Corporate Obligations. No recourse under or upon any obligation, covenant or agreement contained in this Indenture, any indenture supplement, or in any Security, because of any indebtedness evidenced thereby, shall be had against any incorporator, or against any past, present or future stockholder, employee, officer or director, as such, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or penalty or by any legal or equitable proceeding or otherwise, all such liability, whether at common law, in equity, by any constitution, statute or otherwise, of incorporators, stockholders, employees, officers or directors being expressly waived and released by the acceptance of the Securities by the Holders thereof and as part of the consideration of the issuance of the Securities. 58 Texas Commerce Bank National Association hereby accepts the trusts in this Indenture upon the terms and conditions hereinabove set forth. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed on May 26, 1995, to be effective as of the day and year first above written. ELECTRONIC DATA SYSTEMS CORPORATION By: _________________________ Title: ___________________ TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Trustee By: __________________________ Title: ____________________ 59 ACKNOWLEDGMENTS THE STATE OF COUNTY OF Before me, a Notary Public, on this day personally appeared _________________________, known to me to be the person and officer whose name is subscribed to the foregoing instrument, who acknowledged to me that the same was the act of Electronic Data Systems Corporation and that he [she] executed the same as the act of that corporation for the purposes and consideration expressed therein and in the capacity stated therein. Given under my hand and seal of office this ___ day of ____________, 1995. ___________________________________ Notary Public in and for the State of (SEAL) My commission expires the ___ day of__________, 19__. THE STATE OF COUNTY OF Before me, a Notary Public, on this day personally appeared _________________________, known to me to be the person and officer whose name is subscribed to the foregoing instrument, who acknowledged to me that the same was the act of Texas Commerce Bank National Association and that he [she] executed the same as the act of that corporation for the purposes and consideration expressed therein and in the capacity stated therein. Given under my hand and seal of office this ___ day of ____________, 1995. ___________________________________ Notary Public in and for the State of (SEAL) My commission expires the ___ day of __________, 19__. 60 EXHIBIT A --------- FOREST LANE DESCRIPTION The Forest Lane property consists of 175.3498 acres located in the City of Dallas, Dallas County, Texas, Being part of Block 7462 of Electronic Data Systems Addition M.J. Sanchez Survey Abstract 1272 and Hiram Wilburn Survey Abstract 1568. The site is bound by White Rock Creek on the East, Forest Lane on the South, Hillcrest Road on the West and Churchill Way on the North. PLANO TEXAS DESCRIPTION The Plano Texas property consists of 363 acres (plus the approximately 18-acre parcel on which the Education Buildings referred to below are located) located in the City of Plano, Collin County, Texas, bound by White Rock Creek on the East, Tennyson Parkway on the South, Parkwood Drive on the West and Legacy Drive on the North. The property currently contains the following principal facilities: EDS Centre Building, Cluster I, Cluster II, Cluster III; IPC I, IPC II, IPC III, IPC IV; IMC Command Center; Health and Fitness Facility; Vehicle Service Center; Heliport; and Ground Maintenance Facility. Also included in this Plano Texas Description is Education Building 1, Education Building 2, Education Building 3, and Education Building 4 located in the City of Plano, Collin County Texas Bound By Tennyson Parkway on the North and Democracy Drive on the West. A-1 EXHIBIT 10(H) ================================================================================ $1,250,000,000 ELECTRONIC DATA SYSTEMS CORPORATION ================================================================================ REVOLVING CREDIT AND TERM LOAN AGREEMENT DATED AS OF OCTOBER 4, 1995 CITIBANK, N.A., as Administrative Agent and BANCO SANTANDER - NEW YORK BRANCH, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, CHEMICAL BANK, CITIBANK, N.A., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, and NATIONSBANK OF TEXAS, N.A., as Arrangers and BANQUE NATIONALE DE PARIS, CIBC INC., PNC BANK, NATIONAL ASSOCIATION, TORONTO DOMINION (TEXAS), INC., and WACHOVIA BANK OF GEORGIA, N.A., as Managers and the other lenders named herein, as LENDERS ================================================================================ TABLE OF CONTENTS ----------------- PAGE ARTICLE I. DEFINITION OF TERMS
1.1 Definitions................................................ 1 1.2 Other Definitional Provisions.............................. 12 ARTICLE II. FACILITY 2.1 Committed Loans............................................ 13 2.2 Committed Loan Borrowing Procedure; Disbursement........... 13 2.3 Bid Rate Loans............................................. 15 2.4 Optional Extension of the Commitment Termination Date...... 17 2.5 Conversion to Term Loan.................................... 19 2.6 Several Obligations........................................ 20 ARTICLE III. TERMS OF PAYMENT 3.1 Notes...................................................... 21 3.2 Payments on Committed Loan Notes and Bid Rate Notes........ 21 3.3 Interest................................................... 22 3.4 Continuation/Conversion With Respect to Committed Loans.... 22 3.5 Funding Losses............................................. 24 3.6 Default Rates.............................................. 24 3.7 Interest and Fee Calculations.............................. 24 3.8 Voluntary Principal Prepayments............................ 24 3.9 Inadequacy of Eurodollar or CD Loan Pricing................ 25 3.10 Illegality................................................. 25 3.11 Increased Cost and Reduced Return.......................... 26 3.12 Several Obligations........................................ 27 3.13 Taxes...................................................... 28 3.14 Application of Principal Payments.......................... 30 3.15 Payments, Computations, Judgments, etc..................... 31 3.16 Mitigation of Circumstances; Replacement of Affected Lenders, etc............................................. 31 3.17 Failure to Pay Additional Amounts.......................... 32 ARTICLE IV. FEES; MODIFICATION OF COMMITMENTS 4.1 Facility Fee................................................. 33 4.2 Reduction or Cancellation of Commitments..................... 33
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ARTICLE V. CONDITIONS PRECEDENT 5.1 Initial Availability...................................... 33 5.2 Each Advance.............................................. 34 5.3 Waiver of Conditions to Bid Rate Loans.................... 34 ARTICLE VI. REPRESENTATIONS AND WARRANTIES 6.1 EDS Representations and Warranties........................ 35 ARTICLE VII. COVENANTS 7.1 Use of Proceeds........................................... 36 7.2 Accounting Books and Financial Records; Inspections....... 37 7.3 Items to be Furnished..................................... 37 7.4 Taxes..................................................... 38 7.5 Maintenance of Corporate Existence, Assets, Business and Insurance........................................... 38 7.6 Compliance with Laws and Documents........................ 38 7.7 Regulation U.............................................. 38 7.8 Net Worth................................................. 38 7.9 Mergers; Consolidations; Transfers of Assets.............. 39 7.10 Pari Passu................................................ 39 7.11 ERISA..................................................... 39 ARTICLE VIII. DEFAULT 8.1 Default................................................... 39 8.2 Default Under Certain Other Debt.......................... 41 ARTICLE IX. RIGHTS AND REMEDIES UPON DEFAULT 9.1 Remedies Upon Default..................................... 41 9.2 Waivers by Borrower and Others............................ 41 9.3 Delegation of Duties and Rights........................... 41 9.4 Lenders Not in Control.................................... 41 9.5 Cumulative Remedies....................................... 42 9.6 Expenditures by Lenders................................... 42 9.7 Performance by Administrative Agent....................... 42 ARTICLE X. THE ADMINISTRATIVE AGENT 10.1 Appointment and Authorization............................. 42 10.2 Note Holders.............................................. 43 10.3 Consultation with Counsel................................. 43 10.4 Documents................................................. 43
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10.5 Resignation or Removal of Administrative Agent............. 43 10.6 Responsibility of Administrative Agent..................... 43 10.7 Notices of Default......................................... 44 10.8 Independent Investigation.................................. 44 10.9 Indemnification of Administrative Agent.................... 44 10.10 Arrangers and Managers..................................... 45 10.11 Benefit of Article X....................................... 45 ARTICLE XI. MISCELLANEOUS 11.1 Number and Gender of Words................................. 45 11.2 Headings................................................... 45 11.3 Exhibits................................................... 45 11.4 Communications............................................. 45 11.5 Exceptions to Covenants.................................... 47 11.6 Survival................................................... 47 11.7 Governing Law.............................................. 47 11.8 Maximum Interest Rate...................................... 47 11.9 Entirety and Amendments.................................... 48 11.10 Waivers.................................................... 48 11.11 Multiple Counterparts...................................... 49 11.12 Parties Bound; Participations and Assignments.............. 49 11.13 Consent to Jurisdiction; Waiver of Jury Trial.............. 52 11.14 Payment of Expenses........................................ 52 11.15 Invalid Provisions......................................... 53 11.16 Borrowers' Right of Offset................................. 53 11.17 Indemnification of Lenders................................. 54 11.18 Designation of EDS Affiliates as Borrowers................. 54 11.19 Lenders' Right of Setoff; Payments Set Aside; Sharing of Payments........................... 54
iii EXHIBITS AND SCHEDULES Exhibit A-1 Form of EDS Committed Loan Note Exhibit A-2 Form of Committed Loan Note for Borrowers other than EDS Exhibit B Form of Term Note Exhibit C Form of Bid Rate Note Exhibit D Form of Unconditional Guaranty Agreement Exhibit E Form of Notice of Advance Exhibit F Form of Request for Bids Exhibit G Form of Offer of Bid Rate Loans Exhibit H Form of Notice of Continuation/Conversion Exhibit I Form of Notice of Term Loan Conversion Exhibit J Form of Notice of Term Loan Rollover Exhibit K Form of Assignment and Acceptance Exhibit L Form of Opinion of Counsel Exhibit M Form of Bid Rate Loan Confirmation Exhibit N Form of Officers' Certificate Schedule 1 Lender Information Schedule 2 Designated EDS Affiliates Schedule 6.1 Litigation iv REVOLVING CREDIT AND TERM LOAN AGREEMENT This Revolving Credit and Term Loan Agreement (the "AGREEMENT") is entered into as of the 4th day of October, 1995, by and among Electronic Data Systems Corporation, a Texas corporation (hereinafter called "EDS"), the financial institutions listed on the signature pages of this Agreement under the heading "LENDERS," and which hereafter become parties hereto pursuant to Section 11.12 hereof, including BANCO SANTANDER - NEW YORK BRANCH, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, CHEMICAL BANK, CITIBANK, N.A., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, MORGAN GUARANTY TRUST COMPANY OF NEW YORK and NATIONSBANK OF TEXAS, N.A., as Arrangers and CITIBANK, N.A., as Administrative Agent for such lenders to the extent and in the manner provided in Article X below ("ADMINISTRATIVE AGENT"). W I T N E S S E T H: WHEREAS, EDS has requested that Lenders (as hereinafter defined) provide EDS and certain EDS Affiliates (as hereinafter defined) with a revolving credit and term loan facility and Lenders are willing to provide such a facility to EDS and such EDS Affiliates upon the terms and subject to the conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the parties hereto hereby agree as follows: ARTICLE I --------- DEFINITION OF TERMS ------------------- 1.1. Definitions. As used herein, the following terms have the meanings assigned to them in this Article I or in the section or recital referred to below: ACCOUNTS shall have the meaning assigned to such term in Section 11.16. ADJUSTED CD RATE means, for any day, a rate per annum determined pursuant to the following formula: ACDR (% [CDBR ]* + AR --------- per annum) = [1.00 -DRP] where CDBR equals the CD Base Rate in effect on such day (expressed as a decimal), DRP equals the Domestic Reserve Percentage in effect on such day and AR equals the Assessment Rate in effect on such day (expressed as a decimal). * The amount in brackets being rounded upward, if necessary, to the next higher 1/10,000th of 1%. 1 ADMINISTRATIVE AGENT shall have the meaning assigned to such term in the preamble hereof. ADVANCE means an amount loaned to one or more Borrowers by any Lender pursuant to this Agreement. AFFILIATE of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. A Person shall be deemed to be "controlled by" any other Person if such Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. AGGREGATE COMMITTED SUM means, as of any date, the aggregate of the Committed Sums of all Lenders in effect on such date. AGREEMENT means this Revolving Credit and Term Loan Agreement, including the Schedules and Exhibits hereto, as the same may be renewed, extended, amended, supplemented, or modified from time to time. APPLICABLE LENDING OFFICE means, with respect to each Lender, such Lender's Eurodollar Lending Office for Eurodollar Loans and such Lender's Domestic Lending Office for all Loans other than Eurodollar Loans. APPLICABLE MARGIN, with respect to the calculation of the CD Rate or the Eurodollar Rate, means the applicable percentage amount set forth in the table below: Committed Loans: Eurodollar Loans: 0.175% CD Loans: 0.300% Term Loans: Eurodollar Loans: 0.175% CD Loans: 0.300% ASSESSMENT RATE means, for any day, the lowest net annual assessment rate (rounded upward, if necessary, to the next higher 1/10,000th of 1%) determined by the Administrative Agent to be generally applicable to member banks of the Federal Reserve System in New York City with deposits exceeding Two Hundred Fifty Million Dollars ($250,000,000), and which meet the highest minimum capitalization ratios and supervisory subgroup designations specified by applicable Tribunals for qualification for the lowest assessment rate as of the date of such determination. 2 ASSIGNEE shall have the meaning assigned to such term in Section 11.12(c). AVAILABILITY DATE means the later of (a) the date when sufficient Lenders have executed this Agreement so that the Aggregate Committed Sum is equal to or greater than $1,250,000,000, or (b) the date when all conditions precedent in Section 5.1 have been satisfied in full or waived. BASE RATE, with respect to any day, means the greater of (a) the average of the rates of interest publicly announced by each Domestic Reference Bank as its Dollar prime rate, base lending rate or reference rate as in effect for that day or (b) the Federal Funds Rate plus 0.50% per annum, all as determined by Administrative Agent and notified to EDS. Each change in the prime rate or base lending rate so announced by such Domestic Reference Bank will be effective as of the effective date of the announcement or, if no effective date is specified, as of the date of the announcement. Such rate is a reference rate only and is not intended to be the lowest rate of interest charged by Lenders in connection with extensions of credit to debtors. BASE RATE LOAN means any Loan or Bid Rate Loan hereunder bearing interest at a rate that is calculated by reference to the Base Rate. BID DATE shall have the meaning assigned to such term in Section 2.3(b). BID RATE means, with respect to each Lender, the rate of interest bid by such Lender with respect to a Bid Rate Loan in response to a Request for Bids. BID RATE LOAN and BID RATE LOANS shall have the meanings assigned to such terms in Section 2.3. BID RATE LOAN BORROWING DATE means the proposed date of availability of a Bid Rate Loan requested by a Borrower in its Request for Bids. BID RATE LOAN CONFIRMATION shall have the meaning assigned to such term in Section 2.3(d). BID RATE NOTES shall have the meaning assigned to such term in Section 3.1 and BID RATE NOTE shall mean any of the Bid Rate Notes. BORROWER means EDS and any Designated EDS Affiliate if, at the time in question, such Designated EDS Affiliate has an outstanding request for a Loan or a Bid Rate Loan or is obligated for payment of one or more Loans or Bid Rate Loans outstanding hereunder, and Borrowers means all of the Persons that meet the foregoing criteria, in each case as designated in the applicable Notice(s) of Advance, Request(s) for Bids or Notice(s) of Continuation/Conversion. BORROWING DATE means the date requested by a Borrower on which a Loan is to be advanced. 3 BUSINESS DAY means any day, other than a Saturday or Sunday, on which commercial banks generally are open for business in Dallas, Texas and New York, New York, and in each other location of a Lender's Applicable Lending Office. CD BASE RATE means, with respect to any Interest Period, the rate of interest determined by Administrative Agent to be the arithmetic average (rounded upward, if necessary, to the next higher 1/10,000th of 1%) of the prevailing rates per annum bid at 9:00 a.m. (New York time) (or as soon thereafter as practicable) on the first day of such Interest Period by two (2) or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each Domestic Reference Bank of its certificates of deposit in an amount comparable to the unpaid principal amount of the CD Loan of Lenders to which such Interest Period applies and having a maturity equal to such Interest Period. CD LOAN means any Loan hereunder bearing interest at a rate that is calculated by reference to the CD Base Rate. CD RATE means the Adjusted CD Rate plus the Applicable Margin. CHANGE OF CONTROL means the acquisition by any Person or any combination of a Person and its Affiliates, of an aggregate of more than fifty percent (50%) of the total issued and outstanding shares of the voting stock of EDS. CODE means the Internal Revenue Code of 1986, as amended, and all regulations promulgated and rulings issued thereunder. COMMITMENT means the obligation of each Lender to make Advances to Borrowers under this Agreement. COMMITMENT TERMINATION DATE means 12:00 noon (New York, New York time) on the 364th day after the Availability Date, or such later date as may be accepted by one or more Lenders pursuant to Section 2.4; provided, however, as to any Lender which does not agree to a requested extension of the Commitment Termination Date, the Commitment Termination Date for such Lender shall continue to be the date so scheduled prior to EDS's request that such Lender extend the Commitment Termination Date. COMMITTED LOAN means any Advance by any Lender to any Borrower pursuant to such Lender's Commitment and COMMITTED LOANS shall mean all of such Loans. COMMITTED LOAN NOTES shall have the meaning assigned to such term in Section 3.1, and COMMITTED LOAN NOTE shall mean any of the Committed Loan Notes. COMMITTED SUM means, for each Lender, the maximum aggregate principal sum which such Lender has committed to lend to Borrowers as set forth in Schedule 1 opposite such Lender's name and the caption "Committed Sum," subject, however, to any increases or reductions in such Lender's Committed Sum occurring during the term of the Facility. 4 COMPENSATION RATE means, for any day, the Federal Funds Rate for such day. DEBT of any Person means all obligations, contingent or otherwise, which in accordance with GAAP should be classified upon such Person's balance sheet as liabilities, but in any event including liabilities secured by any lien or encumbrance existing on property owned or acquired by such Person or a Subsidiary thereof (whether or not the liability secured thereby shall have been assumed), obligations which have been or under GAAP should be capitalized for financial reporting purposes, obligations under acceptance facilities and reimbursement obligations and all guaranties, endorsements, and other contingent obligations with respect to Debt of others, including, but not limited to, any obligations to acquire any such Debt, to purchase, sell, or furnish property or services primarily for the purpose of enabling such other Person to make payment of any of such Debt, or to otherwise assure the owner of any of such Debt against loss with respect thereto. DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of America and all other applicable domestic or foreign liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, fraudulent transfer or conveyance Laws, suspension of payments, or similar Laws from time to time in effect affecting the Rights of creditors generally. DEFAULT shall have the meaning assigned to such term in Article VIII. DESIGNATED EDS AFFILIATE means any EDS Affiliate if, at the time in question, such EDS Affiliate is named on Schedule 2 hereto, as such Schedule is supplemented or amended pursuant to Section 11.18. DOLLARS and the symbol $ mean lawful money of the United States of America. DOMESTIC LENDING OFFICE means, as to each Lender, its office or branch identified in Schedule 1 as its Domestic Lending Office or such other office or branch of such Lender as such Lender may from time to time specify to EDS and the Administrative Agent. DOMESTIC REFERENCE BANKS means Citibank, N.A., Bank of America National Trust and Savings Association, and NationsBank of Texas, N.A., and DOMESTIC REFERENCE BANK means each of them; provided that if any Domestic Reference Bank regularly fails to provide quotations to the Administrative Agent or regularly provides quotations that in the judgment of EDS are not representative of the rates at which deposits are generally available to Lenders, EDS may request (by notice to the Administrative Agent, which shall promptly notify the other parties hereto) that such bank be replaced as a Domestic Reference Bank by another Lender. In the event that only two (2) Domestic Reference Banks shall so provide quotations to the Administrative Agent, the Administrative Agent shall make the calculations required hereunder using such quotations. DOMESTIC RESERVE PERCENTAGE means, for any day, that percentage (expressed as a decimal) which Administrative Agent determines is in effect on such day, as prescribed by the 5 Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation, any basic, supplemental, marginal and emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding Two Hundred Fifty Million Dollars ($250,000,000) in respect of new non-personal time deposits in Dollars in New York City having a maturity equal to the related Interest Period and in an amount of $100,000 or more. EDS shall have the meaning assigned to such term in the preamble hereof. EDS AFFILIATE means any Person which is, directly or indirectly, wholly or partially owned by EDS. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. EUROCURRENCY BUSINESS DAY means a Business Day on which dealings in Eurodollar deposits are carried out in the London interbank market. EUROCURRENCY RESERVE PERCENTAGE means, for any day, that percentage (expressed as a decimal) which Administrative Agent determines is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor), at which reserves (including without limitation any basic, supplemental, marginal and emergency reserves) are imposed by the Board of Governors of the Federal Reserve System in respect of "eurocurrency liabilities," as defined under Regulation D of the Board of Governors of the Federal Reserve System (or any applicable regulation which may be substituted for Regulation D). EURODOLLAR LENDING OFFICE means, as to each Lender, its office or branch in London or New York City identified in Schedule 1 as its Eurodollar Lending Office or such other office or branch of such Lender as such Lender may hereafter designate by notice to EDS and the Administrative Agent, but no such designation shall be effective if EDS notifies such Lender and the Administrative Agent promptly thereafter that, in EDS's reasonable determination, such designation would have adverse consequences to EDS or any other Borrower to a material extent. EURODOLLAR LOAN means any Loan or Bid Rate Loan hereunder bearing interest at a rate that is calculated by reference to the LIBOR Rate. EURODOLLAR RATE means the LIBOR Rate for Dollars plus the Applicable Margin. EURODOLLAR REFERENCE BANKS means Citibank, N.A., Bank of America National Trust and Savings Association and Credit Lyonnais Cayman Island Branch, and EURODOLLAR REFERENCE BANK means each of them; provided that if any Eurodollar Reference Bank regularly fails to provide quotations to the Administrative Agent or regularly provides quotations that in the judgment of EDS are not representative of the rates at which deposits are generally available to Lenders in the relevant currencies, EDS may request (by notice to the Administrative Agent, which shall promptly notify the other parties hereto) that such Eurodollar Reference Bank be 6 replaced as a Eurodollar Reference Bank by another Lender. In the event that only two (2) Eurodollar Reference Banks shall so provide quotations to the Administrative Agent, the Administrative Agent shall make the calculations required hereunder using such quotations. EXCLUDED TAX means any, and EXCLUDED TAXES means all, Taxes imposed on or measured by the net income of any Lender or the Administrative Agent, and franchise taxes imposed on any of them, by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, Taxes imposed on its net income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof. EXHIBIT means an exhibit attached hereto unless otherwise specified. EXTENSION RESPONSE DATE shall have the meaning assigned to such term in Section 2.4. FACILITY means the 364-day revolving credit and term loan facility provided for in this Agreement. FEDERAL FUNDS RATE for any day means the rate set forth for such day (or, if such day is not a Business Day the next preceding Business Day) opposite the caption "Federal Funds (Effective)" in the weekly statistical release designated as "H.15(519)", or any successor publication, published by the Board of Governors of the Federal Reserve System or, if such rate is not so published for any day which is a Business Day, the average of quotations for such day on overnight Federal funds transactions received by Administrative Agent from three (3) Federal funds brokers of recognized standing selected by it. FINANCIAL STATEMENTS means the consolidated balance sheet of EDS and its Subsidiaries and the consolidated statements of income, cash flows, and shareholders' equity of EDS and its Subsidiaries. FIXED RATE LOAN means a Bid Rate Loan bearing interest at a fixed percentage rate per annum specified by the Lender making such Bid Rate Loan in its offer of Bid Rate Loans. GAAP means all applicable generally accepted accounting principles of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board which are applicable as of the date in question. GUARANTY means that certain Unconditional Guaranty Agreement substantially in the form of Exhibit D hereto, executed by EDS in favor of the Lenders, and delivered to the Administrative Agent, as the same may be amended or restated from time to time. HIGHEST LAWFUL RATE means the maximum nonusurious interest rate or amount of interest which, under applicable law, any Lender is allowed to contract for, charge, take, collect, reserve, or receive. 7 INDEMNIFIED LIABILITY and INDEMNIFIED LIABILITIES shall have the meanings assigned to such terms in Section 11.17. INDICATED RATE means, with respect to any Interest Period, the rate for deposits in Dollars for a period comparable to the relevant Interest Period which appears on the Telerate Page 3750 as of 11:00 a.m. London time two (2) Eurocurrency Business Days preceding the first day of the relevant Interest Period or, if Telerate Page 3750 is unavailable at such time, the rate which appears on the Reuters Screen ISDA Page as of such date and time; provided, however, that if Administrative Agent determines that the relevant foregoing source is unavailable for any Interest Period, Indicated Rate means the rate of interest determined by Administrative Agent to be the average (rounded upward, if necessary, to the nearest 1/10,000th of 1%) of the rates per annum at which deposits in Dollars in immediately available funds are offered to each of the Eurodollar Reference Banks two (2) Eurocurrency Business Days preceding the first day of the relevant Interest Period by prime banks in the London interbank Eurodollar market as of 11:00 a.m. London time for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount comparable to the amount of the relevant Loan. INTEREST OPTION shall have the meaning assigned to such term in Section 2.5(c). INTEREST PAYMENT DATE means, as to any Base Rate Loan, each Quarterly Date to occur while such Base Rate Loan is outstanding, and the date such Base Rate Loan is paid in full. INTEREST PERIOD means (a) with respect to each Loan consisting of a Eurodollar Loan or a Bid Rate Loan (other than a Bid Rate Loan which is a Fixed Rate Loan), the period commencing on the date of such Loan, or on the last day of the immediately preceding Interest Period in the case of a continuation or conversion, and ending on the numerically corresponding day in the first, second, third, or sixth month thereafter, as the applicable Borrower may elect in the applicable Notice of Advance, Notice of Acceptance, Request for Bids or Notice of Continuation/Conversion, (b) with respect to each Loan consisting of a CD Loan, the period commencing on the date of such Loan, or on the last day of the immediately preceding Interest Period in the case of a continuation or conversion, and ending 30, 60, 90 or 180 days thereafter as the applicable Borrower may elect in the applicable Notice of Advance, Notice of Acceptance or Notice of Continuation/Conversion and (c) with respect to any Bid Rate Loan which is a Fixed Rate Loan, the period commencing on the date of such Fixed Rate Loan and ending such number of days thereafter (which shall not be less than fifteen (15) days or more than one hundred eighty-three (183) days after such date) as selected by the relevant Borrower in its Notice of Acceptance. Notwithstanding the above, (x) any Interest Period which would otherwise end on a day that is not a Business Day, or Eurocurrency Business Day, as appropriate, shall be extended to the next succeeding Business Day, or Eurocurrency Business Day, as appropriate, unless, in the case of Eurodollar Loans, such next succeeding Eurocurrency Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Eurocurrency Business Day, (y) in the case of Eurodollar Loans, any Interest Period which begins on the last Eurocurrency Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurocurrency Business Day of a calendar month, and (z) no Interest Period may end later than (i) 8 the Commitment Termination Date, except an Interest Period for a Committed Loan that is to be converted to a Term Loan pursuant to a Notice of Term Loan Conversion, or (ii) for any Term Loan, the Term Loan Maturity Date. LAW means all applicable statutes, laws, ordinances, regulations, orders, writs, injunctions, or decrees of any Tribunal and any treaties or international conventions. LENDER means a financial institution identified in Schedule 1 or added pursuant to Section 11.12 hereof, in each case, for the account of the Applicable Lending Office, and Lenders means all such financial institutions. LIBOR RATE means, with respect to any Interest Period, an interest rate per annum (rounded upward, if necessary, to the next higher 1/10,000th of 1%) determined by Administrative Agent two (2) Eurocurrency Business Days prior to the first day of such Interest Period to be the quotient obtained by dividing (a) the Indicated Rate for such Interest Period by (b) a percentage equal to 100% minus the Eurocurrency Reserve Percentage, if applicable. LITIGATION means any proceeding, claim, lawsuit, or investigation conducted or threatened by or before any Tribunal. LOAN means any Committed Loan or Term Loan by any Lender to any Borrower and LOANS shall mean all of such Committed Loans and Term Loans. LOAN DOCUMENTS means (a) this Agreement, (b) the Notes, (c) the Guaranty, and (d) any and all other agreements ever delivered pursuant to this Agreement, as the same may be renewed, extended, restated, amended, or supplemented from time to time. MAJORITY LENDERS shall mean, as of any date, Lenders representing at least 66-2/3% of (a) at any time Lenders are committed to lend hereunder, the sum of (i) the Aggregate Committed Sum plus (ii) the aggregate unpaid principal amount of all Term Loans, if any, or (b) at any time after the Commitments shall have expired or terminated, (i) at any time that Loans are outstanding, the aggregate unpaid principal amount of the Loans, and (ii) at any time that no Loans are outstanding, the aggregate unpaid principal amount of the Bid Rate Loans. MATERIAL ADVERSE EFFECT means any set of circumstances or events which would reasonably be expected to (a) have any material adverse effect upon the validity or enforceability of this Agreement, any Note or the Guaranty, (b) be material and adverse to the financial condition of EDS and its Subsidiaries taken as a whole, (c) materially impair the ability of EDS and its Subsidiaries, taken as a whole, to fulfill their obligations under the terms and conditions of the Loan Documents, or (d) cause a Default or a Potential Default. MULTIEMPLOYER PLAN means a multiemployer plan as defined in sections 3(37) or 4001(a)(3) of ERISA or section 414 of the Code to which EDS or any of its Subsidiaries is making, or has made, or is accruing, or has accrued, an obligation to make contributions. 9 NET INCOME means, with respect to any Person for any period, the net income or loss of such Person for such period, determined in accordance with GAAP, except that extraordinary and non-recurring gains and losses as determined in accordance with GAAP shall be excluded. NET WORTH means the excess, if any, of (a) the total assets of EDS and its consolidated Subsidiaries over (b) without duplication, all items of indebtedness, obligation, or liability which would be classified as liabilities of EDS and its consolidated Subsidiaries, each to be determined in Dollars in accordance with GAAP. NOTES shall have the meaning assigned to such term in Section 3.1 and NOTE shall mean any of the Notes. NOTICE OF ACCEPTANCE means a notice by a Borrower to the Administrative Agent accepting an offer for a Bid Rate Loan. NOTICE OF ADVANCE means a notice submitted and executed by a Borrower (and, if such Borrower is not EDS, by such Borrower and EDS), which notice shall be irrevocable and binding, requesting a Committed Loan, which Notice of Advance shall be substantially in the form of Exhibit E. NOTICE OF CONTINUATION/CONVERSION shall have the meaning assigned to such term in Section 3.4 and shall be substantially in the form of Exhibit H. NOTICE OF REJECTION means a notice by a Borrower to the Administrative Agent rejecting an offer for a Bid Rate Loan. NOTICE OF TERM LOAN CONVERSION shall have the meaning assigned to such term in Section 2.5. NOTICE OF TERM LOAN ROLLOVER shall have the meaning assigned to such term in Section 2.5(c). OBLIGATION means all present and future indebtedness, obligations and liabilities, and all renewals, extensions, and modifications thereof, now or hereafter owed to Lenders by each Borrower arising from, by virtue of, or pursuant to any Loan Document, together with all interest lawfully accruing thereon and reasonable costs, reasonable expenses, and reasonable attorneys' fees incurred in the enforcement or collection thereof. OFFER OF BID RATE LOANS shall mean a duly completed Offer of Bid Rate Loans, substantially in the form of Exhibit G, delivered by a Lender to Administrative Agent in connection with a Bid Rate Loan. PARTICIPANT shall have the meaning assigned to such term in Section 11.12(b). 10 PAYMENT OFFICE means the principal office of Administrative Agent in New York City, located on the date hereof at 399 Park Avenue, New York, New York 10043, which may be changed by written notice to EDS and the Lenders. PBGC means the Pension Benefit Guaranty Corporation, or any successor thereto. PENSION PLAN means an employee pension benefit plan as defined in section 3(2) of ERISA which is maintained or contributed to by EDS or any Subsidiary of EDS for employees of EDS or any Subsidiary of EDS, excluding any Multiemployer Plan. PERCENTAGE means, at any time, for each Lender, the percentage obtained by (x) dividing such Lender's Committed Sum by the Aggregate Committed Sum and (y) multiplying the product so obtained by 100. PERSON means any individual, entity, or Tribunal. POTENTIAL DEFAULT means the occurrence of any event specified in Section 8.1 which, with notice or lapse of time or both, as provided in Section 8.1, could become a Default. PROCESS AGENT means Prentice Hall Systems, Inc., 15 Columbus Circle, New York, New York 10073-7773. PRO RATA means, at any time, for each Lender, the ratio of the unpaid principal balance of the Loans made by such Lender to the unpaid principal balance of all Loans. PURCHASING LENDER shall have the meaning assigned to such term in Section 2.4. QUARTERLY DATE means the last Business Day of each December, March, June and September during the term of this Agreement. REFERENCE BANKS means the Domestic Reference Banks and the Eurodollar Reference Banks and REFERENCE BANK means any of them. REGISTER shall have the meaning assigned to such term in Section 11.12(d). REPORTABLE EVENT shall have the meaning assigned thereto under Section 4043 of ERISA. REQUEST FOR BIDS means a duly completed Request for Bids, substantially in the form of Exhibit F, delivered by a Borrower to Administrative Agent in connection with a Bid Rate Loan. RIGHTS means rights, remedies, powers, privileges, and benefits. SCHEDULE means a schedule attached hereto unless specified otherwise. SECTION means a section or subsection of this Agreement unless specified otherwise. 11 SUBSIDIARY of a Person means any Person (and Subsidiaries means all of such Persons), whether or not existing on the date of this Agreement, of which an aggregate of 50% or more (in number of votes) of the securities having ordinary voting power for the election of directors (or individuals performing similar functions), or comparable ownership interest, is owned of record or beneficially, directly or indirectly, by such Person, by one or more of the other Subsidiaries of such Person, or by a combination thereof. TAXES means all taxes, assessments, fees, levies, imposts, duties, deductions, withholdings, or other charges of any nature whatsoever from time to time or at any time imposed by any Law or Tribunal. TERMINATING LENDER shall have the meaning assigned to such term in Section 2.4. TERM LOAN and TERM LOANS shall have the meanings assigned to such terms in Section 2.5. TERM LOAN MATURITY DATE shall have the meaning assigned to such term in Section 2.5(b). TERM NOTE shall have the meaning assigned to such term in Section 2.5 and TERM NOTES shall mean all of the Term Notes. TRIBUNAL means any (a) local, state, or federal judicial, executive, or legislative authority, including, without limitation, any governmental agency or regulatory authority, whether of the United States or any other country, or (b) private arbitration board or panel. 1.2. Other Definitional Provisions. (a) Other Agreements. All terms defined in this Agreement shall have the above-defined meanings when used in the Notes or any Loan Documents, and any certificate, report or other document made or delivered pursuant to this Agreement, unless the context therein shall otherwise require. (b) To/From. Relative to the determination of any period of time, "from" means "from and including" and "to" or "until" means "to but excluding". (c) References to Loan Documents. The words "hereof," "herein," "hereunder" and similar terms when used in any Loan Documents shall refer to such Loan Document as a whole and not to any particular provision thereof. (d) Accounting Terms. As used herein and in any certificate or other document made or delivered pursuant thereto, accounting terms relating to Borrowers but not defined in Article I and accounting terms partly defined in Article I shall have the respective meanings given to them under GAAP. 12 (e) Include/Including. The term "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term. ARTICLE II ---------- FACILITY -------- 2.1 Committed Loans. Subject to and in reliance upon the terms, conditions, representations, and warranties contained in this Agreement, each Lender, severally, and not jointly, agrees to make Advances in Dollars to EDS and any of the Designated EDS Affiliates so long as the aggregate principal amount of the Committed Loans from such Lender outstanding never exceeds such Lender's Committed Sum; provided that, the aggregate outstanding principal amount of all Committed Loans and Bid Rate Loans from all Lenders shall not exceed the Aggregate Committed Sum. Notwithstanding anything to the contrary set forth herein, any Lender may make and have outstanding one or more Bid Rate Loans which, when aggregated with the outstanding principal amount of all Committed Loans from such Lender, would exceed such Lender's Committed Sum. Administrative Agent shall maintain a record of each Lender's Committed Sum, Percentage, Committed Loans, Term Loans and Bid Rate Loans. Each Lender's Commitment shall continue in full force and effect until and expire on, the applicable Commitment Termination Date, and no Lender shall have any obligation to make any Committed Loan thereafter; provided that, each Borrower's Obligation and Lender's Rights under the Loan Documents shall continue in full force and effect until such Borrower's Obligation is paid and performed in full and provided, further, that, pursuant to the terms of Section 2.5, Borrowers may convert the outstanding principal balance of the Committed Loans to Term Loans. From and after the Availability Date, through and including the final Commitment Termination Date, EDS and each Designated EDS Affiliate may borrow, repay, and reborrow Committed Loans and Bid Rate Loans hereunder, subject as respects Bid Rate Loans to Section 2.3. 2.2 Committed Loan Borrowing Procedure; Disbursement. (a) Notice of Borrowing of Committed Loans. Each Committed Loan shall be made following a Borrower's Notice of Advance to Administrative Agent requesting a Committed Loan on a certain Borrowing Date. Each Notice of Advance shall be given to Administrative Agent in writing or by telegraph, telex or telecopy, or by telephonic notice (followed by a written confirmation) (i) not later than 11:00 a.m., New York, New York time on the proposed Borrowing Date of each Committed Loan which is a Base Rate Loan, which proposed Borrowing Date shall be a Business Day, (ii) not later than 11:00 a.m., New York, New York time on the Business Day that is two (2) Business Days before the proposed Borrowing Date of each Committed Loan which is a CD Loan, which proposed Borrowing Date shall be a Business Day, and (iii) not later than 11:00 a.m., New York, New York time on the Eurocurrency Business Day that is three (3) Eurocurrency Business Days before the proposed Borrowing Date of each Committed Loan which is a Eurodollar Loan, which proposed Borrowing Date shall be a Eurocurrency Business Day. 13 Each Committed Loan, except Committed Loans for the remaining unborrowed Aggregate Committed Sum, shall be in an amount of not less than $15,000,000 or, if greater, an integral multiple of $1,000,000. (b) Funding of Committed Loans. After receiving a Notice of Advance in the manner provided herein, Administrative Agent shall promptly notify each Lender by telephone (confirmed immediately by telex, cable or telecopy), telecopy, telex or cable of the terms of the Notice of Advance and such Lender's Percentage of the requested Committed Loan. Each Lender shall, before 1:00 p.m., New York, New York time on the Borrowing Date specified in the Notice of Advance, deposit with Administrative Agent at its Payment Office such Lender's Percentage of such Committed Loan in immediately available funds. Upon fulfillment of all applicable conditions set forth herein, including receipt by Administrative Agent of a duly executed Committed Loan Note for each Lender from the relevant Borrower (provided, however, that EDS shall be required only to provide to each Lender a Committed Loan Note in the form of Exhibit A-1 to evidence all Committed Loans from such Lender to EDS) and after receipt by Administrative Agent of such funds, Administrative Agent shall pay or deliver all funds so received to the order of the relevant Borrower to the account specified in the Notice of Advance. (c) Failure to Fund Committed Loans. The failure of any Lender to make any Advance required to be made by it hereunder shall not relieve any other Lender of its obligation to make its Advance hereunder. If any Lender fails to provide its Percentage of any Committed Loan and if all conditions to such Committed Loan have apparently been satisfied, Administrative Agent will make available to the relevant Borrower the funds received by it from the other Lenders. Neither Administrative Agent nor any Lender shall be responsible for the performance by any other Lender of its obligations hereunder. Upon the failure of a Lender to make an Advance required to be made by it hereunder, Administrative Agent shall notify EDS, the relevant Borrower (if other than EDS) and all Lenders, and shall consult with all Lenders (other than the defaulting Lender) to determine whether one or more of such Lenders will make an additional Advance to cover the shortfall created by the defaulting Lender's failure to fund its Advance. If Lenders decline to cover such shortfall, Administrative Agent shall use good faith efforts to obtain one or more banks, acceptable to EDS, to replace the defaulting Lender, but neither Administrative Agent nor any other Lender shall have any liability or obligation whatsoever as a result of the failure to obtain a replacement for such Lender. (d) Funding by Administrative Agent. Unless Administrative Agent shall have received notice from a Lender prior to the date of any Committed Loan that such Lender will not make available to Administrative Agent such Lender's Percentage of such Committed Loan, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on the date of such Committed Loan in accordance with this Section 2.2. Administrative Agent may, in reliance upon such assumption, make available a corresponding amount to or on behalf of the relevant Borrower on such date. If and to the extent any Lender shall not have so made its Percentage of any Committed Loan available to Administrative Agent, the relevant 14 Borrower shall repay to Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to or on behalf of such Borrower until the date such amount is repaid to Administrative Agent, at the rate per annum applicable to the Committed Loan in question. Each Lender shall record in its records, or at its option on the schedule attached to its applicable Committed Loan Note, the date and amount of each Committed Loan made by such Lender thereunder, each repayment or prepayment thereof, and the dates on which each Interest Period for such Committed Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on such Committed Loan Note. The failure to so record or any error in so recording any such amount shall not, however, limit or otherwise affect the obligations of any Borrower hereunder or under any Committed Loan Note to repay the principal amount of each Committed Loan to such Lender together with all interest accruing thereon. 2.3. Bid Rate Loans. From time to time, each Borrower may request that Lenders make one or more Advances available to such Borrower under the Facility for the same purposes expressed herein, at an interest rate and subject to other terms and conditions to be determined in accordance with this Section 2.3 (each, a "BID RATE LOAN" and collectively, the "BID RATE LOANS") pursuant to the procedure described below. (a) Requests for Bids. Except as otherwise provided herein, each Borrower may from time to time request that Administrative Agent invite bids for Bid Rate Loans, which requests shall be made by delivering to Administrative Agent a completed Request for Bids not later than 11:00 a.m., New York, New York time, (i) on the Eurocurrency Business Day that is four (4) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date for a Eurodollar Loan; and (ii) on the Business Day that is one (1) Business Day before the proposed Bid Rate Loan Borrowing Date for a Fixed Rate Loan. Each Request For Bids shall be irrevocable and shall specify (A) the proposed Bid Rate Loan Borrowing Date, which date shall be a Eurocurrency Business Day, if the requested Bid Rate Loan is a Eurodollar Loan, or a Business Day in all other cases, (B) the amount which the Borrower proposes to borrow on such date, which amount shall be not less than $5,000,000 or, if greater, an integral multiple of $1,000,000, (C) whether the Lenders should offer to make Eurodollar Loans and/or Fixed Rate Loans, (D) the Interest Period(s) applicable to such proposed borrowing, if the proposed Bid Rate Loan is to be a Eurodollar Loan, (E) the term of the proposed Bid Rate Loan, (F) the account into which the Advance of the Bid Rate Loan is to be made and (G) such other information as is provided for in Exhibit F. Administrative Agent, promptly after receipt by it of a Request For Bids, shall notify each Lender by telecopy of its receipt of a Request For Bids and the contents thereof and shall invite bids from each Lender. (b) Offers by Lenders. Prior to 10:00 a.m., New York, New York time, (i) on the Eurocurrency Business Day at least three (3) Eurocurrency Business Days prior to the proposed Bid Rate Loan Borrowing Date, if the requested Bid Rate Loan is a Eurodollar Loan or (ii) on the proposed Bid Rate Loan Borrowing Date if the requested Bid Rate 15 Loan is a Fixed Rate Loan (the "BID DATE"), each Lender willing to make a Bid Rate Loan shall provide notice to Administrative Agent of such Lender's offer to provide a Bid Rate Loan in response to the relevant Borrower's Request For Bids by delivering to Administrative Agent an Offer of Bid Rate Loans. Such Offer of Bid Rate Loans shall specify the minimum and maximum amount of the Bid Rate Loan such Lender would be willing to provide (which amount may exceed such Lender's Committed Sum), the Interest Period(s) relative thereto, if the offered Bid Rate Loan is to be a Eurodollar Loan, the Bid Rate for such Bid Rate Loan, any other information provided for in Exhibit G and all other terms and conditions required by such Lender. At or prior to 10:30 a.m. New York, New York time, on the Bid Date, Administrative Agent shall provide notice to the Borrower having submitted the relevant Request For Bids of all of the information provided to Administrative Agent by Lenders in response to such Request For Bids; provided, however, if Administrative Agent, in its capacity as a Lender, shall elect to make any such offer, it shall notify the relevant Borrower of such offer before 9:00 a.m., New York, New York time, on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders. (c) Acceptance of Bids. The Borrower having issued a Request For Bids shall, not later than 11:00 a.m., New York, New York time, on the relevant Bid Date, and in its sole discretion, either (i) reject any or all of the offered Bid Rate Loans by delivering a Notice of Rejection to Administrative Agent, or (ii) accept any or all of the offered Bid Rate Loans by delivering a Notice of Acceptance to Administrative Agent; provided, however, that (A) the aggregate principal amount of each Bid Rate Loan may not exceed the applicable amount set forth in the related Request for Bids, and (B) in the event that two (2) or more offers of Bid Rate Loans have identical terms other than interest rate, acceptance of offers shall be made on the basis of ascending interest rates. Promptly following the acceptance of one or more Bid Rate Loans by a Borrower, the Administrative Agent shall notify each Lender of the ranges of offers submitted and the highest and lowest offers accepted for each Interest Period requested by such Borrower, the aggregate amount of the Bid Rate Loans borrowed pursuant to the related Request for Bids and the consequent reduction in the availability of the Aggregate Committed Sum. Any Notice of Acceptance shall specify each Lender whose Bid Rate Loan is accepted, the amount of the Bid Rate Loans so accepted, which shall not be more than the maximum amount offered by such Lender nor less than the minimum amount offered by such Lender, and all other terms and conditions with respect to which such Lender offered varying options in its notice to Borrower. All notices by Borrower to Administrative Agent shall be promptly communicated by Administrative Agent to the relevant Lenders. If Borrower fails to issue to Administrative Agent either a Notice of Rejection or a Notice of Acceptance at or prior to 11:00 a.m., New York, New York time, on the Bid Date indicating its acceptance or rejection of a Lender's offered Bid Rate Loan, Borrower shall be deemed to have rejected such offered Bid Rate Loan and Administrative Agent shall so notify such Lender. (d) Funding of Bid Rate Loans. After receiving a Notice of Acceptance from Borrower that it wishes to accept an offered Bid Rate Loan, Administrative Agent shall 16 promptly notify the relevant Lender by telephone (confirmed immediately by telex, cable or telecopy), telecopy, telex or cable of the terms of the requested Bid Rate Loan, such written confirmation to be in the form of Exhibit M attached hereto (each, a "BID RATE LOAN CONFIRMATION"). Each such Lender whose offered Bid Rate Loan was accepted shall, before 12:00 noon, New York, New York time, on the Bid Rate Loan Borrowing Date, deposit with Administrative Agent at its Payment Office the amount of such Bid Rate Loan in immediately available funds. Upon fulfillment of all applicable conditions set forth herein, including receipt by Administrative Agent of a duly executed Bid Rate Note for each Lender obligated to fund a Bid Rate Loan from the relevant Borrower and after receipt by Administrative Agent of such funds, Administrative Agent shall make such funds available to the relevant Borrower at the account specified in the Request for Bids and thereafter deliver a Bid Rate Note to each Lender funding a Bid Rate Loan. (e) Waivers Permitted. Notwithstanding anything set forth in this Section 2.3, the required notices and time periods set forth in this Section 2.3 as to Bid Rate Loans may be waived by agreement of any Borrower and any affected Lender. (f) Reliance. The Administrative Agent may rely and act upon notice given by telephone by individuals reasonably believed by the Administrative Agent to be those individuals designated to the Administrative Agent by the Borrower in writing from time to time to possess authority to give such notice, without waiting for receipt of written confirmation thereof, and EDS and each other Borrower hereby indemnifies and holds harmless the Administrative Agent from and against any and all losses, costs, expenses, damages, claims, actions and other proceedings relating to such reliance, except for losses, costs, expenses, damages, claims, actions and proceedings resulting from acts or omissions constituting gross negligence or willful misconduct on the part of the Administrative Agent. If a written confirmation differs in any respect from the action taken by the Administrative Agent, the records of the Administrative Agent shall govern, absent manifest error. 2.4. Optional Extension of the Commitment Termination Date. At any time after the sixty-first (61st) day prior to the then current Commitment Termination Date, EDS may request that the Commitment Termination Date be extended, effective on the then current Commitment Termination Date, to the date which is the 364th day after the then current Commitment Termination Date and Lenders may, at their option, accept or reject such request. To request an extension, EDS shall notify Administrative Agent of EDS's request to extend the Commitment Termination Date, and Administrative Agent shall promptly notify the Lenders of each such request. Each Lender shall notify Administrative Agent in writing within thirty (30) days after such request, provided, that, no Lender shall be required to give notice of consent prior to thirty (30) days prior to the then current Commitment Termination Date (the later of such days shall be referred to as the "EXTENSION RESPONSE DATE") whether it consents to such extension. If any Lender shall fail to give such notice to Administrative Agent by the Extension Response Date, such Lender shall be deemed to have rejected the requested extension. If all Lenders consent to the requested extension by the Extension Response Date, the Commitment Termination Date shall be automatically extended to the date which is the 364th day after the then current Commitment 17 Termination Date. If fewer than all Lenders so consent (each Lender rejecting the requested extension being referred to as a "TERMINATING LENDER"), EDS shall within five (5) days after the Extension Response Date notify Administrative Agent (which shall promptly notify each Lender) whether EDS elects to withdraw its request for an extension of the Commitment Termination Date or to extend the Commitment Termination Date for all Lenders that have consented to such extension. If EDS elects to so extend the Commitment Termination Date as to fewer than all Lenders, Administrative Agent shall promptly notify the non- Terminating Lenders of EDS's decision, and each Lender which is not a Terminating Lender shall have the right, but not the obligation, to elect to increase its respective Committed Sum by an amount not to exceed the aggregate amount of the Committed Sums of the Terminating Lenders, which election shall be made by notice from each such non-Terminating Lender to the Administrative Agent and EDS given not later than five (5) Business Days after the date notified by Administrative Agent, and specifying the amount of such proposed increase in such non-Terminating Lender's Committed Sum. If the aggregate amount of the proposed increases in the Committed Sums of all such non-Terminating Lenders making such an election is in excess of the aggregate Committed Sums of the Terminating Lenders, (a) the Committed Sums of the Terminating Lenders shall be allocated pro rata among such non-Terminating Lenders based on the respective amounts of the proposed increases to Committed Sums elected by each of such non- Terminating Lenders, and (b) the respective Committed Sums of such non- Terminating Lenders shall be increased by the respective amounts allocated pursuant to clause (a) above so that, after giving effect to such termination and increases, the amount of the Aggregate Committed Sum will be the same as prior to such termination. If the aggregate amount of the proposed increases to Committed Sums of all non-Terminating Lenders making such an election equals the aggregate Committed Sums of the Terminating Lenders, the respective Committed Sums of such non- Terminating Lenders shall be increased by the respective amounts of their proposed increases, so that after giving effect to such termination and increases, the amount of the Aggregate Committed Sum will be the same as prior to such termination. If the aggregate amount of the proposed increases to Committed Sums of all non-Terminating Lenders making such an election is less than the aggregate Committed Sums of the Terminating Lenders, (i) the respective Committed Sums of such non-Terminating Lenders shall be increased by the respective amounts of their proposed increases and (ii) EDS shall have the right to add one or more banks or other financial institutions (which are not Terminating Lenders) as purchasing lenders under this Agreement (in such capacity, each a "PURCHASING LENDER") to replace such Terminating Lenders, which Purchasing Lenders shall have aggregate Committed Sums not greater than those of the Terminating Lenders less the amounts thereof, if any, assumed by the non- Terminating Lenders pursuant to the above-described increases. The transfer of Commitments or outstanding Loans from Terminating Lenders to Purchasing Lenders or non-Terminating Lenders shall take place on the effective date of, and pursuant to the execution, delivery, acceptance and recording of, an Assignment and Acceptance in accordance with the procedures set forth in Section 11.12. To the extent that replacements are not obtained by EDS for any Terminating Lender, on the Commitment Termination Date applicable to such Terminating Lender, the Aggregate Committed Sum shall be reduced by the amount of the Committed Sum of such Terminating Lender and, concurrently with such reduction in the Aggregate Committed Sum, EDS shall either (1) pay, and cause any other relevant Borrower to 18 pay, the principal amount of the Loans of any such Terminating Lender, all accrued and unpaid interest thereon, such Terminating Lender's ratable share of all accrued and unpaid facility fees and any remaining unpaid Obligation owed to such Terminating Lender in relation to the Facility, in each case to the extent not assigned and purchased pursuant hereto, and the Commitment of such Terminating Lender shall thereupon terminate or (2) convert the Committed Loans of any such Terminating Lender to Term Loans pursuant to Section 2.5, provided, however, that no Committed Loan made by any Terminating Lender pursuant to a Notice of Advance sent after Administrative Agent has given notice to EDS that such Terminating Lender has rejected the requested extension may be converted to a Term Loan, unless the then Commitment Termination Date is not extended for any Lender and all, or a Pro Rata Portion of all, Committed Loans outstanding on the then Commitment Termination Date are converted to Term Loans. Each Terminating Lender's Commitment shall expire no later than its Commitment Termination Date and, unless a Terminating Lender's Committed Loans are converted to Term Loans hereunder, each Terminating Lender shall have no further rights or obligations under the Facility or Commitment hereunder following the effective date of the later to occur of (x) the transfer of all outstanding Loans from such Terminating Lender to Purchasing Lenders or non- Terminating Lenders, or (y) the payment in full of the Obligation owed to such Terminating Lender hereunder, other than any rights or obligations as to the Facility accruing prior to such date under this Agreement as provided herein; but in no event shall such Terminating Lender have any obligation to make Advances after its Commitment Termination Date. 2.5. Conversion to Term Loan. So long as Borrowers shall have fulfilled all the conditions precedent set forth in this Section 2.5, and so long as no Default or Potential Default exists, on the Commitment Termination Date each Borrower shall have the option, exercisable upon delivery to Administrative Agent, on or prior to three (3) Business Days prior to the Commitment Termination Date, of a notice (a "NOTICE OF TERM LOAN CONVERSION") in the form of Exhibit I, to convert the outstanding principal balance of any Committed Loan Note due on such Commitment Termination Date with respect to which such Borrower is the obligor to a term loan (such Loan made by a Lender herein being called a "TERM LOAN" and all such Loans being herein collectively called the "TERM LOANS") on the terms and conditions set forth below, except as limited by Section 2.4. (a) Term Notes. The Term Loan of each Lender to a Borrower shall be evidenced by a promissory note (a "TERM NOTE") executed by such Borrower which shall (i) be dated as of the Commitment Termination Date, (ii) be in the unpaid principal balance of the Committed Loan of such Lender as of such date, (iii) bear interest at a rate selected in accordance with this Section 2.5, (iv) be payable to the order of such Lender, at the Payment Office of Administrative Agent, (v) be in renewal and extension of such Lender's Committed Loan Note and (vi) be in the form of Exhibit B attached hereto with blanks appropriately completed in conformity herewith. Each Borrower electing to convert one or more Committed Loans to Term Loans shall deliver to Administrative Agent a Term Note for each such Term Loan contemporaneously with the delivery of the Notice of Term Loan Conversion provided for in Section 2.5, which Term Note shall be delivered by 19 Administrative Agent to the relevant Lender in exchange for the related Committed Loan Note, which shall be delivered to the relevant Borrower. (b) Principal and Interest Payments on Term Notes. Interest on the Term Notes shall be payable in accordance with Section 3.3. The unpaid principal amount of the Term Notes and all accrued but unpaid interest thereon, shall be payable on the second anniversary of the date thereof (the "TERM LOAN MATURITY DATE"). (c) Interest Options. Each Borrower of a Term Loan shall have the option of having all or any portion of the Term Loans bear interest at the Base Rate, the CD Rate or the Eurodollar Rate (each, an "INTEREST OPTION"). (i) At Time of Borrowing. Each Borrower shall, in its Notice(s) of Term Loan Conversion , give Administrative Agent notice of the initial Interest Option and Interest Period selected with respect to each Loan of such Borrower to be converted into a Term Loan on the Commitment Termination Date. (ii) At Expiration of Interest Periods. Prior to the end of each Interest Period, each Borrower of a Term Loan shall give written notice (a "NOTICE OF TERM LOAN ROLLOVER") in the form of Exhibit J to Administrative Agent of the Interest Option which shall be applicable to such Term Loan upon the expiration of such Interest Period. Such Term Loan Rollover Notice shall be given to Administrative Agent (1) not later than 11:00 a.m., New York, New York time on a Business Day that is at least two (2) Business Days, in the case of a Base Rate or CD Rate selection or (2) not later than 11:00 a.m., New York, New York time on a Eurocurrency Business Day that is at least three (3) Eurocurrency Business Days, in the case of a Eurodollar Rate selection, prior to the termination of such Interest Period. Such Term Loan Rollover Notice shall also specify the length of the succeeding Interest Period (subject to the provisions of the definition of such term), selected by the relevant Borrower with respect to each Term Loan. Each Notice of Term Loan Rollover shall be irrevocable and effective upon notification thereof to Administrative Agent. If the required Notice of Term Loan Rollover shall not have been timely received by Administrative Agent in accordance with this Section 2.5(c)(ii), each Borrower not providing such timely notice shall be deemed to have converted such Loan into a Base Rate Loan on the last day of the Applicable Interest Period and the Administrative Agent shall promptly notify the relevant Borrower of such conversion. 2.6 Several Obligations. The failure of any Lender to perform its obligations under this Agreement shall not affect the obligations of any Borrower toward any other Lender or the obligations of any other Lender toward any Borrower, nor shall any other Lender be liable for the failure of such Lender to perform its obligations under this Agreement. 20 ARTICLE III ----------- TERMS OF PAYMENT ---------------- 3.1. Notes. Committed Loans and interest thereon shall be evidenced by promissory notes substantially in the form and upon the terms of Exhibit A-1 in the case of EDS or Exhibit A-2 in the case of any other Borrower, respectively, duly executed by the applicable Borrower (the "COMMITTED LOAN NOTES") and shall be due and payable in accordance with this Agreement and the terms of such Committed Loan Notes. Term Loans and interest thereon shall be evidenced by Term Notes substantially in the form and upon the terms of Exhibit B duly executed by the applicable Borrower and shall be due and payable in accordance with this Agreement and the terms of such Term Notes. Bid Rate Loans and interest thereon shall be evidenced by promissory notes substantially in the form and upon the terms of Exhibit C duly executed by the applicable Borrower (the "BID RATE NOTES") and shall be due and payable in accordance with this Agreement and the terms of such Bid Rate Notes. The Committed Loan Notes, the Term Notes and the Bid Rate Notes are collectively called the "NOTES". 3.2. Payments on Committed Loan Notes and Bid Rate Notes. The unpaid principal balance of each Committed Loan Note, and all accrued but unpaid interest thereon, shall be due and payable on the Commitment Termination Date, subject to Borrowers' right to convert such Committed Loans to Term Loans. The unpaid principal balance of each Bid Rate Note, and all accrued and unpaid interest thereon, shall be due and payable in accordance with the terms of such Bid Rate Note, provided, however, that interest on any Bid Rate Note that evidences a Fixed Rate Loan shall be payable at least every ninety (90) days during the term of such Fixed Rate Loan, and provided, further, that such Bid Rate Note shall mature not later than the Commitment Termination Date. Administrative Agent shall deliver to each Borrower and EDS notice of each payment of interest, principal, facility fee or other payment required to be made on each Loan and Bid Rate Loan not less than three (3) Business Days or Eurocurrency Business Days, as applicable, prior to the due date thereof; provided, however, that failure to provide such notice will not affect any Borrower's Obligation hereunder. Each payment or prepayment on the Obligation and payments of fees must be paid at Administrative Agent's Payment Office or address in London or New York City set forth in Schedule 1 in funds which are or will be available for immediate use by Administrative Agent at such address on or before 1:00 p.m., New York, New York time, on the day due. Funds received after such time shall be deemed to have been received by Administrative Agent on the next following Business Day (in the case of Base Rate Loans and CD Loans) or Eurocurrency Business Day (in the case of Eurodollar Loans). Amounts received by Administrative Agent for the account of another Person shall be promptly remitted in like funds to such other Person. If, in the case of Base Rate Loans and/or CD Loans, any action is required or any payment is to be made on a day which is not a Business Day, then such action or payment shall be delayed until the next succeeding Business Day. If, in the case of Eurodollar Loans, any action is required on a day which is not a Eurocurrency Business Day, then such action or payment shall be delayed until the next Eurocurrency Business Day unless a payment by a Borrower of a Eurodollar Loan is involved and the next Eurocurrency Business Day would fall in the succeeding calendar month, in which event such payment shall be made on the immediately preceding Eurocurrency Business Day. Any extension of time shall be included in the 21 computation of payments of interest. Upon receipt of any payment of principal or interest from a Borrower hereunder (except payments and/or prepayments on Bid Rate Notes), Administrative Agent will promptly thereafter cause to be distributed (x) like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Sections 3.5, 3.9, 3.10, 3.11 or 3.13) to the Lenders for the account of their respective Applicable Lending Offices and (y) like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its respective Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon any assignment of any Lender's Commitment pursuant to Section 11.12 and after notification thereof to Administrative Agent, Administrative Agent shall make all payments hereunder in respect of the interest assigned thereby to the Assignee. 3.3. Interest. The Loans from day to day shall bear interest on the outstanding principal balance thereof at a rate per annum equal to the lesser of (a) the Highest Lawful Rate, or (b) (i) in the case of Base Rate Loans, the Base Rate, (ii) in the case of CD Loans, the CD Rate, and (iii) in the case of Eurodollar Loans, the Eurodollar Rate. Bid Rate Loans from day to day shall bear interest on the outstanding principal balance thereof at a rate per annum equal to the lesser of (A) the Highest Lawful Rate, or (B) the Bid Rate applicable thereto. Accrued interest on each Loan is payable in arrears, (x) in the case of Base Rate Loans, on each Interest Payment Date, and, (y) in the case of CD Loans and Eurodollar Loans, on the last day of each Interest Period with respect to such Loan or if occurring earlier in any case, the Commitment Termination Date (in the case of Committed Loans) or the Term Loan Maturity Date (in the case of Term Loans); provided, however, as to any Loan having an Interest Period longer than three (3) months, in the case of Eurodollar Loans, or ninety (90) days, in the case of CD Loans, interest shall also be payable on each day which is three (3) months, in the case of Eurodollar Loans, or ninety (90) days, in the case of CD Loans, after the first day of such Interest Period. Interest accrued on the principal of each Loan and each Bid Rate Loan after the maturity thereof and, to the extent permitted by applicable Law, interest on other overdue amounts, shall be payable on demand. Each determination by Administrative Agent of the rate of interest applicable to any Loan shall be conclusive in the absence of manifest error and each change in the Base Rate and Highest Lawful Rate, subject to the terms hereof, will become effective, without notice to any Borrower, upon the effective date of such change. 3.4. Continuation/Conversion with Respect to Committed Loans. (a) Conversion of Loans. Any Borrower may elect at any time to convert all or any part (but, if less than all, not less than $15,000,000 or any greater integral multiple of $1,000,000) of any outstanding Base Rate Loan, CD Loan or Eurodollar Loan (other than a Bid Rate Loan) to a Base Rate Loan, CD Loan or Eurodollar Loan, as the case may be, by giving Administrative Agent an irrevocable notice of such election, in the form of Exhibit H hereto (the "NOTICE OF CONTINUATION/CONVERSION") not later than 12:00 noon, New York, New York time on the second (2nd) Business Day before the date of conversion, in the case of conversion into a Base Rate Loan or a CD Loan, or 12:00 noon, New York, New York time on the third (3rd) Eurocurrency Business Day before the date of the conversion, in the case of conversion into a Eurodollar Loan, specifying the date of 22 conversion, the type of Loan into which each such Loan or specified portion thereof shall be converted and the duration of the Interest Period applicable thereto. Any conversion pursuant to this clause (a) other than a conversion from a Base Rate Loan to a CD Loan or a Eurodollar Loan, shall be made on the last day of an Interest Period. (b) Continuation of Loans. Any Borrower may elect to continue (on the last day of the applicable Interest Period) any CD Loan or Eurodollar Loan (other than a Bid Rate Loan) as the same type of Loan by giving Administrative Agent an irrevocable Notice of Continuation/Conversion not later than (i) 12:00 noon, New York, New York time, the second (2nd) Business Day before the last day of such Interest Period, if continuing a CD Loan, or (ii) 12:00 noon, New York, New York time, the third (3rd) Eurocurrency Business Day before the last day of such Interest Period, if continuing a Eurodollar Loan. The Notice of Continuation/Conversion shall specify the portion of such Loan that shall be continued and the duration of the Interest Period applicable thereto. (c) Coordination with Interest Periods. Notwithstanding anything in clause (a) and (b) of this Section 3.4 to the contrary, but without limiting Section 3.5, each Borrower shall use its reasonable efforts to exercise its options with regard to electing to convert into or continue a Loan so that, on any date on which the Committed Sum is reduced pursuant to Section 4.2, it will not be necessary to prepay any Loan that does not have an Interest Period ending on such date. (d) Inapplicability of Conditions Precedent. Loans continued or converted pursuant to this Section 3.4 shall not constitute new Loans for purposes of Section 5.2 hereof. (e) Failure to Provide Notice. If no Notice of Continuation/ Conversion is given with respect to any Loan prior to the time specified in this Section 3.4 or if a Notice of Continuation/Conversion is given, but it is incomplete, Administrative Agent shall use good faith efforts to contact the relevant Borrower to obtain a Notice of Continuation/Conversion or to complete the information required thereby, but if a complete Notice of Continuation/Conversion is not provided in a timely fashion, the relevant Borrower shall be deemed to have converted such Loan into a Base Rate Loan on the last day of the applicable Interest Period and Administrative Agent shall promptly notify the relevant Borrower of such conversion or continuation. (f) Continuation/Conversion in Default Situations. Notwithstanding anything to the contrary contained in this Section 3.4, no CD Loan or Eurodollar Loan may be continued as such or converted into another type of Loan when any Default exists (other than a Default under Section 8.1(d), so long as EDS is diligently pursuing the cure thereof and the Commitment of the Lenders have not been terminated), but each such CD Loan or Eurodollar Loan shall be automatically converted to a Base Rate Loan on the last day of the applicable Interest Period. 23 (g) Continuation/Conversion Not Applicable to Term Loans. Notwithstanding anything to the contrary contained in this Section 3.4, this Section 3.4 shall not be applicable to Term Loans. 3.5. Funding Losses. If any Borrower makes any payment of principal with respect to any Loan or a Bid Rate Loan, other than a Base Rate Loan, on any day other than the last day of the Interest Period applicable thereto, or if any Borrower fails to borrow or prepay any Loan or any Bid Rate Loan after the applicable notice has been given to any Lender by Administrative Agent or if any Borrower converts a Loan from a CD Loan or a Eurodollar Loan at any time other than at the end of the relevant Interest Period, such Borrower shall reimburse each affected Lender, within ten (10) Business Days after demand, for any resulting loss or expense actually incurred by it, including (without limitation) any loss incurred in obtaining, liquidating, employing or redeploying deposits from third parties, for the period after any such payment, conversion, or failure to borrow, through the end of such Interest Period (the calculation of such loss or expense shall include a credit (not in excess of such loss or expense) for the interest that could be earned by such Lender as a result of redepositing such amount), together with interest thereon at the Compensation Rate from the date of demand until paid in full; provided that, Administrative Agent shall have delivered to such Borrower a certificate of each affected Lender as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. 3.6. Default Rates. At Majority Lenders' option and to the extent permitted by Law, all past-due Obligation and accrued interest thereon and fees shall bear interest from maturity (stated or by acceleration) at a rate per annum from day to day equal to the lesser of (i) the Highest Lawful Rate or (ii) the greater of (x) the interest rate then being charged on such Obligation or portion thereof hereunder, or (y) the sum of the Base Rate plus one percent (1%) per annum. Any sum referred to in Section 8.1(a)(ii) not paid when due in accordance with the terms of the Loan Documents shall bear interest at the Compensation Rate from the due date thereof until the earlier of (i) the date such sum is paid in full or (ii) the date any applicable grace period expires. 3.7. Interest and Fee Calculations. All payments of interest and fees shall be calculated on the basis of actual number of days (including the first day but excluding the last day) elapsed during the period for which such interest or fee is payable but computed as if each calendar year consisted of 360 days, provided, however, that the Base Rate shall be computed on the basis of a calendar year of 365 (or 366, as the case may be) days. 3.8. Voluntary Principal Prepayments. Upon giving Administrative Agent, in the case of a prepayment of a Committed Loan, or the relevant Lender, in the case of a Bid Rate Loan, two (2) Business Days' notice, in the case of a prepayment of a CD Loan or Base Rate Loan, or two (2) Eurocurrency Business Days' notice, in the case of prepayment of a Eurodollar Loan, each Borrower shall be entitled to prepay any Committed Loan, Term Loan or Bid Rate Loan from time to time and at any time, in whole or in part, without premium or penalty (subject, however, to Borrowers' other obligations hereunder in respect to funding losses and other matters); provided that (a) each partial prepayment shall equal or exceed the principal amount of 24 (i) $100,000, or any integral multiple thereof, for each Bid Rate Loan or Term Loan, (ii) $10,000,000, in the aggregate, for Committed Loans, or (iii) the unpaid principal balance of any Loan or Bid Rate Loan being prepaid in full (b) a Borrower shall only be entitled to make a prepayment if all accrued interest on the amount prepaid (including, without limitation, past due interest, if any) payable to such Lender hereunder shall be paid to the date of such prepayment and (c) except as otherwise set forth herein, prepayments of CD Loans shall only be made on a Business Day and prepayments of Eurodollar Loans shall only be made on a Eurocurrency Business Day. Prior to the Commitment Termination Date, the Committed Loans prepaid may, subject to the conditions of this Agreement, be reborrowed hereunder, and this Agreement shall not be deemed to be terminated or canceled prior to the expiration or termination of Lenders' Commitments solely because the Obligation may from time to time be paid in full. 3.9. Inadequacy of Eurodollar or CD Loan Pricing. If with respect to any Interest Period for any Eurodollar Loan (i) Administrative Agent determines (which determination shall be binding and conclusive on all parties) that by reason of circumstances affecting the interbank Eurocurrency market generally, deposits in Dollars (in the applicable amounts) are not being offered to the relevant Lenders in the interbank Eurocurrency market for such Interest Period or (ii) Majority Lenders advise Administrative Agent that the Eurodollar Rate will not adequately and fairly reflect the cost to such Lenders of maintaining or funding such Eurodollar Loan for such Interest Period, and Administrative Agent shall forthwith give notice thereof to EDS and all affected Borrowers and Lenders, whereupon until Administrative Agent notifies EDS and such affected Borrowers that the circumstances giving rise to such suspension no longer exist, (A) the obligation of Lenders to make Eurodollar Loans shall be suspended, and (B) all affected Borrowers shall either (1) repay in full the then outstanding principal amount of the affected Loans, together with accrued interest thereon, on the last day of the then-current Interest Period applicable thereto or (2) convert such affected Loans (if such affected Loans are Eurodollar Loans) to CD Loans or Base Rate Loans in accordance with Section 3.4 of this Agreement at the end of the then-current Interest Period applicable to such affected Loans or (3) exercise the option set forth in Section 3.16(b). If with respect to any Interest Period for any CD Loan, Majority Lenders advise Administrative Agent that the CD Rate will not adequately and fairly reflect the cost to such Lenders of maintaining or funding CD Loans, then Administrative Agent shall forthwith give notice thereof to all affected Borrowers and Lenders, whereupon, until Administrative Agent shall notify Borrowers that the circumstances giving rise to such suspension no longer exist (A) the obligation of Lenders to make CD Loans shall be suspended and (B) all affected Borrowers shall either (1) repay in full the then outstanding principal amount of any CD Loans, together with accrued interest thereon on the last day of the then-current Interest Period(s) applicable thereto or (2) convert all outstanding CD Loans to Eurodollar Loans or Base Rate Loans in accordance with Section 3.4 at the end of the then-current Interest Period applicable to such CD Loans or (3) exercise the option set forth in Section 3.16(b). 3.10. Illegality. If, after the date of this Agreement, the adoption of any applicable Law or any change therein, or any change in the interpretation or administration thereof by any Tribunal charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive of any such authority, central bank or comparable agency, shall make it unlawful or impossible for any Lender to make, maintain or fund its Eurodollar Loans, and such 25 Lender shall so notify Administrative Agent, which shall notify EDS (and, if EDS shall so request, such Lender shall provide EDS with reasonable evidence of such illegality or impossibility), then, until such Lender notifies EDS, via Administrative Agent, that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Loans or to convert Base Rate Loans or CD Loans to Eurodollar Loans, shall be suspended. Subject to the provisions of Section 3.16(a), if such Lender shall determine that it may not lawfully continue to maintain and fund any of its outstanding Eurodollar Loans to maturity and shall so specify in such notice, each affected Borrower shall immediately prepay in full the then outstanding principal amount of each such Loan or Bid Rate Loan together with accrued interest thereon without premium or penalty (subject, however, to Borrowers' other obligations hereunder in respect of funding losses and other matters); provided that, concurrently with prepaying each such Committed Loan the affected Borrower may borrow a Base Rate Loan or a CD Loan in an equal principal amount from such Lender. Any Lender that has given a notice of unlawfulness pursuant to this Section 3.10 shall rescind such notice promptly upon the cessation of such unlawfulness by giving notice to the Administrative Agent, EDS and the affected Borrower(s). 3.11. Increased Cost and Reduced Return. (a) Increases in Reserve Requirements. If, after the date hereof, the adoption of any applicable Law or any change therein, or any change in the interpretation or administration thereof by any Tribunal charged with the interpretation or administration thereof, or compliance by any Lender (or its lending office) with any request or directive of general applicability (whether or not having the force of Law) of any such Tribunal shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (A) with respect to any CD Loan or Bid Rate Loan any such requirement included in an applicable Domestic Reserve Percentage, and (B) with respect to any Eurodollar Loan or Bid Rate Loan any such requirement included in an applicable Eurocurrency Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by such Lender (or its Applicable Lending Office), or shall impose on such Lender (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its CD Loans, Eurodollar Loans, Bid Rate Loans, its Notes evidencing such Loans or Bid Rate Loans, or its obligation to make such Loans; and the result of any of the foregoing is actually to increase the cost to (or to impose a cost on) such Lender (or its Applicable Lending Office) of making or maintaining any such Loan or Bid Rate Loan, or to reduce the amount of any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or under its Notes with respect thereto by an amount deemed by such Lender to be material, then, subject to the provisions of Section 3.16(a), if such Lender is generally imposing payments for increased costs on its similarly situated customers, within ten (10) Business Days after demand by such Lender, made via Administrative Agent, accompanied by the certificate required by Section 3.11(c), any affected Borrower or EDS shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction actually incurred by it in connection with this Agreement and EDS may reduce the Commitment of 26 that Lender and prepay (or cause any other Borrower to prepay) Loans from that Lender without premium or penalty (subject, however, to Borrowers' other obligations hereunder in respect to funding losses and other matters). (b) Capital Adequacy Rules. If, after the date hereof, the adoption or phase-in of any Law of general applicability regarding capital adequacy, or any change in existing or future Laws regarding capital adequacy, or any change in the interpretation or administration of any such Law by any Tribunal charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office or any corporation controlling such Lender) with any request or directive of general applicability regarding capital adequacy (whether or not having the force of Law) of any such Tribunal, shall, in the reasonable determination of any Lender, have the effect of reducing the rate of return on such Lender's capital or on the capital of the corporation controlling such Lender as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change, or compliance (taking into consideration such Lender's policies with respect to capital adequacy), then from time to time if Lender is generally imposing payments for such reduction on its similarly situated customers, within ten (10) Business Days after demand by such Lender, made via Administrative Agent, all affected Borrowers or EDS shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction, net of the savings, if any, which may be reasonably projected to be associated with any such increased capital requirement. (c) Procedure for Claiming Compensation. Any affected Lenders will promptly notify Borrowers, via Administrative Agent, of any event of which such Lender has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 3.11 and will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of such Lender, delivered via Administrative Agent, claiming compensation under this Section 3.11 and setting forth the additional amount or amounts to be paid to it, as well as the manner in which such amount or amounts were calculated, hereunder shall be conclusive in the absence of manifest error. In determining such amount, the affected Lender may use any reasonable averaging and attribution methods. 3.12. Several Obligations. Except as otherwise expressly set forth herein and in the Guaranty, the obligations of Borrowers hereunder are several and not joint and each Borrower shall be liable only in respect of Loans and Bid Rate Loans made to such Borrower and the Obligation of such Borrower related thereto. 3.13. Taxes. (a) Payments to be Free and Clear. All payments made by any Borrowers under this Agreement shall be made, in accordance with Sections 3.2 and 3.3, free and clear of and without any deduction or withholding for or on account of any Tax, by way of 27 set-off or otherwise, except as otherwise provided by this Section 3.13 and by Section 11.16. (b) Grossing-up of Payments. If any Borrower shall be required by Law to deduct any Tax (other than an Excluded Tax) from or in respect of any sum payable hereunder to any Lender or the Administrative Agent: (i) as soon as such Borrower is aware that any such deduction, withholding or payment of a Tax (other than an Excluded Tax) is required, or of any change in any such requirement, it shall notify Administrative Agent; (ii) the sum payable by such Borrower shall be increased to the extent necessary so that, after the Borrower has made all required deductions (including deductions applicable to additional sums payable under this Section), such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made; provided, however, that such Borrower shall not be required to increase any such sums payable to any Lender if such Lender fails to comply with the requirements of Section 3.13(e); (iii) such Borrower shall make such deductions, or pay such Tax (other than an Excluded Tax), before any interest or penalty becomes payable or, if such Tax (other than an Excluded Tax) is paid by the Administrative Agent or any Lender, shall reimburse the Administrative Agent or such Lender (as the case may be) on demand for the amount paid by it; (iv) such Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable Law; and (v) within thirty (30) days after paying any such Tax (other than an Excluded Tax), the relevant Borrower shall deliver to Administrative Agent, at its address referred to in Section 11.4 satisfactory evidence of that deduction, withholding or payment and (where remittance is required) of the remittance thereof to the relevant taxing or other authority. (c) Stamp and Other Taxes. Each Borrower shall pay any present and future stamp or documentary taxes or any other excise or property Taxes which arise from any payment made by such Borrower or by the Administrative Agent hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement. (d) Indemnification. Within thirty (30) days from the date of written demand therefor from any Lender or the Administrative Agent, each Borrower will indemnify and hold harmless each Lender and the Administrative Agent from and against the full amount of Taxes (other than Excluded Taxes), including, without limitation, Taxes imposed by any jurisdiction on amounts payable under this Section 3.13(d), paid by such Lender or the 28 Administrative Agent (as the case may be) and any liability, including penalties, interest and expenses, arising therefrom or with respect thereto whether or not such Taxes were correctly or legally asserted by such jurisdiction, provided, however, that any Lender receiving indemnification from any Borrower under this Section 3.13(d) shall (i) at the request, direction and expense of such Borrower challenge and contest the imposition of such Taxes, if such Lender is the appropriate party in interest to initiate and pursue such a challenge, or (ii) cooperate fully with and assist such Borrower in any challenge or contest by such Borrower relating to such Taxes, if such Borrower is the appropriate party in interest to initiate and pursue such a challenge, which challenge shall be pursued at such Borrower's expense, except that in either case, Borrowers have no right hereunder to participate in the internal tax affairs of any Lender. (e) Tax Certificates. (i) In the event a Borrower is incorporated under the laws of the United States or a state or jurisdiction thereof, then each Lender that is not incorporated under the laws of the United States or a state thereof shall so long as it is lawfully able to do so: (A) deliver to the relevant Borrower and Administrative Agent (A) two (2) duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, and (B) one (1) duly completed copy of Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be; (B) deliver to the relevant Borrower and Administrative Agent two (2) further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the applicable Borrower; and (C) obtain such extensions of time for filing and completing such forms or certifications as may reasonably be requested by the relevant Borrower or Administrative Agent. Such Lender shall certify (I) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal or state income taxes and (II) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. Each Person not incorporated under the laws of the United States or a state thereof that is an Assignee hereunder pursuant to Section 11.12 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this Section 3.13. 29 (ii) In the event a Borrower is not incorporated under the laws of the United States of America or a state thereof, then each Lender (and any Assignee hereunder pursuant to Section 11.12) shall deliver any statements, declarations, certifications, or other documentation that may be reasonably requested by such Borrower in accordance with Section 3.13(f). (f) Statements and other Documentation. Each Lender shall honor all reasonable requests from any Borrower to file or to provide such Borrower with such statements, declarations, certifications or other documentation as shall enable such Borrower to claim on behalf of such Lender a reduced rate of Tax or exemption from any Taxes, provided that no Lender shall be required to file or provide any such statement, declaration, certification or other documentation unless (i) such Borrower shall have provided to such Lender, within a reasonable time prior to the date such Borrower wishes to receive or have such Lender file such statement or other documentation, a written request describing such statement or other documentation and, if available, a blank copy thereof with instructions for completion thereof and (ii) the information necessary for completion of such statement or other documentation is within the control of such Lender; provided, further, that any Borrower receiving any information or documentation pursuant to this Section 3.14 shall keep such information and documentation confidential and disclose the same only to appropriate Tribunals in furtherance of the purposes of this Section 3.13. 3.14. Application of Principal Payments. (a) Payment of Committed Loans. Each repayment or prepayment of the principal of Committed Loans by any Borrower shall be applied (except as EDS may otherwise specify by notice to the Administrative Agent when no Default shall be continuing), to the extent of such payment, pro rata to the Committed Loans: (i) first, to the Committed Loans of such Borrower having an Interest Period ending on the date of such payment, (ii) second, to any outstanding Base Rate Loans to such Borrower, (iii) third, to any outstanding CD Loans to such Borrower, and (iv) fourth, to any outstanding Eurodollar Loans to such Borrower. Notwithstanding the foregoing or any other provision of this Agreement, no Eurodollar Loans shall be prepaid on any day other than the last day of the Interest Period therefor except pursuant to the provisions of Sections 3.5, 3.8, 3.9, 3.10, 3.11 or 3.13, or upon acceleration pursuant to this Agreement. (b) Payment of Term Loans. Each repayment or prepayment of the principal of Term Loans by any Borrower shall be applied (except as EDS may otherwise specify by 30 notice to the Administrative Agent when no Default shall be continuing), to the extent of such payment, pro rata to the Term Loans: (i) first, to the Term Loans of such Borrower having an Interest Period ending on the date of such payment, (ii) second, to any outstanding Base Rate Loans to such Borrower, (iii) third, to any outstanding CD Loans to such Borrower, and (iv) fourth, to any outstanding Eurodollar Loans to such Borrower. Notwithstanding the foregoing or any other provision of this Agreement, no Eurodollar Loans shall be prepaid on any day other than the last day of the Interest Period therefor except pursuant to the provisions of Sections 3.5, 3.8, 3.9, 3.10, 3.11 or 3.13 or upon acceleration pursuant to this Agreement. (c) Payment of Bid Rate Loans. Each repayment or prepayment of the principal of Bid Rate Loans by any Borrower shall be applied (except as EDS may otherwise specify by notice to the relevant Lender when no Default shall be continuing), to the extent of such payment, to the Bid Rate Loans made by the Lender receiving such payment having an Interest Period ending on the date of such payment. Notwithstanding the foregoing or any other provision of this Agreement, no Bid Rate Loans which are Eurodollar Loans shall be prepaid on any day other than the last day of the Interest Period therefor except pursuant to the provisions of Sections 3.5, 3.8, 3.9, 3.10, 3.11 or 3.13, or upon acceleration pursuant to this Agreement. 3.15. Payments, Computations, Judgments, etc. All payments by any Borrower pursuant to this Agreement or any other Loan Document, whether in respect of principal or interest or otherwise, shall be made by such Borrower in Dollars. 3.16. Mitigation of Circumstances; Replacement of Affected Lenders, etc. (a) Mitigation of Circumstances. Each Lender agrees to use reasonable efforts to mitigate or avoid (i) an obligation by any Borrower to withhold or deduct any Taxes pursuant to Section 3.13, or pay any costs pursuant to Section 3.11 or (ii) the occurrence of any circumstances of the nature described in Section 3.9 or Section 3.10 (including by changing the office through which it has booked or funded its Commitment or any Loan or Bid Rate Loan or by making any other mechanical change in funding Loans or Bid Rate Loans), in each case prior, if possible, to the occurrence of such circumstances or the incurrence of any obligation of any Borrower to compensate such Lender for amounts payable pursuant to any such Section; provided, however, that, in the reasonable judgment of such Lender, such efforts are consistent with legal and regulatory restrictions and are not materially disadvantageous to such Lender. 31 (b) Replacement of Affected Lenders. At any time any Lender is affected by any condition or circumstance set forth in Sections 3.9, 3.10, 3.11 or 3.13, and so long as no Default or Potential Default exists, (i) EDS may replace such affected Lender as a party to this Agreement with one or more other bank(s) or financial institution(s), (and upon notice from EDS such affected Lender shall assign, pursuant to Section 11.12, without recourse or warranty, its Commitment, its Loans and Bid Rate Loans, its Note(s) and all of its other rights and obligations hereunder to such replacement bank(s) or other financial institution(s) for a purchase price equal to the sum of the principal amount of the Loans and Bid Rate Loans so assigned, all accrued and unpaid interest thereon, its ratable share of all accrued and unpaid facility fees and its ratable share of any remaining unpaid Obligation owed to such affected Lender) and/or (ii) EDS may (and, if EDS replaces any affected Lender in part as provided in clause (i) above, concurrently with such replacement EDS shall) cause such affected Lender to cease to be a party hereto by terminating the Commitment of such Lender (whereupon the Aggregate Committed Sum shall be reduced by the amount of such affected Lender's Committed Sum less any portion thereof assigned pursuant to clause (i) above) by paying, and causing any other relevant Borrower to pay, the principal amount of such affected Lender's Loans and Bid Rate Loans, all accrued and unpaid interest thereon, all accrued and unpaid commitment fees owed to such affected Lender and any remaining unpaid Obligation owed to such affected Lender, in each case to the extent not assigned and purchased pursuant to clause (i) above, and such affected Lender shall thereupon cease to be a party hereto. Notwithstanding anything to the contrary set forth in this Section 3.16, EDS may not require any assignment or effect the termination of any Lender's Commitment pursuant to this Section 3.16 if such assignment or termination would conflict with any applicable Law. 3.17. Notwithstanding anything to the contrary set forth herein, the failure of any Borrower to pay any amount demanded by any Lender pursuant to Sections 3.5, 3.9, 3.10, 3.11, 3.13, or 11.17 shall not be deemed to constitute a Default hereunder to the extent that such Borrower is contesting in good faith its obligations to pay such amount by ongoing discussions diligently pursued with such Lender or by appropriate proceedings; provided, however, that under no circumstances shall any such failure to pay continue for more than forty (40) days from the date on which the related amount is demanded consistent with the terms of this Agreement, at which date such failure to pay shall become a Default. ARTICLE IV ---------- FEES; MODIFICATION OF COMMITMENTS --------------------------------- 4.1 Facility Fee. EDS will pay Administrative Agent, for the account of each Lender, in Dollars, a facility fee on the average daily Committed Sum of such Lender, or the unpaid principal balance of the Term Loan owing to such Lender, as the case may be, from the Availability Date through and including the Commitment Termination Date or Term Loan Maturity Date, as the case may be, at a rate of 0.05 percent per annum, computed on a daily basis for the actual number of days elapsed over a year of 360 days, including the first day but 32 excluding the last day. The facility fee will be payable quarterly in arrears on each Quarterly Date, Commitment Termination Date and Term Loan Maturity Date and the Administrative Agent shall notify EDS, not less than ten (10) days prior to each such date, of the amount of the facility fee then payable. 4.2. Reduction or Cancellation of Commitments. In addition to its rights under Section 2.4, upon three (3) Business Days' prior written and irrevocable notice to Administrative Agent, EDS may from time to time permanently reduce in whole or in part the Aggregate Committed Sum, provided that, any reduction in part must be in the amount of at least $10,000,000 or a greater integral multiple of $10,000,000 and, provided, further, that no such notice may be given or become effective at any time when a Notice of Advance or a Request for Bids is outstanding and, provided, further, that no such reduction shall cause the Aggregate Committed Sum to be less than the total principal amount of all Committed Loans plus all Bid Rate Loans then outstanding. Any such reduction shall be effective as of the date set forth in the notice and shall reduce the Committed Sum of each Lender in proportion to each Lender's Percentage unless such reduction shall be made (i) because one or more Lenders has declined to extend the Commitment Termination Date pursuant to Section 2.4, in which case the Committed Sum of such Terminating Lender(s) may be eliminated by EDS on such Terminating Lender's Commitment Termination Date, or (ii) pursuant to Section 3.16. EDS may, in its sole discretion, replace any Lender at any time upon three (3) Business Days' prior notice to Administrative Agent and such Lender, which notice shall be irrevocable, provided, however, that no such notice may be given or become effective at any time when a Notice of Advance or a Request for Bids is outstanding, and, provided, further, that such Lender's Commitment is assigned to another bank effective as of the date of such replacement pursuant to Section 11.12 and any amounts due to such Lender as a result of such termination have been paid in full. Any reduction in the Aggregate Committed Sum and any replacement of any Lender shall have no effect upon any Loans then outstanding hereunder, except as otherwise provided in Section 2.4. ARTICLE V --------- CONDITIONS PRECEDENT -------------------- 5.1 Initial Availability. Lenders will not be obligated to make any Loan hereunder unless, on or before the date of such Loan, Administrative Agent has received, in addition to this Agreement, executed by EDS, all of the items described below in form and substance reasonably satisfactory to Administrative Agent: (a) Note(s). The applicable Note(s) executed by EDS. (b) Guaranty. The Guaranty executed by EDS. (c) Articles of Incorporation. A recent copy of the articles or certificate of incorporation, and all amendments thereto, of EDS certified by the Secretary of State of Texas. 33 (d) Good Standing. A recent certificate of existence and good standing for EDS from appropriate officials of the State of Texas. (e) Officers' Certificate. An Officers' Certificate certifying as to (i) bylaws, (ii) resolutions and (iii) incumbency of all officers of EDS who will be authorized to execute or attest to any Loan Document substantially in the form of Exhibit N. The Administrative Agent may conclusively rely on such certificate until it shall receive a further certificate canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate. (f) Opinion of Counsel. An opinion of Hughes & Luce, L.L.P., or Counsel - Corporate Acquisitions and Finance, EDS, substantially in the form attached hereto as Exhibit L, and an opinion of special New York counsel to EDS regarding the enforceability under New York law of the Loan Documents executed on or before the Availability Date by EDS. 5.2 Each Advance. In addition, Lenders will not be obligated to make any Loan or Bid Rate Loan unless (a) each statement or certification made by the relevant Borrower in its Notice of Advance shall be true and correct in all material respects on the Borrowing Date; (b) at the time of each Loan or Bid Rate Loan no Default or Potential Default shall exist; (c) the Administrative Agent shall have received a Notice of Advance or a Request for Bids and a Notice of Acceptance related thereto, as applicable, and each statement or certification made therein shall be true and correct in all material respects on the Borrowing Date; (d) the Administrative Agent shall have received a Note duly executed by the relevant Borrower (other than EDS) complying with the terms and provisions hereof; and (e) no event or circumstance, analogous or similar to any of the events or circumstances described in Sections 8.1(e) and/or (f) shall have occurred and be continuing with respect to the relevant Borrower. 5.3 Waiver of Conditions to Bid Rate Loans. Any Lender may, at its election, waive any condition to the making of its Bid Rate Loan (except the existence of a Default), but no such waiver shall be deemed to be a waiver of the requirement that each such condition precedent be satisfied as a prerequisite for any subsequent Bid Rate Loan or any Loan. ARTICLE VI ---------- REPRESENTATIONS AND WARRANTIES ------------------------------ 6.1. EDS Representations and Warranties. To induce Lenders to enter into this Agreement and make Loans and Bid Rate Loans hereunder, EDS represents and warrants to Lenders as follows: (a) Corporate Existence and Authority. Each Borrower (i) is duly organized, validly existing, and in good standing under the Laws of its jurisdiction of organization, (ii) is duly qualified to transact business and is in good standing in each jurisdiction where the failure to do so would have a Material Adverse Effect, and (iii) has all requisite power 34 and authority (x) to own its assets and to carry on the business in which it is engaged, (y) to execute, deliver and perform its obligations under each Loan Document to which it is a party, and (z) to issue the Notes to which it is a party in the manner and for the purpose contemplated by this Agreement. (b) Binding Obligations. The execution and delivery of the Loan Documents have been duly authorized and approved by all necessary corporate or partnership action and the Loan Documents constitute the legal, valid, and binding obligations of each Borrower having executed the Loan Documents enforceable against it in accordance with their respective terms except as the enforceability thereof may be limited by applicable Debtor Relief Laws. (c) Compliance with Laws and Documents. Each Borrower is not, nor will the execution, delivery, and the performance of and compliance with the terms of the Loan Documents cause any Borrower to be, in violation of (i) any Laws, other than such violations which could not, individually or collectively, cause a Material Adverse Effect, or (ii) its organizational documents, including, where relevant, its bylaws or articles or certificate of incorporation (as amended), other than such violations which could not, individually or collectively, cause a Material Adverse Effect. The execution, delivery, and the performance of and compliance with the terms of the Loan Documents are not inconsistent with, and will not conflict with or result in any breach of, or constitute a default (excluding breaches and defaults which individually or collectively could not have a Material Adverse Effect) under, or result in the creation or imposition of any lien upon any of the material property or assets of any Borrower pursuant to the terms of its organizational documents, any material indenture, mortgage, lease, deed of trust, agreement, contract, or instrument to which any Borrower is a party or by which any Borrower or its property or assets is bound or to which it is subject. No Default or Potential Default has occurred and is continuing. (d) Financial Statements. EDS has delivered to Administrative Agent a copy of the Financial Statements as of the period ended December 31, 1994. Such Financial Statements were prepared in accordance with GAAP and present fairly the financial condition and the results of operations of EDS and its consolidated Subsidiaries as of, and for the portion of the fiscal year ending on, the date or dates thereof. All material liabilities (direct or indirect, fixed or contingent) of EDS and its consolidated Subsidiaries as of the date or dates of such Financial Statements are reflected therein or in the notes thereto. Between the date or dates of such Financial Statements and the date hereof, there has been no material adverse change in the financial condition of EDS and its consolidated Subsidiaries. (e) Litigation. Except for the Litigation described on Schedule 6.1, EDS and its Subsidiaries are not involved in, nor, to the best of EDS's knowledge, are they aware of, any Litigation which could, collectively or individually, have a Material Adverse Effect, if determined adversely to EDS and its Subsidiaries, nor are there any outstanding or 35 unpaid judgments against EDS or its Subsidiaries in excess of $25,000,000, in the aggregate. (f) Taxes. All tax returns and reports of EDS required by Law to be filed have been filed, and all Taxes imposed upon EDS which are due and payable have been paid, other than Taxes being contested in good faith and for which reserves have been established to the extent required by GAAP. (g) Guaranty Authorization. All requisite corporate action has been taken by EDS to authorize the Guaranty. (h) No Approvals, etc. No authorization, consent, approval, license or formal exemption from, nor any filing, declaration or registration with, any Tribunal, including the Securities and Exchange Commission or any securities exchange, is required in connection with the execution, delivery or performance by EDS of any Loan Document. (i) Investment Company. Neither EDS nor any other Borrower is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940. (j) ERISA Compliance. EDS is in compliance with all material provisions of ERISA except to the extent that all failures to be in compliance could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. ARTICLE VII ----------- COVENANTS --------- So long as Lenders have any commitment to make Loans under this Agreement and thereafter until the Obligation is paid and performed in full, unless Majority Lenders shall otherwise consent in writing: 7.1. Use of Proceeds. EDS covenants and agrees that it shall, and shall cause each Borrower to, and each Borrower covenants and agrees to, use the proceeds of Loans for general corporate or partnership purposes and working capital needs, including, without limitation, capital expenditures, purchase of capital stock and support of EDS's or such Borrower's commercial paper facilities (or any commercial paper facilities of any EDS Affiliate guaranteed by EDS). 7.2. Accounting Books and Financial Records; Inspections. EDS covenants and agrees that it shall (a) keep, in accordance with GAAP, proper and complete accounting books and financial records and permit Lenders to inspect the same during reasonable business hours, (b) allow Lenders to inspect any of its properties during reasonable business hours and (c) allow Lenders to discuss its affairs, condition, and finances with its directors or officers from time to time during reasonable business hours; provided, that all information obtained pursuant to this Section 7.2 shall be kept confidential. 36 7.3 Items to be Furnished. EDS covenants and agrees that it shall cause to be furnished to Administrative Agent, with a copy for each Lender, each of the following: (a) Annual Financial Statements. As soon as available, but no later than one hundred twenty (120) days after the last day of each fiscal year of EDS, audited Financial Statements as of, and for the year ended on, such last day, in each case setting forth, in comparative form, the corresponding figures for the previous fiscal year, accompanied by the opinion of independent certified public accountants, without qualification, that such Financial Statements were prepared in accordance with GAAP and present fairly the financial condition and results of operations of EDS and its consolidated Subsidiaries, accompanied by a certificate signed by the Treasurer or the Chief Financial Officer of EDS, which certificate shall state that to the best of his or her knowledge, EDS has fulfilled all its obligations under the Loan Documents and, at the end of such fiscal period, no Default or Potential Default exists, and further sets forth the then- current calculation of the covenant contained in Section 7.8. (b) Quarterly Financial Statements. As soon as available, but no later than sixty (60) days after the last day of each of the first three fiscal quarters of EDS, Financial Statements showing the financial condition and result of operations of EDS and its consolidated Subsidiaries as of, and for the period from the beginning of the current fiscal year to, such last day, setting forth in comparative form the corresponding figures for the corresponding dates and periods of the preceding fiscal year, accompanied by a certificate signed by the Treasurer or the Chief Financial Officer of EDS, which certificate shall state that, to the best of his or her knowledge, at the end of such fiscal period, no Default or Potential Default exists, and further sets forth the then-current calculation of the covenant contained in Section 7.8. (c) SEC Filings. In the event that EDS shall be required to file reports with the Securities and Exchange Commission pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to its public stockholders generally and copies of all registration statements (without exhibits) and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission), but excluding any filings relating to shelf registrations or Debt issuances. (d) Notices of Significant Events. Notice, promptly after EDS knows or has reason to know, of (i) the commencement or the change in status of any Litigation with respect to EDS which could have a Material Adverse Effect, (ii) any change in any material fact or circumstance represented or warranted in any Loan Document, (iii) a Default or Potential Default, specifying the nature thereof and what action EDS has taken, is taking, or proposes to take with respect thereto. 37 7.4 Taxes. EDS covenants and agrees that it shall promptly pay when due any and all Taxes due, except Taxes being contested in good faith by appropriate proceedings so long as reserves have been established to the extent required by GAAP. 7.5 Maintenance of Corporate Existence, Assets, Business and Insurance. EDS covenants and agrees that it (or any successor corporation of EDS permitted by Section 7.9) shall at all times: maintain its corporate existence and authority to transact business and good standing in its jurisdiction of incorporation and all other jurisdictions where the failure to do so might have a Material Adverse Effect; maintain all licenses, permits, and franchises necessary for its businesses and where the failure to do so might have a Material Adverse Effect; maintain, preserve and keep all of its assets which are useful in and necessary to its businesses in good working order and condition and from time to time make all necessary and proper repairs, replacements, and renewals thereto and replacements thereof where the failure to do so might have a Material Adverse Effect; and maintain insurance with financially sound and reputable insurance companies or associations or self-insure as deemed appropriate in the reasonable judgment of EDS, in such amounts and covering such risks as are usual to companies with comparable assets engaged in similar businesses and owning properties in the same general areas in which EDS operates, and where the failure to do so might have a Material Adverse Effect. 7.6 Compliance with Laws and Documents. EDS covenants and agrees that it will not, directly or indirectly, violate the provisions of any material Laws, its articles or certificate of incorporation or bylaws or any material agreements if such violation alone, or when aggregated with all other such violations, could cause a Material Adverse Effect. 7.7. Regulation U. EDS covenants and agrees that neither the making of any Advance hereunder, nor the use of the proceeds thereof, will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. 7.8 Net Worth. EDS covenants and agrees that, at all times, the Net Worth of EDS and its consolidated Subsidiaries shall exceed the sum of (a) $3,070,050,000 plus (b) fifty percent (50%) of the Net Income of EDS and its consolidated Subsidiaries for each fiscal quarter commencing on or after June 30, 1995. 7.9. Mergers; Consolidations; Transfers of Assets. EDS covenants and agrees that it shall not consolidate with, or sell or convey all or substantially all of its assets to, or merge with or into any other Person or Persons, in a single transaction or a series of transactions, unless (a) either EDS is the continuing corporation, or the successor corporation(s) is(are) organized under the laws of the United States or a state thereof and the successor corporation(s) expressly assume(s) all obligations of EDS under the Facility and the due and punctual performance and observance of all of the covenants and conditions of EDS under the Facility; and (b) EDS or the successor corporation(s), as the case may be, will not, immediately after the merger, consolidation, sale or conveyance, be in Default under the Facility and no Potential Default under the Facility will have occurred and be continuing. 38 7.10. Pari Passu. EDS covenants and agrees that all obligations of EDS under this Agreement shall rank at least pari passu with all other unsecured Debt of EDS. 7.11. ERISA. EDS covenants and agrees that if, at any time when there shall exist a deficiency in excess of $25,000,000 in the assets of any Pension Plan which are available to satisfy the benefits guaranteeable under ERISA with respect to such Pension Plan, (i) the PBGC institutes proceedings to terminate such Pension Plan or notice of intent to terminate such Pension Plan is filed under Title IV of ERISA by EDS or any Subsidiary having liability with respect thereto, or (ii) any Reportable Event for which the PBGC has not waived the 30- day notice requirement shall occur with respect to such Pension Plan and such Reportable Event shall present a material risk of termination with respect to such Pension Plan, EDS shall (A) give Administrative Agent prompt written notice thereof, (B) within fifteen (15) days after the date of such event, propose to Administrative Agent a plan for bringing such Pension Plan into compliance with ERISA or reducing such deficiency to $25,000,000 or less and (C) within thirty (30) days after the date of such event, cause such deficiency to be reduced to $25,000,000 or less, or cause such Pension Plan to be brought into compliance with ERISA. ARTICLE VIII ------------ DEFAULT ------- 8.1. Default. A "DEFAULT" shall exist if any one or more of the following events shall occur and be continuing: (a) Payment of Obligation. (i) The failure or refusal of any Borrower to pay any principal installment when due in accordance with the terms of the Loan Documents, or (ii) the failure or refusal of any Borrower to pay any interest installment, any fee or any other sum (other than principal) payable hereunder to any Lender or the Administrative Agent when due in accordance with the terms of the Loan Documents, and such failure or refusal continues for a period of five (5) Business Days. (b) Representations and Warranties. Any representation or warranty made by a Borrower is untrue in any material respect on the date as of which made or deemed to be made. (c) Certain Covenants. The failure or refusal of EDS punctually and properly to perform, observe, and comply with Sections 7.9, 7.10 or 7.11 or to maintain its corporate existence, except as the result of an action permitted by Section 7.9. (d) Other Covenants. The failure or refusal of any Borrower punctually and properly to perform, observe, and comply with any covenant, agreement, or condition contained in any of the Loan Documents, other than the agreements described in Sections 8.1(a) or 8.1(c), and such failure or refusal continues for a period of thirty (30) days (or, in the case of Section 7.8, twenty (20) days) after the earlier of (i) EDS's having 39 knowledge thereof, or (ii) written notice thereof is given by Administrative Agent or any Lender to such Borrower and EDS. (e) Voluntary Debtor Relief. EDS shall (i) execute an assignment for the benefit of creditors, (ii) admit in writing its inability to, or generally fail to, pay its debts generally as they become due, (iii) voluntarily seek the benefits of any Debtor Relief Law which could suspend or otherwise affect any of Lender's Rights under any of the Loan Documents, or (iv) take any action to authorize any of the foregoing. (f) Involuntary Proceedings. An order, judgment or decree shall be entered against EDS by any Tribunal pursuant to any Debtor Relief Law, the effect of which could be to suspend or otherwise affect any Lenders' Rights under any of the Loan Documents or a petition shall be filed against EDS seeking the benefit or benefits provided for by any Debtor Relief Law, the effect of which could be to suspend or otherwise affect any of Lenders' Rights under any of the Loan Documents, and such order, judgment, decree, or petition is not discharged within ninety (90) days after the entry or filing thereof. (g) Payment of Judgments. EDS shall fail to pay any money judgment in excess of $25,000,000 against it or its assets at least ten (10) days prior to the date on which its assets may be sold lawfully to satisfy such judgment. (h) Default Under Other Debt. EDS shall default in the due and punctual payment of the principal of or the interest on any Debt, which Debt is in excess of $25,000,000 in aggregate principal amount, secured or unsecured, or in the due performance or observance of any covenant or condition of any indenture or other agreement executed in connection therewith, and as a consequence thereof such Debt shall be declared to be due and payable or required to be repaid prior to its stated maturity (other than by a regularly scheduled required prepayment). (i) Change of Control. A Change of Control shall occur, provided, however, that such a Change of Control shall not constitute a Default if immediately thereafter, the long-term indebtedness of EDS is rated at least BBB- or the equivalent thereof by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or Baa3 or the equivalent thereof by Moody's Investors Services, Inc., or if such rating is not made, then the commercial paper of EDS is rated at least A-2 or the equivalent thereof by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or P-2 or the equivalent thereof by Moody's Investors Service, Inc. 8.2 Default Under Certain Other Debt. A Default, as defined therein, shall exist under that certain Multi-Currency Revolving Credit Agreement, dated as of October 4, 1995, among EDS, Citibank, N.A., as administrative agent, and the lenders named therein, as hereafter amended or extended, from time to time. 40 ARTICLE IX ---------- RIGHTS AND REMEDIES UPON DEFAULT -------------------------------- 9.1 Remedies Upon Default. Should a Default exist, Majority Lenders may, at their election, do any one or more of the following without notice of any kind, including, without limitation, notice of acceleration or of intention to accelerate, presentment and demand or protest, all of which are hereby expressly waived by each Borrower: (a) declare the entire unpaid balance of the Obligation, or any part thereof, immediately due and payable, whereupon it shall be due and payable (provided that, upon the occurrence of a Default under Section 8.1(e) or (f), the entire Obligation shall automatically become due and payable without notice or other action of any kind whatsoever); (b) terminate all or any portion of their Commitments hereunder; (c) reduce any claim to judgment; (d) exercise the Rights of offset or banker's lien against the interest of each Borrower in and to every account and other property of Borrower which are in the possession of any Lender to the extent of the full amount of the Obligation; and (e) exercise any and all other legal or equitable Rights afforded by the Loan Documents or applicable Laws, as Majority Lenders shall deem appropriate. 9.2 Waivers by Borrower and Others. Each Borrower and each surety, endorser, guarantor, and other party ever liable for payment of any of the Obligation jointly and severally waive notice, presentment, demand for payment, protest, notice of intention to accelerate, notice of acceleration, and notice of protest and nonpayment, and agree that their liability with respect to the Obligation, or any part thereof, shall not be affected by any renewal or extension in the time of payment of the Obligation, by any indulgence, or by any release or change in any security for the payment of the Obligation, and hereby consent to any and all renewals, extensions, indulgences, releases, or changes, regardless of the number thereof. 9.3 Delegation of Duties and Rights. Each Lender may perform any of its duties or exercise any of its Rights under the Loan Documents by or through its officers, directors, employees, attorneys, agents, or other representatives. 9.4 Lenders Not in Control. None of the covenants or other provisions contained in this Agreement shall, or shall be deemed to, give Lenders the Right or power to exercise control over the affairs or management of any Borrower, the power of Lenders being limited to the Rights of creditors generally and the Right to exercise the remedies provided in this Article IX. 9.5 Cumulative Remedies. The Rights provided for in this Agreement and the other Loan Documents are cumulative and not intended to be exclusive of any other Right given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. 9.6 Expenditures by Lenders. Following any Default hereunder, all court costs, reasonable attorneys' fees, other costs of collection, and other sums spent by Lenders pursuant to the exercise of any Right (including, without limitation, any effort to collect or enforce the Notes) provided herein shall be payable by Borrowers to Lenders on demand, shall become part of the 41 Obligation, and shall bear interest at a rate per annum that is one percent (1%) above the Base Rate from the date spent until the date repaid. 9.7. Performance by Administrative Agent. Should EDS or any other Borrower fail to perform any covenant, duty, or agreement contained herein or in any of the Loan Documents, the Administrative Agent, after giving ten (10) days' notice to EDS and such Borrower, may, but shall not be obligated to, perform or attempt to perform such covenant, duty, or agreement on behalf of such Borrower. In such event, such Borrower shall, at the request of the Administrative Agent promptly pay any amount expended by the Administrative Agent in such performance or attempted performance to the Administrative Agent at the Payment Office, together with interest thereon at the default rate from the date of such expenditure until paid. Notwithstanding the foregoing, it is expressly understood that neither Administrative Agent nor Lenders assume any liability or responsibility for the performance of any duties of any Borrower hereunder or under any of the Loan Documents or other control over the management and affairs of any Borrower, nor by any such action shall the Administrative Agent or the Lenders be deemed to create a partnership arrangement with any Borrower. ARTICLE X --------- THE ADMINISTRATIVE AGENT ------------------------ 10.1. Appointment and Authorization. Each Lender hereby irrevocably appoints and authorizes Administrative Agent to take such action on its behalf and to exercise such powers under the Loan Documents as are delegated to Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto. With respect to its Committed Sum, the Committed Loans, Term Loans and Bid Rate Loans made by it and the Notes issued to it, Administrative Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include the Administrative Agent in its capacity as a Lender. Administrative Agent and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, any of Borrowers, and any Person which may do business with any of Borrowers, all as if Administrative Agent were not Administrative Agent hereunder and without any duty to account therefor to Lenders. 10.2. Note Holders. Administrative Agent may treat the payee of any Note as the holder thereof until written notice of transfer shall have been filed with it signed by such payee and in form satisfactory to Administrative Agent. 10.3. Consultation with Counsel. Lenders agree that Administrative Agent may retain legal counsel, accountants and other professionals and may consult with such professionals selected by it and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such professionals. 42 10.4. Documents. Administrative Agent shall not be under a duty to examine or pass upon the validity, effectiveness, enforceability, genuineness or value of any of the Loan Documents or any other instrument or document furnished pursuant thereto or in connection therewith, and Administrative Agent shall be entitled to assume that the same are valid, effective, enforceable and genuine and what they purport to be. 10.5. Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, Administrative Agent may resign at any time by giving thirty (30) days' prior written notice thereof to Lenders, EDS and Borrowers and the Administrative Agent may be removed at any time with or without cause by EDS. Upon any such resignation or removal, EDS shall appoint a successor Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article X shall continue in effect for its benefit in respect to any actions taken or omitted to be taken by it while it was acting as Administrative Agent. 10.6. Responsibility of Administrative Agent. It is expressly understood and agreed that the obligations of Administrative Agent under the Loan Documents are only those expressly set forth in the Loan Documents and that Administrative Agent shall be entitled to assume that no Default exists, unless Administrative Agent has actual knowledge of such fact or has received notice from a Lender that such Lender considers that a Default exists and specifying the nature thereof. Lenders recognize and agree that Administrative Agent has no responsibility for confirming the accuracy of any statements made by Borrowers, or to inspect the property, including the books and financial records of any Borrower, and in disbursing funds to Borrowers, Administrative Agent may rely fully upon statements contained in the relevant Notice of Advance. Neither Administrative Agent nor any of its directors, officers or employees shall be liable for any action taken or omitted to be taken by it under or in connection with the Loan Documents, except for its own gross negligence or willful misconduct. In the absence of gross negligence or willful misconduct, Administrative Agent shall incur no liability under or in respect of any of the Loan Documents by acting upon any notice, consent, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything which it may do or refrain from doing in the reasonable exercise of its judgment, or which may seem to it to be necessary or desirable in the premises. Administrative Agent shall not be responsible to Lenders for any recitals, statements, representations or warranties contained in this Agreement, or in any certificate or other document referred to or provided for in, or received by any Lender under, this Agreement, or for the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any document referred to or provided for herein or for any failure by Borrowers to perform any of their obligations hereunder. Administrative Agent may employ agents and attorneys-in-fact and shall not be answerable, except as to money or securities received by it or its authorized agents, 43 for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The relationship between Administrative Agent and each of the Lenders is only that of agent and principal and has no fiduciary aspects, and Administrative Agent's duties hereunder are acknowledged to be only ministerial and not involving the exercise of discretion on its part. Nothing in this Agreement or elsewhere contained shall be construed to impose on Administrative Agent any duties or responsibilities other than those for which express provision is herein made. In performing its duties and functions hereunder, Administrative Agent does not assume and shall not be deemed to have assumed, and hereby expressly disclaims, any obligation or responsibility toward or any relationship of agency or trust with or for Borrowers. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of Majority Lenders and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that Administrative Agent shall not be required to take any action which exposes Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. 10.7. Notices of Default. In the event that Administrative Agent shall have acquired actual knowledge of any Default or any Potential Default, Administrative Agent shall promptly give notice thereof to Lenders. 10.8. Independent Investigation. Each of Lenders severally represents and warrants to Administrative Agent that it has made its own independent investigation and assessment of the financial condition and affairs of EDS in connection with the making and continuation of its participation in the Loans hereunder and has not relied exclusively on any information provided to such Lender by Administrative Agent in connection herewith, and each Lender represents, warrants and undertakes to Administrative Agent that it shall continue to make its own independent appraisal of the creditworthiness of EDS while the Loans are outstanding or while it has any obligation to make Loans hereunder to Borrowers. 10.9. Indemnification of Administrative Agent. Lenders agree to indemnify Administrative Agent (to the extent not reimbursed by Borrowers), Pro Rata, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Administrative Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by Administrative Agent under the Loan Documents, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Administrative Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent, on a Pro Rata basis, promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, 44 legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrowers. 10.10. Arrangers and Managers. None of the Lenders identified on the cover page or signature pages of this Agreement as an "arranger" or "manager" shall have any right, power, obligation, liability, responsibility or duty, including, without limitation, any fiduciary duty, under this Agreement other than those applicable to all Lenders as such. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. 10.11. Benefit of Article X. The agreements contained in this Article X are solely for the benefit of Administrative Agent and Lenders, and are not for the benefit of, or to be relied upon by, Borrowers or any third party . ARTICLE XI ---------- MISCELLANEOUS ------------- 11.1. Number and Gender of Words. Whenever in any Loan Document the singular number is used, the same shall include the plural where appropriate, and vice versa; and words of any gender in any Loan Document shall include each other gender where appropriate. 11.2. Headings. The headings, captions, and arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify, or modify the terms of the Loan Documents, nor affect the meaning thereof. 11.3. Exhibits. If any Exhibit which is to be executed and delivered contains blanks, the same shall be completed correctly and in accordance with the terms and provisions contained and as contemplated herein prior to, at the time of, or after the execution and delivery thereof. 11.4. Communications. Unless specifically otherwise provided, whenever any Loan Document requires or permits any consent, approval, notice, request, or demand from one party to another, such communication must be in writing (which may be by telecopier) to be effective and shall be deemed to have been given on the day actually delivered or telecopied, or, if mailed, on the third Business Day after it is enclosed in an envelope, addressed to the party to be notified at the address stated below, properly stamped for first class delivery, sealed, and deposited in the appropriate official postal service. Until changed by notice pursuant hereto (any party being entitled to change its address for purposes of this Section 11.4 by notice to all other parties hereto), the address and telecopy number for each party for purposes hereof are as follows: 45 BORROWERS: Electronic Data Systems Corporation 5400 Legacy Drive Plano, Texas 75024 Attention: Manager, Corporate Finance Telecopy No.: (214) 605-3005 Telephone No.: (214) 605-3002 COPY TO: Electronic Data Systems Corporation 5400 Legacy Drive Plano, Texas 75024 Attention: General Counsel Telecopy No.: (214) 605-5613 Telephone No.: (214) 605-5500 LENDERS: See Schedule 1 ADMINISTRATIVE AGENT: FOR NOTICES UNDER ARTICLES II AND III AND SECTION 4.2: Citibank, N.A. Bank Loan Syndications One Court Square, 7th Floor Long Island City, NY 11120 Attention: Mr. Phil Green Telecopy No.: (718) 248-4844/45 Telephone No.: (718) 248-4529 IN ALL CASES WITH A HARD COPY TO: Citibank, N.A. Central Customer Service One Court Square, 7th Floor Long Island City, NY 11120 Attention: Ms. Angela Valentin FOR ALL OTHER NOTICES: Citibank, N.A. 399 Park Avenue 8th Floor, Zone 12 New York, NY 10043 Telecopy No.: (212) 826-2375 Telephone No.: (212) 559-8851 Attention: Mr. William G. McKnight, III 46 PROCESS Prentice Hall Systems, Inc. AGENT: 15 Columbus Circle New York, New York 10023-7773 COPY TO: Electronic Data Systems Corporation 5400 Legacy Drive Plano, Texas 75024 Attention: General Counsel Telecopy No.: (214) 605-5613 11.5. Exceptions to Covenants. No Borrower shall take any action or fail to take any action which is permitted as an exception to any of the covenants contained in any of the Loan Documents if such action or omission would result in the breach of any other covenant contained in any of the Loan Documents. 11.6. Survival. All covenants, agreements, undertakings, representations, and warranties made in any of the Loan Documents shall survive all closings under the Loan Documents and, except as otherwise indicated, shall not be affected by any investigation made by any party. 11.7. GOVERNING LAW. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (OTHER THAN THE CONFLICT OF LAWS PROVISIONS THEREOF), EXCEPT TO THE EXTENT THAT FEDERAL LAWS MAY APPLY. 11.8. Maximum Interest Rate. Regardless of any provision contained in any of the Loan Documents, no Lender shall ever be entitled to contract for, charge, take, reserve, receive, or apply, as interest on the Obligation, or any part thereof, any amount in excess of the Highest Lawful Rate, and, in the event any Lender ever contracts for, charges, takes, reserves, receives, or applies as interest any such excess, it shall be deemed a partial prepayment of principal and treated hereunder as such and any remaining excess shall be refunded to the relevant Borrower. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Highest Lawful Rate, Borrowers and Lenders shall, to the maximum extent permitted under applicable Law, (a) treat all Advances as but a single extension of credit (and Lenders and Borrowers agree that such is the case and that provision herein for multiple Advances and for one or more Notes is for convenience only), (b) characterize any nonprincipal payment as an expense, fee, or premium rather than as interest, (c) exclude voluntary prepayments and the effects thereof, and (d) "spread" the total amount of interest throughout the entire contemplated term of the Obligation; provided that, if the Obligation is paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the Highest Lawful Rate, any Lender receiving such excess interest shall refund such excess, and, in such event, such Lender shall not be subject to any penalties provided by any Laws for contracting for, charging, taking, reserving, or receiving interest in excess of the Highest Lawful Rate. To the extent the Laws of the State of Texas are applicable for purposes of 47 determining the "Highest Lawful Rate," such term shall mean the "indicated rate ceiling" from time to time in effect under Article 1.04, Title 79, Revised Civil Statutes of Texas, as amended. 11.9. ENTIRETY AND AMENDMENTS. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. This Agreement and the other Loan Documents embody the entire agreement between Borrowers and Lenders and supersedes all prior proposals, agreements and understandings relating to the subject matter hereof. Borrowers certify that they are relying on no representation, warranty, covenant or agreement except for those set forth herein and the other Loan Documents of even date herewith. This Agreement and the other Loan Documents may be amended, or the provisions hereof waived, only by an instrument in writing executed jointly by an authorized officer of EDS and Administrative Agent, acting on behalf of Majority Lenders, and supplemented only by documents delivered or to be delivered in accordance with the express terms hereof. Notwithstanding anything to the contrary set forth herein, no change in the Loan Documents or waiver of the provisions thereof which has the effect of (a) extending the maturity or decreasing the amount of any payment on any Notes or payment of any fee, (b) decreasing any rate or amount of interest or other sums payable to any Lender under the Loan Documents, (c) changing the definition of the term "Majority Lenders", (d) amending or waiving Sections 5.2 (except with respect to a Bid Rate Loan as set forth in Section 5.3), 7.8, 11.9 or 11.12 or (e) discharging any guarantor shall be effective absent the concurrence of all Lenders. No increase to the Committed Sum of any Lender, no extension of the Commitment Termination Date of any Lender, and no imposition of any additional obligations upon any Lender, except as expressly provided herein, shall be effective without the consent of such Lender. Notwithstanding the foregoing, EDS or any other Borrower and any Lender of a Bid Rate Loan may, from time to time, and at any time, enter into an amendment of such Bid Rate Loan and the Bid Rate Note related thereto. EDS and Administrative Agent may, from time to time and at any time, enter into an amendment hereof, for the purpose of adding as a Lender hereunder any commercial lending institution. 11.10. Waivers. The acceptance by Lenders at any time and from time to time of partial payment on the Obligation shall not be deemed to be a waiver of any Default or Potential Default then existing. No failure to exercise and no delay on the part of Lenders or their respective officers, directors, employees, agents, representatives or attorneys in exercising any Right under this Agreement or any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any Right under this Agreement preclude any other or further exercise thereof or the exercise of any other Right. Any waiver or consent allowed hereunder and in conformity with the provisions hereof shall be effective only in the specific instance to which it relates and for the purpose for which it is given. 11.11. Multiple Counterparts. This Agreement may be executed in any number of identical counterparts, and by different parties hereto on separate counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one 48 Agreement; but, in making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. 11.12. Parties Bound; Participations and Assignments. (a) Successors and Assigns. This Agreement is binding upon, and inures to the benefit of, each Lender, each Borrower, and their respective successors and assigns; provided that, unless otherwise permitted by this Section 11.12, no Lender may transfer, pledge, assign, sell participations in or otherwise encumber its Commitment or Loans hereunder; and provided further, except as otherwise expressly provided herein, the Borrowers shall not have any right to assign their rights or obligations hereunder or any interest herein without the prior written consent of the Lenders. (b) Participations. Any Lender may in accordance with applicable Law, at any time sell to one or more banks or other entities (each, a "PARTICIPANT") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder; provided that such Lender shall have given prior written notice to EDS of the identity of each such Participant, and provided, further, that no Lender shall transfer, grant or assign any participation under which any Participant shall have rights to approve any amendment, supplement or modification to or waiver of this Agreement except to the extent such amendment, supplement, modification or waiver would (i) increase the amount of the Participant's funding obligations in respect of such Lender's Commitment, (ii) reduce the principal of, or interest on, any of the Participant's interest in such Lender's Notes or any fees or other amounts payable to such Lender hereunder (to the extent an interest therein has been sold to the Participant) or (iii) postpone the date fixed for any payment of principal of, or interest on, any of such Lender's Notes or any fees or other amounts payable to such Lender hereunder (to the extent an interest therein has been sold to the Participant). In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any obligation owing to it hereunder for all purposes under this Agreement, and Borrowers and the Administrative Agent shall continue to be entitled to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Borrowers hereby agree that each Participant shall be entitled to the benefits of Sections 3.5, 3.9, 3.10, 3.11 and 3.13 with respect to its participation in the Commitment and the Loans outstanding from time to time as if it were a Lender; provided that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Assignments. Any Lender may, in the ordinary course of its commercial lending business and in accordance with applicable Law, at any time and from time to time, assign to any Lender or any Affiliate thereof or, with the prior written consent of 49 EDS (which consent shall not be unreasonably withheld), to an additional bank or financial institution (each such Lender, Affiliate, bank or financial institution, an "ASSIGNEE") all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance, substantially in the form of Exhibit K, executed by such Assignee, such assigning Lender and EDS and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that, unless EDS otherwise consents, any such assignment to any Assignee that is not a Lender or an Affiliate of a Lender shall be an undivided share of the assigning Lender's Committed Sum and Loans, in a minimum amount of $17,500,000 and shall not exceed fifty percent (50%) of the assigning Lender's Committed Sum as of the date such Lender became a Lender hereunder, and provided, further, that no Assignee shall be entitled to receive any greater amount pursuant to Sections 3.11(a) or 3.13 than the assignor Lender would have been entitled to receive in respect of the amount of the Loan(s) assigned had no such assignment occurred. Upon such execution, delivery, acceptance and recording from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of (and be) a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement. Notwithstanding anything to the contrary contained herein, any Lender may sell, transfer, assign or grant participations in all or any part of the Bid Rate Loans made by it to any Assignee without requirement of notice or consent and without limitation of any kind; provided, that no Assignee of any Bid Rate Loans shall be entitled to receive any greater amount pursuant to Sections 3.11(a) or 3.13 than the assignor Lender would have been entitled to receive in respect of the amount of the Bid Rate Loan(s) assigned had no such assignment occurred. (d) Maintenance of Register. The Administrative Agent shall maintain at its address referred to in Section 11.4 a copy of each Assignment and Acceptance delivered to it and a register (the "REGISTER") for the recordation of the name and address of each of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be prima facie evidence of the existence and amounts of the obligations of Borrowers therein recorded, and Borrowers, Administrative Agent and Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection and copying by Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. The Administrative Agent shall provide a copy of the Register to EDS on a monthly basis. (e) Payment of Costs. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender, an Assignee, Administrative Agent and EDS, and payment by the assigning Lender to Administrative Agent and EDS of all of their reasonable costs in connection with such assignment, including, without limitation, a processing and recordation fee of $3,000 to Administrative Agent, Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date 50 determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the assigning Lender, its Assignee and EDS. (f) Delivery of Notes. Within five (5) Business Days after its receipt of an Assignment and Acceptance, together with an execution copy of each replacement Note, the applicable Borrower shall execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes such replacement Note or Notes, duly executed, and payable to the order of such Assignee in an amount equal to the amount assigned to it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a portion of the Obligation hereunder, a replacement Note or Notes to the order of the assigning Lender in an amount equal to the portion retained by it hereunder. Such replacement Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the surrendered Note or Notes. (g) Disclosure of Borrower Information. Borrowers authorize each Lender to disclose to any prospective Participant, any Participant or any prospective Assignee (each, a "TRANSFEREE") any and all financial information in such Lender's possession concerning Borrowers which has been delivered to such Lender by or on behalf of Borrowers pursuant to this Agreement or which has been delivered to all Lenders by or on behalf of Borrowers in connection with their respective credit evaluations of Borrowers prior to becoming a party to this Agreement; provided that each Lender disclosing such information notifies EDS in advance that it is doing so, and, prior to any such disclosure, the Transferee shall agree to preserve the confidentiality of any information relating to Borrowers received from such Lender. Nothing contained in this Section 11.12(f) shall be deemed to prohibit the delivery to any Transferee of any financial information which is otherwise publicly available or to subject the delivery of any such publicly available information to the notice and consent procedures hereinabove set forth. (h) Pledges and Assignments to Federal Reserve Banks. Nothing herein shall prohibit any Lender from pledging or assigning all or any portion of its Loans or Bid Rate Loans to any Federal Reserve Bank in accordance with applicable Law but such Lender shall remain liable for performance of its obligations hereunder. 11.13. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. BORROWERS HEREBY AGREE THAT ANY SUIT, ACTION OR PROCEEDING AGAINST BORROWERS WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF, MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, BOROUGH OF MANHATTAN, OR IN THE UNITED STATES COURTS LOCATED IN THE STATE OF NEW YORK, BOROUGH OF MANHATTAN, AS MAJORITY LENDERS IN THEIR SOLE DISCRETION MAY ELECT AND THE BORROWERS HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF 51 ANY SUCH SUIT, ACTION OR PROCEEDING. BORROWERS HEREBY AGREE THAT SERVICE OF ALL WRITS, PROCESS AND SUMMONSES IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN THE STATE OF NEW YORK MAY BE MADE UPON PROCESS AGENT AT ITS ADDRESS AS SET FORTH IN SECTION 11.4 (AS SUCH ADDRESS MAY BE CHANGED FROM TIME TO TIME) AND EACH OF THE BORROWERS HEREBY IRREVOCABLY APPOINTS PROCESS AGENT AS ITS TRUE AND LAWFUL ATTORNEY-IN-FACT IN THE NAME, PLACE AND STEAD OF SUCH BORROWER TO ACCEPT SUCH SERVICE OF ANY AND ALL SUCH WRITS, PROCESS AND SUMMONSES, AND AGREE THAT THE FAILURE OF THE PROCESS AGENT TO GIVE ANY NOTICE OF SUCH SERVICE OF PROCESS TO IT SHALL NOT IMPAIR OR AFFECT THE VALIDITY OF SUCH SERVICE OR OF ANY JUDGMENT BASED THEREON. BORROWERS HEREBY IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN SAID COURTS BY THE MAILING THEREOF BY ADMINISTRATIVE AGENT OR ANY LENDER BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWERS' ADDRESS SET FORTH IN SECTION 11.4 HEREOF. EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY NOTE BROUGHT IN THE COURTS LOCATED IN THE STATE OF NEW YORK, BOROUGH OF MANHATTAN, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN CONNECTION WITH THIS CREDIT AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, WHICH WAIVER IS INFORMED AND VOLUNTARY. 11.14. Payment of Expenses. EDS agrees to pay (a) all costs and expenses of Lenders, including attorneys' fees and expenses, incurred by Lenders in connection with the preservation and enforcement of Lenders' rights under this Agreement, the Notes and/or the other Loan Documents and (b) the legal fees and expenses of Haynes and Boone, L.L.P., in connection with the negotiation, preparation, execution and delivery of this Agreement, the Notes and the other Loan Documents. 11.15. Invalid Provisions. If any provision of any of the Loan Documents is held to be illegal, invalid or unenforceable under present or future laws during the term of this Agreement, such provision shall be fully severable; such Loan Document shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of such Loan Document; and the remaining provisions of such Loan Document shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from such Loan Document. Furthermore, in lieu of each such illegal, invalid or unenforceable provision there shall be added as part of such Loan Document a provision mutually agreeable to Borrowers, Administrative Agent and Majority Lenders as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 52 In the event Borrowers, Administrative Agent and Majority Lenders are unable to agree upon a provision to be added to the Loan Document in question within a period of ten (10) Business Days after a provision of any Loan Document is held to be illegal, invalid or unenforceable, then a provision acceptable to Administrative Agent and Majority Lenders as similar in terms to the illegal, invalid or unenforceable provision as is possible and be legal, valid and enforceable shall be added automatically to such Loan Document. In either case, the effective date of the added provision shall be the date upon which the prior provision was held effectively to be illegal, invalid or unenforceable. 11.16. Borrowers' Right of Offset. (a) Offset Against Accounts. Each of Lenders and the Borrowers hereby agree, with respect to the Obligation, that, automatically and without any action by or notice to the Borrowers, upon the occurrence of the appointment of a conservator or receiver for a Lender or, if a Lender's deposits are insured by the Federal Deposit Insurance Corporation on the date of an Advance by such Lender, the termination of federal deposit insurance of such Lender's deposits by the Federal Deposit Insurance Corporation, or any successor thereto, each Borrower's unpaid payment obligations under the Obligation, including any unpaid principal and interest thereunder, shall be offset, Dollar for Dollar, against any and all funds of such Borrower on deposit with such Lender in any and all accounts which such Borrower maintains at such Lender in the name of such Borrower, whether individually, or jointly with any of its Affiliates, and which have not been previously pledged to a party other than such Lender (the "ACCOUNTS"). The Accounts shall in such circumstance be applied against the Obligation in such order as each Borrower elects or, if no such election is made, in such order as the Lender or the entity applying such Accounts elects. (b) Lender Representations. Each Lender whose deposits are insured by the Federal Deposit Insurance Corporation represents and warrants that the execution of this Agreement by such Lender and the obligations herein undertaken by it have been approved in compliance with applicable regulations of the Federal Deposit Insurance Corporation. 11.17 Indemnification of Lenders. EDS agrees to indemnify and hold Administrative Agent and each Lender and their respective directors, officers, shareholders, employees, attorneys and agents, and Affiliates (each, an "INDEMNITEE") harmless from and against any and all liabilities, obligations, losses, actions, judgments, suits, disbursements, penalties, damages (other than consequential damages) and related expenses, including attorneys' fees and expenses, with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the Notes, and the other Loan Documents (collectively, the "INDEMNIFIED LIABILITIES" and, individually, an "INDEMNIFIED LIABILITY"), provided, however, that EDS and the Borrowers shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities arising from (a) the gross negligence or willful misconduct of any Indemnitee, (b) any legal proceedings commenced against any Indemnitee by any other Indemnitee or by any Participant or Assignee, (c) any violation or claimed violation by any Indemnitee of any material banking Law of the jurisdiction of its or its related Lender's Applicable Lending Office, or (d) any 53 action by Administrative Agent or any Lender not required or contemplated by the Agreement or the Loan Documents or necessary for the performance of Administrative Agent's or any Lender's obligations, Administrative Agent's or any Lender's duties or enforcement of Administrative Agent's or any Lender's rights thereunder. The provisions of this Section 11.17 shall remain operative and in full force and effect regardless of the termination of the Commitments, the consummation of the transactions contemplated hereby, the repayment of the Loans, the occurrence of the Commitment Termination Date, the invalidity, illegality, or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of Administrative Agent or the other Lenders. All amounts due under this Section 11.17 shall be payable within ten (10) days after written demand therefor, delivered to EDS and the relevant Borrower (if other than EDS) through the Administrative Agent as promptly as practical after the Indemnitee in question obtains knowledge of any Indemnified Liability, which notice shall be certified by an authorized officer of Administrative Agent or Lender (if Administrative Agent or such Lender is the Indemnitee making such claim) and shall reasonably identify the basis upon which such claim is made. 11.18. Designation of EDS Affiliates as Borrowers. EDS may, at any time, or from time to time, supplement or amend Schedule 2 hereto to add an EDS Affiliate or delete a Designated EDS Affiliate by delivering to Administrative Agent a revised Schedule 2 together, in the case of an addition of an EDS Affiliate, with a certificate executed by the Treasurer, Assistant Treasurer or Chief Financial Officer of EDS stating that the guaranty by EDS of the obligations of such EDS Affiliate may reasonably be expected to benefit, directly or indirectly, EDS. 11.19 Lenders' Right of Setoff; Payments Set Aside; Sharing of Payments. (a) Right of Setoff. Should a Default exist, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of a Borrower against any and all of the obligations of such Borrower now or hereafter existing under this Agreement and the Notes, irrespective of whether or not demand shall have been made under this Agreement or any such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify any affected Borrower after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of setoff) which such Lender may have. (b) Payments Set Aside. To the extent that EDS or any other Borrower makes a payment or payments to a Lender or a Lender exercises its right of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other Person under any Debtor Relief Law or equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all rights and remedies therefor, shall be revived and 54 shall continue in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. (c) Sharing of Payments. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of the Loans made by it (other than costs or losses paid pursuant to Sections 3.5, 3.9 or 3.11) in excess of its ratable share of payments on account of the Loans obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. EDS and each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 11.19(c) may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. [The remainder of this page is intentionally left blank.] 55 EXECUTED as of the day and year first above written. BORROWER: ELECTRONIC DATA SYSTEMS CORPORATION By:______________________________________ Name:____________________________________ Title:___________________________________ ADMINISTRATIVE AGENT: CITIBANK, N.A., in its individual capacity as a Lender and as Administrative Agent By:______________________________________ Name:____________________________________ Title:___________________________________ ARRANGERS/LENDERS: BANCO SANTANDER - NEW YORK BRANCH By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ 56 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:______________________________________ Name:____________________________________ Title:___________________________________ CHEMICAL BANK By:______________________________________ Name:____________________________________ Title:___________________________________ CREDIT LYONNAIS CAYMAN ISLAND BRANCH By:______________________________________ Name:____________________________________ Title:___________________________________ MORGAN GUARANTY TRUST COMPANY OF NEW YORK By:______________________________________ Name:____________________________________ Title:___________________________________ NATIONSBANK OF TEXAS, N.A. By:______________________________________ Name:____________________________________ Title:___________________________________ 57 MANAGERS/LENDERS: BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ CIBC INC. By:______________________________________ Name:____________________________________ Title:___________________________________ PNC BANK, NATIONAL ASSOCIATION By:______________________________________ Name:____________________________________ Title:___________________________________ TORONTO DOMINION (TEXAS), INC. By:______________________________________ Name:____________________________________ Title:___________________________________ WACHOVIA BANK OF GEORGIA, N.A. By:______________________________________ Name:____________________________________ Title:___________________________________ 58 LENDERS: THE DAI-ICHI KANGYO BANK, LTD. By:______________________________________ Name:____________________________________ Title:___________________________________ SOCIETE GENERALE, SOUTHWEST AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ THE SANWA BANK, LIMITED, DALLAS AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ THE BANK OF TOKYO TRUST COMPANY By:______________________________________ Name:____________________________________ Title:___________________________________ 59 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ THE FUJI BANK, LIMITED - HOUSTON AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ THE SUMITOMO BANK, LIMITED, HOUSTON AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ 60 DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ FIRST FIDELITY BANK, N.A. By:______________________________________ Name:____________________________________ Title:___________________________________ ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A. By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ 61 BANCA DI ROMA - HOUSTON AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ BANCA MONTE DEI PASCHI DI SIENA, S.p.A. By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ COMERICA BANK By:______________________________________ Name:____________________________________ Title:___________________________________ KREDIETBANK N.V. By:______________________________________ Name:____________________________________ Title:___________________________________ 62 NATIONAL WESTMINSTER BANK Plc By:______________________________________ Name:____________________________________ Title:___________________________________ THE ROYAL BANK OF SCOTLAND plc By:______________________________________ Name:____________________________________ Title:___________________________________ THE SAKURA BANK, LIMITED, HOUSTON AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ SUNBANK, NATIONAL ASSOCIATION By:______________________________________ Name:____________________________________ Title:___________________________________ UNITED STATES NATIONAL BANK OF OREGON By:______________________________________ Name:____________________________________ Title:___________________________________ 63 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED CAYMAN ISLANDS BRANCH By:______________________________________ Name:____________________________________ Title:___________________________________ BANK OF MONTREAL By:______________________________________ Name:____________________________________ Title:___________________________________ CREDIT SUISSE By:______________________________________ Name:____________________________________ Title:___________________________________ FIRST INTERSTATE BANK OF CALIFORNIA By:______________________________________ Name:____________________________________ Title:___________________________________ THE FIRST NATIONAL BANK OF BOSTON By:______________________________________ Name:____________________________________ Title:___________________________________ 64 THE FIRST NATIONAL BANK OF MARYLAND By:______________________________________ Name:____________________________________ Title:___________________________________ MELLON BANK, N.A. By:______________________________________ Name:____________________________________ Title:___________________________________ STANDARD CHARTERED BANK By:______________________________________ Name:____________________________________ Title:___________________________________ 65 EXHIBIT 10(I) ================================================================================ $1,250,000,000 ELECTRONIC DATA SYSTEMS CORPORATION ================================================================================ MULTI-CURRENCY REVOLVING CREDIT AGREEMENT DATED AS OF OCTOBER 4, 1995 CITIBANK, N.A., as Administrative Agent and BANCO SANTANDER - NEW YORK BRANCH, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, CHEMICAL BANK, CITIBANK, N.A., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, MORGAN GUARANTY TRUST COMPANY OF NEW YORK, and NATIONSBANK OF TEXAS, N.A., as Arrangers and BANQUE NATIONALE DE PARIS, CIBC INC., PNC BANK, NATIONAL ASSOCIATION, TORONTO DOMINION (TEXAS), INC., and WACHOVIA BANK OF GEORGIA, N.A., as Managers and the other lenders named herein, as LENDERS ================================================================================ TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITION OF TERMS 1.1 Definitions................................................ 1 1.2 Other Definitional Provisions.............................. 14 ARTICLE II FACILITY 2.1 Committed Loans............................................ 15 2.2 Committed Loan Borrowing Procedure; Disbursement........... 15 2.3 Bid Rate Loans............................................. 17 2.4 Optional Extension of the Commitment Termination Date...... 21 2.5 Several Obligations........................................ 22 2.6 Determination of Availability.............................. 22 ARTICLE III TERMS OF PAYMENT 3.1 Notes...................................................... 23 3.2 Payments on Committed Loan Notes and Bid Rate Notes........ 23 3.3 Interest................................................... 24 3.4 Continuation/Conversion with Respect to Committed Loans.................................................... 24 3.5 Funding Losses............................................. 26 3.6 Default Rates.............................................. 26 3.7 Interest and Fee Calculations.............................. 26 3.8 Mandatory Principal Prepayments............................ 27 3.9 Voluntary Principal Prepayments............................ 27 3.10 Inadequacy of Eurodollar, Eurocurrency or CD Loan Pricing.................................................. 27 3.11 Illegality................................................. 28 3.12 Increased Cost and Reduced Return.......................... 29 3.13 Several Obligations........................................ 30 3.14 Taxes...................................................... 30 3.15 Application of Principal Payments.......................... 33 3.16 Payments, Computations, Judgments, etc..................... 34 3.17 Mitigation of Circumstances; Replacement of Affected Lenders......................................... 34 3.18 Failure to Pay Additional Amounts.......................... 35 ARTICLE IV FEES; MODIFICATION OF COMMITMENTS 4.1 Facility Fee............................................... 36 4.2 Reduction or Cancellation of Commitments................... 36 ARTICLE V CONDITIONS PRECEDENT 5.1 Initial Availability....................................... 36 5.2 Each Advance............................................... 37 5.3 Waiver of Conditions to Bid Rate Loans..................... 37
PAGE ---- ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.1 EDS Representations and Warranties......................... 38 ARTICLE VII COVENANTS 7.1 Use of Proceeds............................................ 40 7.2 Accounting Books and Financial Records; Inspections........ 40 7.3 Items to be Furnished...................................... 40 7.4 Taxes...................................................... 41 7.5 Maintenance of Corporate Existence, Assets, Business and Insurance............................................ 41 7.6 Compliance with Laws and Documents......................... 41 7.7 Regulation U............................................... 41 7.8 Net Worth.................................................. 41 7.9 Mergers; Consolidations; Transfers of Assets............... 42 7.10 Pari Passu................................................. 42 7.11 ERISA...................................................... 42 ARTICLE VIII DEFAULT 8.1 Default.................................................... 42 ARTICLE IX RIGHTS AND REMEDIES UPON DEFAULT 9.1 Remedies Upon Default...................................... 44 9.2 Waivers by Borrower and Others............................. 44 9.3 Delegation of Duties and Rights............................ 45 9.4 Lenders Not in Control..................................... 45 9.5 Cumulative Remedies........................................ 45 9.6 Expenditures by Lenders.................................... 45 9.7 Performance by Administrative Agent........................ 45 ARTICLE X THE ADMINISTRATIVE AGENT 10.1 Appointment and Authorization.............................. 45 10.2 Note Holders............................................... 46 10.3 Consultation with Counsel.................................. 46 10.4 Documents.................................................. 46 10.5 Resignation or Removal of Administrative Agent............. 46 10.6 Responsibility of Administrative Agent..................... 46 10.7 Notices of Default......................................... 47 10.8 Independent Investigation.................................. 47 10.9 Indemnification of Administrative Agent.................... 48 10.10 Arrangers and Managers..................................... 48 10.11 Benefit of Article X....................................... 48
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PAGE ---- ARTICLE XI MISCELLANEOUS 11.1 Number and Gender of Words................................ 48 11.2 Headings.................................................. 48 11.3 Exhibits.................................................. 49 11.4 Communications............................................ 49 11.5 Exceptions to Covenants................................... 50 11.6 Survival.................................................. 50 11.7 Governing Law............................................. 50 11.8 Maximum Interest Rate..................................... 51 11.9 Entirety and Amendments................................... 51 11.10 Waivers................................................... 52 11.11 Multiple Counterparts..................................... 52 11.12 Parties Bound; Participations and Assignments............. 52 11.13 Consent to Jurisdiction; Waiver of Jury Trial............. 55 11.14 Payment of Expenses....................................... 56 11.15 Invalid Provisions........................................ 56 11.16 Borrowers' Right of Offset................................ 56 11.17 Indemnification of Lenders................................ 57 11.18 Designation of EDS Affiliates as Borrowers................ 57 11.19 Judgment Currency......................................... 58 11.20 Lenders' Right of Set-off; Payments Set Aside; Sharing of Payments..................................... 58
iii EXHIBITS AND SCHEDULES Exhibit A Form of EDS Committed Loan Note Exhibit B Form of Committed Loan Note for Borrowers other than EDS Exhibit C Form of Bid Rate Note Exhibit D Form of Unconditional Guaranty Agreement Exhibit E Form of Notice of Advance Exhibit F Form of Request for Bids Exhibit G Form of Offer of Bid Rate Loans Exhibit H Form of Notice of Continuation/Conversion Exhibit I Form of Assignment and Acceptance Exhibit J Form of Opinion of Counsel Exhibit K Form of Bid Rate Loan Confirmation Exhibit L Form of Officers' Certificate Schedule 1 Lender Information Schedule 2 Designated EDS Affiliates Schedule 6.1 Litigation iv MULTI-CURRENCY REVOLVING CREDIT AGREEMENT ----------------------------------------- This Multi-Currency Revolving Credit Agreement (the "AGREEMENT") is entered into as of the 4th day of October, 1995, by and among Electronic Data Systems Corporation, a Texas corporation (hereinafter called "EDS"), the financial institutions listed on the signature pages of this Agreement under the heading "LENDERS", and which hereafter become parties hereto pursuant to Section 11.12 hereof, including BANCO SANTANDER - NEW YORK BRANCH, BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, CHEMICAL BANK, CITIBANK, N.A., CREDIT LYONNAIS CAYMAN ISLAND BRANCH, MORGAN GUARANTY TRUST COMPANY OF NEW YORK and NATIONSBANK OF TEXAS, N.A., as Arrangers and CITIBANK, N.A., as Administrative Agent for such lenders to the extent and in the manner provided in Article X below ("ADMINISTRATIVE AGENT"). W I T N E S S E T H: WHEREAS, EDS has requested that Lenders (as hereinafter defined) provide EDS and certain EDS Affiliates (as hereinafter defined) with a multi- currency revolving credit facility and Lenders are willing to provide such a facility to EDS and such EDS Affiliates upon the terms and subject to the conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual promises herein contained and for other good and valuable consideration, the parties hereto hereby agree as follows: ARTICLE I --------- DEFINITION OF TERMS ------------------- 1.1. Definitions. As used herein, the following terms have the meanings assigned to them in this Article I or in the section or recital referred to below: ACCOUNTS shall have the meaning assigned to such term in Section 11.16. ADJUSTED CD RATE means, for any day, a rate per annum determined pursuant to the following formula: ACDR (% [CDBR ]* + AR ----------- per annum) = [1.00 -DRP] where CDBR equals the CD Base Rate in effect on such day (expressed as a decimal), DRP equals the Domestic Reserve Percentage in effect on such day and AR equals the Assessment Rate in effect on such day (expressed as a decimal). * The amount in brackets being rounded upward, if necessary, to the next higher 1/10,000th of 1%. ADMINISTRATIVE AGENT shall have the meaning assigned to such term in the preamble hereof. ADVANCE means an amount loaned to one or more Borrowers by any Lender pursuant to this Agreement. AFFILIATE of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person. A Person shall be deemed to be "controlled by" any other Person if such Person possesses, directly or indirectly, power to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. AGGREGATE COMMITTED SUM means, as of any date, the aggregate of the Committed Sums of all Lenders in effect on such date. AGREEMENT means this Multi-Currency Revolving Credit Agreement, including the Schedules and Exhibits hereto, as the same may be renewed, extended, amended, supplemented, or modified from time to time. ALTERNATIVE CURRENCY means any Primary Currency other than Dollars. APPLICABLE LENDING OFFICE means, with respect to each Lender, such Lender's Eurocurrency Lending Office for Eurocurrency Loans, such Lender's Domestic Lending Office for all Loans other than Eurocurrency Loans and the office of such Lender notified by such Lender to the Administrative Agent as its Applicable Lending Office with respect to Bid Rate Loans. APPLICABLE MARGIN, with respect to the calculation of the CD Rate, the Eurocurrency Rate or the Eurodollar Rate, means the applicable percentage amount set forth in the table below: Committed Loans: Eurodollar Loans and Eurocurrency Loans: 0.145% CD Loans: 0.270% ASSESSMENT RATE means, for any day, the lowest net annual assessment rate (rounded upward, if necessary, to the next higher 1/10,000th of 1%) determined by the Administrative Agent to be generally applicable to member banks of the Federal Reserve System in New York City with deposits exceeding Two Hundred Fifty Million Dollars ($250,000,000), and which meet the highest minimum capitalization ratios and supervisory subgroup designations specified by applicable Tribunals for qualification for the lowest assessment rate as of the date of such determination. ASSIGNEE shall have the meaning assigned to such term in Section 11.12(c). 2 AVAILABILITY DATE means the later of (a) the date when sufficient Lenders have executed this Agreement so that the Aggregate Committed Sum is equal to or greater than $1,250,000,000 or (b) the date when all of the conditions precedent set forth in Section 5.1 have been satisfied in full or waived. BASE RATE, with respect to any day, means the greater of (a) the average of the rates of interest publicly announced by each Domestic Reference Bank as its Dollar prime rate, base lending rate or reference rate as in effect for that day or (b) the Federal Funds Rate plus 0.50% per annum, all as determined by Administrative Agent and notified to EDS. Each change in the prime rate or base lending rate so announced by such Domestic Reference Bank will be effective as of the effective date of the announcement or, if no effective date is specified, as of the date of the announcement. Such rate is a reference rate only and is not intended to be the lowest rate of interest charged by Lenders in connection with extensions of credit to debtors. BASE RATE LOAN means any Loan or Bid Rate Loan hereunder bearing interest at a rate that is calculated by reference to the Base Rate. BELGIAN FRANCS and the abbreviation BFR mean lawful money of the Kingdom of Belgium. BID DATE shall have the meaning assigned to such term in Section 2.3(b). BID RATE means, with respect to each Lender, the rate of interest bid by such Lender with respect to a Bid Rate Loan in response to a Request for Bids. BID RATE LOAN and BID RATE LOANS shall have the meaning assigned to such terms in Section 2.3. BID RATE LOAN BORROWING DATE means the proposed date of availability of a Bid Rate Loan requested by a Borrower in its Request for Bids at the office where the Lenders are to deliver such funds to Administrative Agent. BID RATE LOAN CONFIRMATION shall have the meaning assigned to such term in Section 2.3(d). BID RATE NOTES shall have the meaning assigned to such term in Section 3.1 and BID RATE NOTE shall mean any of the Bid Rate Notes. BORROWER means EDS and any Designated EDS Affiliate if, at the time in question, such Designated EDS Affiliate has an outstanding request for a Loan or a Bid Rate Loan or is obligated for payment of one or more Loans or Bid Rate Loans outstanding hereunder, and BORROWERS means all of the Persons that meet the foregoing criteria, in each case as designated in the applicable Notice(s) of Advance, Request(s) for Bids or Notice(s) of Continuation/Conversion. 3 BORROWING DATE means the date requested by a Borrower on which a Loan is to be advanced. BUSINESS DAY means any day, other than a Saturday or Sunday, on which commercial banks generally are open for business in Dallas, Texas and New York, New York, and in each other location of a Lender's Applicable Lending Office. CANADIAN DOLLARS and the abbreviation and symbol CAN $ mean lawful money of the Dominion of Canada. CD BASE RATE means, with respect to any Interest Period, the rate of interest determined by Administrative Agent to be the arithmetic average (rounded upward, if necessary, to the next higher 1/10,000th of 1%) of the prevailing rates per annum bid at 9:00 a.m. (New York time) (or as soon thereafter as practicable) on the first day of such Interest Period by two (2) or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each Domestic Reference Bank of its certificates of deposit in an amount comparable to the unpaid principal amount of the CD Loan of Lenders to which such Interest Period applies and having a maturity equal to such Interest Period. CD LOAN means any Loan hereunder bearing interest at a rate that is calculated by reference to the CD Base Rate. CD RATE means the Adjusted CD Rate plus the Applicable Margin. CHANGE OF CONTROL means the acquisition by any Person or any combination of a Person and its Affiliates, of an aggregate of more than fifty percent (50%) of the total issued and outstanding shares of the voting stock of EDS. CODE means the Internal Revenue Code of 1986, as amended, and all regulations promulgated and rulings issued thereunder. COMMITMENT means the obligation of each Lender to make Advances to Borrowers under this Agreement. COMMITMENT TERMINATION DATE means 12:00 noon (New York, New York time) on the date which is five (5) years after the Availability Date, or such later date as may be accepted by Lenders pursuant to Section 2.4, provided, however, as to any Lender which does not agree to a requested extension of the Commitment Termination Date, the Commitment Termination Date for such Lender shall continue to be the date so scheduled prior to EDS's request that such Lender extend the Commitment Termination Date. COMMITTED LOAN means any Advance by any Lender to any Borrower pursuant to such Lender's Commitment and COMMITTED LOANS shall mean all of such Loans. 4 COMMITTED LOAN NOTES shall have the meaning assigned to such term in Section 3.1, and COMMITTED LOAN NOTE shall mean any of the Committed Loan Notes. COMMITTED SUM means, for each Lender, the maximum aggregate principal sum which such Lender has committed to lend to Borrowers as set forth in Schedule 1 opposite to such Lender's name and the caption "Committed Sum", subject, however, to any increases or reductions in such Lender's Committed Sum during the term of the Facility. COMPENSATION RATE means (a) for any sum payable in Dollars, for any day, the Federal Funds Rate for such day, (b) for any sum payable in any Alternative Currency, for any day, the Indicated Rate with respect to such Alternative Currency for such day, and (c) for any Secondary Currency, for any day, the relevant Lender's cost of funds with respect to such Secondary Currency for such day. DEBT of any Person means all obligations, contingent or otherwise, which in accordance with GAAP should be classified upon such Person's balance sheet as liabilities, but in any event including liabilities secured by any lien or encumbrance existing on property owned or acquired by such Person or a Subsidiary thereof (whether or not the liability secured thereby shall have been assumed), obligations which have been or under GAAP should be capitalized for financial reporting purposes, obligations under acceptance facilities and reimbursement obligations and all guaranties, endorsements, and other contingent obligations with respect to Debt of others, including, but not limited to, any obligations to acquire any such Debt, to purchase, sell, or furnish property or services primarily for the purpose of enabling such other Person to make payment of any of such Debt, or to otherwise assure the owner of any of such Debt against loss with respect thereto. DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of America and all other applicable domestic or foreign liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, fraudulent transfer or conveyance Laws, suspension of payments, or similar Laws from time to time in effect affecting the Rights of creditors generally. DEFAULT shall have the meaning assigned to such term in Article VIII. DESIGNATED EDS AFFILIATE means any EDS Affiliate if, at the time in question, such EDS Affiliate is named on Schedule 2 hereto, as such Schedule is supplemented or amended pursuant to Section 11.18. DEUTSCHE MARK and the abbreviation DM mean lawful money of the Federal Republic of Germany. DOLLAR EQUIVALENT VALUE means, at any time, with respect to an amount of any Primary Currency (other than Dollars) or any Secondary Currency, an amount of Dollars into which Administrative Agent determines that it could, in accordance with its practice from time to time in the interbank foreign exchange market, convert such amount of Primary Currency or Secondary 5 Currency at its spot rate of exchange in effect at or about 11:00 a.m., London, England time, on the day on which such calculation is made. DOLLARS and the symbol $ mean lawful money of the United States of America. DOMESTIC LENDING OFFICE means, as to each Lender, its office or branch identified in Schedule 1 as its Domestic Lending Office or such other office or branch of such Lender in the United States as such Lender may from time to time specify to EDS and the Administrative Agent. DOMESTIC REFERENCE BANKS means Citibank, N.A., Bank of America National Trust and Savings Association, and NationsBank of Texas, N.A., and DOMESTIC REFERENCE BANK means each of them; provided that if any Domestic Reference Bank regularly fails to provide quotations to the Administrative Agent or regularly provides quotations that in the judgment of EDS are not representative of the rates at which deposits are generally available to Lenders in the relevant currencies, EDS may request (by notice to the Administrative Agent, which shall promptly notify the other parties hereto) that such bank be replaced as a Domestic Reference Bank by another Lender. In the event that only two (2) Domestic Reference Banks shall so provide quotations to the Administrative Agent, the Administrative Agent shall make the calculations required hereunder using such quotations. DOMESTIC RESERVE PERCENTAGE means, for any day, that percentage (expressed as a decimal) which Administrative Agent determines is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation, any basic, supplemental, marginal and emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding Two Hundred Fifty Million Dollars ($250,000,000) in respect of new non-personal time deposits in Dollars in New York City having a maturity equal to the related Interest Period and in an amount of $100,000 or more. DUTCH GUILDERS and the abbreviation DFL mean lawful money of the Kingdom of The Netherlands. EDS shall have the meaning assigned to such term in the preamble hereof. EDS AFFILIATE means any Person which is, directly or indirectly, wholly or partially owned by EDS. ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. EUROCURRENCY BUSINESS DAY means a Business Day other than a legal holiday on which banks are authorized or required to be closed in London, England, or (a) with respect only to any Yen-Denominated Loan, Hong Kong or Tokyo, Japan, or (b) with respect to any Eurocurrency 6 Loan other than a Yen-Denominated Loan, the city in which the principal interbank foreign exchange market is made for the currency in which such Eurocurrency Loan is denominated. EUROCURRENCY LENDING OFFICE means, as to each Lender, its office or branch in London or New York City identified in Schedule 1 as its Eurocurrency Lending Office or such other office or branch of such Lender as such Lender may hereafter designate by notice to EDS and the Administrative Agent, but no such designation shall be effective if EDS notifies such Lender and the Administrative Agent promptly thereafter that, in EDS's reasonable determination, such designation would have adverse consequences to EDS or any Borrower to a material extent. EUROCURRENCY LOAN means any Loan or Bid Rate Loan hereunder, made in a currency other than Dollars. EUROCURRENCY RATE means (a) for Primary Currencies other than Dollars, the LIBOR Rate related to such Primary Currency plus the Applicable Margin, and (b) for Secondary Currencies, the Bid Rate. EUROCURRENCY REFERENCE BANKS means Citibank, N.A., Bank of America National Trust and Savings Association and Credit Lyonnais Cayman Island Branch, and EUROCURRENCY REFERENCE BANK means each of them; provided that if any Eurocurrency Reference Bank regularly fails to provide quotations to the Administrative Agent or regularly provides quotations that in the judgment of EDS are not representative of the rates at which deposits are generally available to Lenders in the relevant currencies, EDS may request (by notice to the Administrative Agent, which shall promptly notify the other parties hereto) that such Eurocurrency Reference Bank be replaced as a Eurocurrency Reference Bank by another Lender. In the event that only two (2) Eurocurrency Reference Banks shall so provide quotations to the Administrative Agent, the Administrative Agent shall make the calculations required hereunder using such quotations. EUROCURRENCY RESERVE PERCENTAGE means, for any day, that percentage (expressed as a decimal) which Administrative Agent determines is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor), at which reserves (including without limitation any basic, supplemental, marginal and emergency reserves) are imposed by the Board of Governors of the Federal Reserve System in respect of "eurocurrency liabilities," as defined under Regulation D of the Board of Governors of the Federal Reserve System (or any applicable regulation which may be substituted for Regulation D). EURODOLLAR LOAN means any Loan or Bid Rate Loan hereunder bearing interest at a rate that is calculated by reference to the LIBOR Rate. EURODOLLAR RATE means the LIBOR Rate for Dollars plus the Applicable Margin. EXCLUDED TAX means any, and EXCLUDED TAXES means all, Taxes imposed on or measured by the net income of any Lender or the Administrative Agent, and franchise taxes imposed on any of them, by the jurisdiction under the laws of which such Lender or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, 7 Taxes imposed on its net income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof. EXHIBIT means an exhibit attached hereto unless otherwise specified. EXTENSION RESPONSE DATE shall have the meaning assigned to such term in Section 2.4. FACILITY means the credit facility provided for in this Agreement. FEDERAL FUNDS RATE for any day means the rate set forth for such day (or, if such day is not a Business Day the next preceding Business Day) opposite the caption "Federal Funds (Effective)" in the weekly statistical release designated as "H.15(519)", or any successor publication, published by the Board of Governors of the Federal Reserve System or, if such rate is not so published for any day which is a Business Day, the average of quotations for such day on overnight Federal funds transactions received by Administrative Agent from three (3) Federal funds brokers of recognized standing selected by it. FINANCIAL STATEMENTS means the consolidated balance sheet of EDS and its Subsidiaries and the consolidated statements of income, cash flows, and shareholders' equity of EDS and its Subsidiaries. FIXED RATE LOAN means a Bid Rate Loan bearing interest at a fixed percentage rate per annum specified by the Lender making such Bid Rate Loan in its offer of Bid Rate Loans. FRENCH FRANCS and the abbreviation FFR mean lawful money of the Republic of France. GAAP means all applicable generally accepted accounting principles of the Accounting Principles Board of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board which are applicable as of the date in question. GUARANTY means that certain Unconditional Guaranty Agreement substantially in the form of Exhibit D hereto, executed by EDS in favor of the Lenders, and delivered to the Administrative Agent, as the same may be amended or restated from time to time. HIGHEST LAWFUL RATE means the maximum nonusurious interest rate or amount of interest which, under applicable law, any Lender is allowed to contract for, charge, take, collect, reserve, or receive. HONG KONG BUSINESS DAY means any day, other than a Saturday or Sunday, on which commercial banks generally are open for business in Hong Kong. INDEMNIFIED LIABILITY AND INDEMNIFIED LIABILITIES shall have the meanings assigned to such terms in Section 11.17. 8 INDICATED RATE means, with respect to any Interest Period, (a) in the case of Dollars, Yen, Swiss Francs and Deutsche Marks, the rate for deposits in the relevant currency for a period comparable to the relevant Interest Period which appears on the Telerate Page 3750 as of 11:00 a.m. London time two (2) London Business Days (which, in the case of Dollars, shall also be Business Days, and in the case of Yen, shall also be Hong Kong Business Days) preceding the first day of the relevant Interest Period or, if Telerate Page 3750 is unavailable at such time, the rate which appears on the Reuters Screen ISDA Page as of such date and time, (b) in the case of Pounds Sterling, the rate for deposits in Pounds Sterling for a period comparable to the relevant Interest Period which appears on the Reuters Screen RPMA Page as of 11:00 a.m. London time two (2) London Business Days preceding the first day of the relevant Interest Period, (c) in the case of Belgian Francs, the rate for deposits in Belgian Francs for a period comparable to the relevant Interest Period which appears on the Reuters ISDB Page as of 11:00 a.m. London time two (2) London Business Days preceding the first day of the relevant Interest Period, (d) in the case of French Francs and Dutch Guilders, the rate for deposits in the relevant currency for a period comparable to the relevant Interest Period which appears on the Telerate Page 3740 as of 11:00 a.m. London time two (2) London Business Days preceding the first day of the relevant Interest Period or, if Telerate Page 3740 is unavailable at such time, the rate which appears on the Reuters ISDB Page as of such date and time, and (e) in the case of Canadian Dollars, Italian Lire and Spanish Pesetas, the rate for deposits in the relevant currency for a period comparable to the relevant Interest Period which appears on the Reuters Screen EFX= Page as of 11:00 a.m. London time two (2) London Business Days preceding the first day of the relevant Interest Period; provided, however, that if Administrative Agent determines that the relevant foregoing source is unavailable for any Interest Period, Indicated Rate means the rate of interest determined by Administrative Agent to be the average (rounded upward, if necessary, to the nearest 1/10,000th of 1%) of the rates per annum at which deposits in the relevant currency in immediately available funds are offered to each of the Eurocurrency Reference Banks two (2) London Business Days (which, in the case of Dollars, shall also be Business Days, and in the case of Yen, shall also be Hong Kong Business Days) preceding the first day of the relevant Interest Period by prime banks in the London interbank Eurocurrency market as of 11:00 a.m. London time for delivery on the first day of such Interest Period, for the number of days comprised therein and in an amount comparable to the amount of the relevant Loan. INTEREST PAYMENT DATE means, as to any Base Rate Loan, each Quarterly Date to occur while such Base Rate Loan is outstanding, and the date such Base Rate Loan is paid in full. INTEREST PERIOD means (a) with respect to each Loan consisting of a Eurodollar Loan, a Eurocurrency Loan, or a Bid Rate Loan (other than a Bid Rate Loan which is a Fixed Rate Loan), the period commencing on the date of such Loan, or on the last day of the immediately preceding Interest Period in the case of a continuation or conversion, and ending on the numerically corresponding day in the first, second, third, or sixth month thereafter, as the applicable Borrower may elect in the applicable Notice of Advance, Notice of Acceptance or Notice of Continuation/Conversion, (b) with respect to each Loan consisting of a CD Loan, the period commencing on the date of such Loan, or on the last day of the immediately preceding Interest Period in the case of a continuation or conversion, and ending 30, 60, 90 or 180 days thereafter as the applicable Borrower may elect in the applicable Notice of Advance, Notice of Acceptance or 9 Notice of Continuation/Conversion and (c) with respect to any Bid Rate Loan which is a Fixed Rate Loan, the period commencing on the date of such Fixed Rate Loan and ending such number of days thereafter (which shall not be less than fifteen (15) days or more than one hundred eighty-three (183) days after such date) as selected by the relevant Borrower in its Notice of Acceptance. Notwithstanding the above, (x) any Interest Period which would otherwise end on a day that is not a Business Day, or Eurocurrency Business Day, as appropriate, shall be extended to the next succeeding Business Day, or Eurocurrency Business Day, as appropriate, unless, in the case of Eurodollar Loans and Eurocurrency Loans, such next succeeding Eurocurrency Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Eurocurrency Business Day, (y) in the case of Eurodollar Loans and Eurocurrency Loans, any Interest Period which begins on the last Eurocurrency Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurocurrency Business Day of a calendar month and (z) no Interest Period may end later than the Commitment Termination Date. ITALIAN LIRE and the symbol LIT mean lawful money of the Republic of Italy. LAW means all applicable statutes, laws, ordinances, regulations, orders, writs, injunctions, or decrees of any Tribunal and any treaties or international conventions. LENDER means a financial institution identified in Schedule 1 or added pursuant to Section 11.12 hereof, in each case, for the account of the applicable lending office, and LENDERS means all such financial institutions. LIBOR RATE means, with respect to any Interest Period, an interest rate per annum (rounded upward, if necessary, to the next higher 1/10,000th of 1%) determined by Administrative Agent two (2) London Business Days (which, in the case of Dollars, shall also be Business Days, and in the case of Yen, shall also be Hong Kong Business Days) prior to the first day of such Interest Period to be the quotient obtained by dividing (a) the Indicated Rate for such Interest Period for the currency in question by (b) a percentage equal to 100% minus the Eurocurrency Reserve Percentage, if applicable. LITIGATION means any proceeding, claim, lawsuit, or investigation conducted or threatened by or before any Tribunal. LOAN means any Advance by any Lender to any Borrower pursuant to such Lender's Commitment and LOANS shall mean all of such Loans. LOAN DOCUMENTS means (a) this Agreement, (b) the Notes, (c) the Guaranty, and (d) any and all other agreements ever delivered pursuant to this Agreement, as the same may be renewed, extended, restated, amended or supplemented from time to time. LONDON BUSINESS DAY means any day, other than a Saturday or Sunday, on which commercial banks generally are open for business in London, England. 10 MAJORITY LENDERS shall mean, as of any date, Lenders representing at least 66-2/3% of (a) at any time Lenders are committed to lend hereunder, the Aggregate Committed Sum, or (b) at any time after the Commitments shall have expired or terminated, (i) at any time that Loans are outstanding, the aggregate unpaid principal amount of the Loans, and (ii) at any time that no Loans are outstanding, the aggregate unpaid principal amount of the Bid Rate Loans. MATERIAL ADVERSE EFFECT means any set of circumstances or events which would reasonably be expected to (a) have any material adverse effect upon the validity or enforceability of this Agreement, any Note or the Guaranty, (b) be material and adverse to the financial condition of EDS and its Subsidiaries taken as a whole, (c) materially impair the ability of EDS and its Subsidiaries, taken as a whole, to fulfill their obligations under the terms and conditions of the Loan Documents, or (d) cause a Default or a Potential Default. MULTIEMPLOYER PLAN means a multiemployer plan as defined in sections 3(37) or 4001(a)(3) of ERISA or section 414 of the Code to which EDS or any of its Subsidiaries is making, or has made, or is accruing, or has accrued, an obligation to make contributions. NET INCOME means, with respect to any Person for any period, the net income or loss of such Person for such period, determined in accordance with GAAP, except that extraordinary and non-recurring gains and losses as determined in accordance with GAAP shall be excluded. NET WORTH means the excess, if any, of (a) the total assets of EDS and its consolidated Subsidiaries over (b) without duplication, all items of indebtedness, obligation, or liability which would be classified as liabilities of EDS and its consolidated Subsidiaries, each to be determined in Dollars in accordance with GAAP. NOTES shall have the meaning assigned to such term in Section 3.1 and NOTE shall mean any of the Notes. NOTICE OF ACCEPTANCE means a notice by a Borrower to the Administrative Agent accepting an offer for a Bid Rate Loan. NOTICE OF ADVANCE means a notice submitted and executed by a Borrower (and, if such Borrower is not EDS, by such Borrower and EDS), which notice shall be irrevocable and binding, requesting a Committed Loan, which Notice of Advance shall be substantially in the form of Exhibit E. NOTICE OF CONTINUATION/CONVERSION shall have the meaning assigned to such term in Section 3.4 and shall be substantially in the form of Exhibit H. NOTICE OF REJECTION means a notice by a Borrower to the Administrative Agent rejecting an offer for a Bid Rate Loan. OBLIGATION means all present and future indebtedness, obligations and liabilities, and all renewals, extensions, and modifications thereof, now or hereafter owed to Lenders by each 11 Borrower arising from, by virtue of, or pursuant to any Loan Document, together with all interest lawfully accruing thereon and reasonable costs, reasonable expenses, and reasonable attorneys' fees incurred in the enforcement or collection thereof. ORIGINAL CURRENCY shall have the meaning assigned to such term in Section 11.19. OTHER CURRENCY shall have the meaning assigned to such term in Section 11.19. OFFER OF BID RATE LOANS shall mean a duly completed Offer of Bid Rate Loans, substantially in the form of Exhibit G, delivered by a Lender to Administrative Agent in connection with a Bid Rate Loan. PARTICIPANT shall have the meaning assigned to such term in Section 11.12(b). PAYMENT OFFICE FOR ALTERNATIVE CURRENCIES means the office of Administrative Agent in London, England, at Citibank London, Citibank International PLC, 336 Strand, London, England WC2R 1LS, Attention: Cliff Posner, telecopy number: 011-44-81-852-7007, telephone number: 011-44-81-297- 4247, which office may be changed to another office in London by written notice to EDS and the Lenders. PAYMENT OFFICE FOR DOLLARS means the principal office of Administrative Agent in New York City, located on the date hereof at 399 Park Avenue, New York, New York 10043, which office may be changed to another location in New York City by written notice to EDS and the Lenders. PAYMENT OFFICE FOR YEN means the office of Administrative Agent in Hong Kong at Citicorp International Limited, 47/F Citibank Tower, Citibank Plaza, 3 Garden Road, Central, Hong Kong, Attention: Charles K.M. Liu, telecopy number: 011-852-877-2591, telephone number: 011-852-868-6666, which office may be changed to another office in Hong Kong by written notice to EDS and the Lenders. PBGC means the Pension Benefit Guaranty Corporation, or any successor thereto. PENSION PLAN means an employee pension benefit plan as defined in section 3(2) of ERISA which is maintained or contributed to by EDS or any Subsidiary of EDS for employees of EDS or any Subsidiary of EDS, excluding any Multiemployer Plan. PERCENTAGE means, at any time, for each Lender, the percentage obtained by (x) dividing such Lender's Committed Sum by the Aggregate Committed Sum and (y) multiplying the product so obtained by 100. PERSON means any individual, entity, or Tribunal. POTENTIAL DEFAULT means the occurrence of any event specified in Section 8.1 which, with notice or lapse of time or both, as provided in Section 8.1, could become a Default. 12 POUNDS STERLING and the sign (Pounds) mean lawful money of the United Kingdom. PRIMARY CURRENCY means Dollars or one of the following freely transferable and convertible eurocurrencies: French Francs, Pounds Sterling, Swiss Francs, Yen, Deutsche Marks, Belgian Francs, Dutch Guilders, Canadian Dollars, Italian Lire and Spanish Pesetas. PROCESS AGENT means Prentice Hall Systems, Inc., 15 Columbus Circle, New York, New York 10023-7773. PRO RATA means, at any time, for each Lender, the ratio of the unpaid principal balance of the Loans made by such Lender to the unpaid principal balance of all Loans. PURCHASING LENDER shall have the meaning assigned to such term in Section 2.4. QUARTERLY DATE means the last Business Day of each December, March, June and September during the term of this Agreement. REFERENCE BANKS means the Domestic Reference Banks and the Eurocurrency Reference Banks and REFERENCE BANK means any of them. REGISTER shall have the meaning assigned to such term in Section 11.12(d). REPORTABLE EVENT shall have the meaning assigned thereto under Section 4043 of ERISA. REQUEST FOR BIDS means a duly completed Request for Bids, substantially in the form of Exhibit F, delivered by a Borrower to Administrative Agent in connection with a Bid Rate Loan. REQUIRED CURRENCY shall have the meaning assigned to such term in Section 3.16. RIGHTS means rights, remedies, powers, privileges, and benefits. SCHEDULE means a schedule attached hereto unless specified otherwise. SECONDARY CURRENCY means any currency other than a Primary Currency. SECTION means a section or subsection of this Agreement unless specified otherwise. SPANISH PESETAS and the abbreviation PTAS. mean lawful money of the Kingdom of Spain. SUBSIDIARY of a Person means any Person (and SUBSIDIARIES means all of such Persons), whether or not existing on the date of this Agreement, of which an aggregate of 50% or more (in number of votes) of the securities having ordinary voting power for the election of directors (or individuals performing similar functions) or comparable ownership interest is owned of record or 13 beneficially, directly or indirectly, by such Person, by one or more of the other Subsidiaries of such Person, or by a combination thereof. SWISS FRANC and the abbreviation SFR mean lawful money of Switzerland. TAXES means all taxes, assessments, fees, levies, imposts, duties, deductions, withholdings, or other charges of any nature whatsoever from time to time or at any time imposed by any Law or Tribunal. TERMINATING LENDER shall have the meaning assigned to such term in Section 2.4. TRIBUNAL means any (a) local, state, or federal judicial, executive, or legislative authority, including, without limitation, any governmental agency or regulatory authority, whether of the United States or any other country, or (b) private arbitration board or panel. YEN and the symbol (Yen) mean lawful money of Japan. YEN-DENOMINATED LOAN means a Loan or Bid Rate Loan hereunder, made in Yen. 1.2. Other Definitional Provisions. (a) Other Agreements. All terms defined in this Agreement shall have the above-defined meanings when used in the Notes or any Loan Documents, and any certificate, report or other document made or delivered pursuant to this Agreement, unless the context therein shall otherwise require. (b) To/From. Relative to the determination of any period of time, "from" means "from and including" and "to" or "until" means "to but excluding". (c) References to Loan Documents. The words "hereof," "herein," "hereunder" and similar terms when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof. (d) Accounting Terms. As used herein and in any certificate or other document made or delivered pursuant thereto, accounting terms relating to Borrowers but not defined in Article I and accounting terms partly defined in Article I shall have the respective meanings given to them under GAAP. (e) Include/Including. The term "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term. 14 ARTICLE II ---------- FACILITY -------- 2.1. Committed Loans. Subject to and in reliance upon the terms, conditions, representations, and warranties contained in this Agreement, each Lender, severally, and not jointly, agrees to make Advances in Primary Currencies to EDS and any of the Designated EDS Affiliates, provided that no Lender shall be obligated to make an Advance which, when added to the aggregate principal amount of the outstanding Committed Loans (in the case of Committed Loans denominated in Alternative Currencies, calculated, as of the date of such Advance, by reference to the Dollar Equivalent Value of such Committed Loans) from such Lender outstanding would exceed such Lender's Committed Sum; provided further that, no Lender shall be obligated to make an Advance which, when added to the aggregate outstanding principal amount of all Committed Loans and Bid Rate Loans (calculated, as of the date of such Advance, by reference to the Dollar Equivalent Value of Committed Loans and Bid Rate Loans denominated in currencies other than Dollars) from all Lenders would exceed the Aggregate Committed Sum. Notwithstanding anything to the contrary set forth herein, any Lender may make and have outstanding one or more Bid Rate Loans which, when aggregated with the outstanding principal amount of all Committed Loans from such Lender, would exceed such Lender's Committed Sum. Administrative Agent shall maintain a record of each Lender's Committed Sum, Percentage, Committed Loans, and Bid Rate Loans. Each Lender's Commitment shall continue in full force and effect until and expire on, the applicable Commitment Termination Date, and no Lender shall have any obligation to make any Committed Loan thereafter; provided that, each Borrower's Obligation and Lender's Rights under the Loan Documents shall continue in full force and effect until such Borrower's Obligation is paid and performed in full. From and after the Availability Date, through and including the final Commitment Termination Date, EDS and each Designated EDS Affiliate may borrow, repay, and reborrow Committed Loans and Bid Rate Loans hereunder, subject as respects Bid Rate Loans to Section 2.3. 2.2. Committed Loan Borrowing Procedure; Disbursement. (a) Notice of Borrowing of Committed Loans. Each Committed Loan shall be made following a Borrower's Notice of Advance to Administrative Agent requesting a Committed Loan on a certain Borrowing Date. Each Notice of Advance shall be given to Administrative Agent in writing or by telegraph, telex or telecopy, or by telephonic notice (followed by a written confirmation) (i) not later than 11:00 a.m., New York, New York time on the proposed Borrowing Date of each Committed Loan which is a Base Rate Loan, which proposed Borrowing Date shall be a Business Day, (ii) not later than 11:00 a.m., New York, New York time on the Business Day that is two (2) Business Days before the proposed Borrowing Date of each Committed Loan which is a CD Loan, which proposed Borrowing Date shall be a Business Day, (iii) not later than 11:00 a.m., New York, New York time on the Eurocurrency Business Day that is three (3) Eurocurrency Business Days before the proposed Borrowing Date of each Committed Loan which is a Eurodollar Loan, which proposed Borrowing Date shall be a Eurocurrency Business Day, 15 (iv) not later than 10:00 a.m., New York, New York time on the Eurocurrency Business Day that is three (3) Eurocurrency Business Days before the proposed Borrowing Date of each Committed Loan which is to be a Eurocurrency Loan other than a Yen-Denominated Loan, which proposed Borrowing Date shall be a Eurocurrency Business Day and (v) not later than 4:00 p.m. New York, New York time on the Eurocurrency Business Day that is four (4) Eurocurrency Business Days before the proposed Borrowing Date of each Committed Loan which is a Yen-Denominated Loan, which proposed Borrowing Date shall be a Eurocurrency Business Day. Each Committed Loan, except Committed Loans for the remaining unborrowed Aggregate Committed Sum, shall be in an amount of not less than $15,000,000 or, if greater, an integral multiple of $1,000,000 (or, if advanced in an Alternative Currency, in an amount of such currency having a Dollar Equivalent Value, on the Borrowing Date, substantially equal to $15,000,000 or a greater integral multiple of $1,000,000). (b) Funding of Committed Loans. After receiving a Notice of Advance in the manner provided herein, Administrative Agent shall promptly notify each Lender by telephone (confirmed immediately by telex, cable or telecopy), telecopy, telex or cable of the terms of the Notice of Advance and such Lender's Percentage of the requested Committed Loan. Each Lender shall, (i) before 1:00 p.m., New York, New York time on the Borrowing Date specified in the Notice of Advance, deposit with Administrative Agent at its Payment Office for Dollars, and, in same day funds, for any Committed Loan denominated in Dollars, such Lender's Percentage of such Committed Loan, (ii) before 12:00 noon, London, England time on the Borrowing Date specified in the Notice of Advance, deposit with Administrative Agent at its Payment Office for Alternative Currencies, and in same day funds, for any Committed Loan denominated in any Alternative Currency other than Yen, such Lender's Percentage of such Committed Loan, and (iii) before 11:00 a.m., Hong Kong time on the Borrowing Date specified in the Notice of Advance, deposit with Administrative Agent at its Payment Office for Yen, and in same day funds, for any Committed Loan denominated in Yen, such Lender's Percentage of such Committed Loan. Upon fulfillment of all applicable conditions set forth herein, including receipt by Administrative Agent of a duly executed Committed Loan Note for each Lender from the relevant Borrower (provided, however, that EDS shall be required only to provide to each Lender a Committed Loan Note in the form of Exhibit A to evidence all Committed Loans from such Lender to EDS) and after receipt by Administrative Agent of such funds, Administrative Agent shall pay or deliver all funds so received to the order of the relevant Borrower to the account specified in the Notice of Advance. (c) Failure to Fund Committed Loans. The failure of any Lender to make any Advance required to be made by it hereunder shall not relieve any other Lender of its obligation to make its Advance hereunder. If any Lender fails to provide its Percentage of any Committed Loan and if all conditions to such Committed Loan have apparently been satisfied, Administrative Agent will make available to the relevant Borrower the funds received by it from the other Lenders. Neither Administrative Agent nor any Lender shall be responsible for the performance by any other Lender of its obligations hereunder. 16 Upon the failure of a Lender to make an Advance required to be made by it hereunder, Administrative Agent shall notify EDS, the relevant Borrower (if other than EDS) and all Lenders, and shall consult with all Lenders (other than the defaulting Lender) to determine whether one or more of such Lenders will make an additional Advance to cover the shortfall created by the defaulting Lender's failure to fund its Advance. If Lenders decline to cover such shortfall, Administrative Agent shall use good faith efforts to obtain one or more banks, acceptable to EDS, to replace the defaulting Lender, but neither Administrative Agent nor any other Lender shall have any liability or obligation whatsoever as a result of the failure to obtain a replacement for such Lender. (d) Funding by Administrative Agent. Unless Administrative Agent shall have received notice from a Lender prior to the date of any Committed Loan that such Lender will not make available to Administrative Agent such Lender's Percentage of such Committed Loan, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on the date of such Committed Loan in accordance with this Section 2.2. Administrative Agent may, in reliance upon such assumption, make available a corresponding amount to or on behalf of the relevant Borrower on such date. If and to the extent any Lender shall not have so made its Percentage of any Committed Loan available to Administrative Agent, the relevant Borrower shall repay to Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to or on behalf of such Borrower until the date such amount is repaid to Administrative Agent, at the rate per annum applicable to the Committed Loan in question. Each Lender shall record in its records, or at its option on the schedule attached to its applicable Committed Loan Note, the date, amount and currency of each Committed Loan made by such Lender thereunder, each repayment or prepayment thereof, and the dates on which each Interest Period for such Committed Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be rebuttable presumptive evidence of the principal amount owing and unpaid on such Committed Loan Note. The failure to so record or any error in so recording any such amount shall not, however, limit or otherwise affect the obligations of any Borrower hereunder or under any Committed Loan Note to repay the principal amount of each Committed Loan to such Lender together with all interest accruing thereon. 2.3. Bid Rate Loans. From time to time, each Borrower may request that Lenders make one or more Advances available to such Borrower under the Facility for the same purposes expressed herein, at an interest rate, in a currency, and subject to other terms and conditions to be determined in accordance with this Section 2.3 (each, a "BID RATE LOAN" and collectively, the "BID RATE LOANS") pursuant to the procedure described below. Bid Rate Loans may be requested in any Primary Currency or Secondary Currency. (a) Requests for Bids. Except as otherwise provided herein, each Borrower may from time to time request that Administrative Agent invite bids for Bid Rate Loans, which requests shall be made by delivering to Administrative Agent a completed Request for Bids (i) not later than 11:01 a.m., New York, New York time, on the Eurocurrency 17 Business Day that is six (6) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date (i.e., approximately 12:01 a.m., Hong Kong time, on the Eurocurrency Business Day that is five (5) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date) for a Yen- Denominated Loan, (ii) not later than 10:00 a.m., New York, New York time, on the Eurocurrency Business Day that is five (5) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date for a Eurocurrency Loan other than a Yen-Denominated Loan, (iii) not later than 11:00 a.m., New York, New York time, on the Eurocurrency Business Day that is four (4) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date for a Eurodollar Loan, and (iv) not later than 11:00 a.m., New York, New York time, on the Business Day that is one (1) Business Day before the proposed Bid Rate Loan Borrowing Date for a Fixed Rate Loan. Each Request For Bids shall be irrevocable and shall specify (A) the proposed Bid Rate Loan Borrowing Date, which date shall be a Eurocurrency Business Day if the requested Bid Rate Loan is a Eurodollar Loan or a Eurocurrency Loan, or a Business Day in all other cases, (B) the amount which the Borrower proposes to borrow on such date and the currency of such proposed borrowing, which amount shall be not less than $5,000,000 (or, if such Bid Rate Loan is to be made in a currency other than Dollars, in an amount of such currency substantially equivalent, on the date of such Request for Bids, to $5,000,000), or, if greater, an integral multiple of $1,000,000, (C) whether the Lenders should offer to make Eurocurrency Loans, Eurodollar Loans, and/or Fixed Rate Loans, (D) if the proposed Bid Rate Loan is to be a Eurodollar Loan or a Eurocurrency Loan, the Interest Period(s) applicable to such proposed borrowing, (E) the term of the proposed Bid Rate Loan, (F) the account into which the Advance of the Bid Rate Loan is to be made and (G) such other information as is provided for in Exhibit F. Administrative Agent, promptly after receipt by it of a Request For Bids, shall notify each Lender by telecopy of its receipt of a Request For Bids and the contents thereof and shall invite bids from each Lender. (b) Offers by Lenders. Each Lender willing to make a Bid Rate Loan shall provide notice to Administrative Agent of such Lender's offer to provide a Bid Rate Loan (i) prior to 2:00 p.m. Hong Kong time, on the Eurocurrency Business Day at least four (4) Eurocurrency Business Days prior to the proposed Bid Rate Loan Borrowing Date, if the proposed Bid Rate Loan is a Yen-Denominated Loan, (ii) prior to 12:00 noon, London, England time, on the Eurocurrency Business Day at least three (3) Eurocurrency Business Days prior to the proposed Bid Rate Loan Borrowing Date, if the proposed Bid Rate Loan is a Eurocurrency Loan other than a Yen-Denominated Loan, (iii) prior to 10:00 a.m., New York, New York time, on the Eurocurrency Business Day at least three (3) Eurocurrency Business Days prior to the proposed Bid Rate Loan Borrowing Date, if the requested Bid Rate Loan is a Eurodollar Loan or (iv) prior to 10:00 a.m., New York, New York time, on the proposed Bid Rate Loan Borrowing Date if the requested Bid Rate Loan is a Fixed Rate Loan (the "Bid Date"), which notice shall be irrevocable and shall be made by delivering to Administrative Agent an Offer of Bid Rate Loans. Such Offer of Bid Rate Loans shall specify the minimum and maximum amount of the Bid Rate Loan such Lender would be willing to provide (which amount may exceed such Lender's Committed Sum), the Interest Period(s) relative thereto, if the offered Bid Rate Loan is to 18 be a Eurodollar Loan or a Eurocurrency Loan, the Bid Rate for such Bid Rate Loan, any other information provided for in Exhibit G and all other terms and conditions required by such Lender. At or prior to (i) 3:00 p.m., Hong Kong time, on the Eurocurrency Business Day that is four (4) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date, in the case of Yen-Denominated Loans, (ii) 1:00 p.m., London, England time, on the Eurocurrency Business Day that is three (3) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date, in the case of Eurocurrency Loans, other than Yen-Denominated Loans, (iii) 10:30 a.m., New York, New York time, on the Eurocurrency Business Day that is three (3) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date, in the case of Eurodollar Loans, and (iv) 10:30 a.m., New York, New York time, on the proposed Bid Rate Loan Borrowing Date, in the case of Fixed Rate Loans, Administrative Agent shall provide notice to the Borrower having submitted the relevant Request For Bids of all of the information provided to Administrative Agent by Lenders in response to such Request For Bids; provided, however, if Administrative Agent, in its capacity as a Lender, shall elect to make any such offer, it shall notify the relevant Borrower of such offer not less than one (1) hour before the time required for receipt by Administrative Agent of each offer of Bid Rate Loans, on the date on which notice of such election is to be given to the Administrative Agent by the other Lenders. (c) Acceptance of Bids. The Borrower having issued the relevant Request For Bids shall, not later than (i) 4:00 p.m., New York, New York time, on the Eurocurrency Business Day that is four (4) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date (i.e., approximately 5:00 a.m., Hong Kong time, on the Eurocurrency Business Day that is three (3) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date), in the case of Yen-Denominated Loans, (ii) 3:00 p.m., London, England time, on the Eurocurrency Business Day that is three (3) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date, in the case of Eurocurrency Loans other than Yen-Denominated Loans, (iii) 11:00 a.m., New York, New York time, on the Eurocurrency Business Day that is three (3) Eurocurrency Business Days before the proposed Bid Rate Loan Borrowing Date, in the case of Eurodollar Loans, and (iv) 11:00 a.m. New York, New York time, on the proposed Bid Rate Loan Borrowing Date, in the case of Fixed Rate Loans, and in its sole discretion, either (A) reject any or all of the offered Bid Rate Loans by delivering a Notice of Rejection to Administrative Agent, or (B) accept any or all of the offered Bid Rate Loans by delivering a Notice of Acceptance to Administrative Agent; provided, however, that (1) the aggregate principal amount of each Bid Rate Loan may not exceed the applicable amount set forth in the related Request for Bids and (2) in the event that two (2) or more offers of Bid Rate Loans have identical terms other than interest rate, acceptance of offers shall be made on the basis of ascending interest rates. Promptly following the acceptance of one or more Bid Rate Loans by a Borrower, Administrative Agent shall notify each Lender of the ranges of offers submitted and the highest and lowest offers accepted for each Interest Period requested by such Borrower, the aggregate amount of the Bid Rate Loans borrowed pursuant to the related Request for Bids and the consequent reduction in the availability of the Aggregate Committed Sum. Any Notice of Acceptance shall specify 19 each Lender whose Bid Rate Loan is accepted, the amount of the Bid Rate Loans so accepted, which shall not be more than the maximum amount offered by such Lender nor less than the minimum amount offered by such Lender, and all other terms and conditions with respect to which such Lender offered varying options in its notice to Borrower. All notices by Borrower to Administrative Agent shall be promptly communicated by Administrative Agent to the relevant Lenders. If Borrower fails to issue to Administrative Agent either a Notice of Rejection or a Notice of Acceptance at or prior to the time prescribed in the first sentence of this Section 2.3(c) indicating its acceptance or rejection of a Lender's offered Bid Rate Loan, Borrower shall be deemed to have rejected such offered Bid Rate Loan and Administrative Agent shall so notify such Lender. (d) Funding of Bid Rate Loans. After receiving a Notice of Acceptance from Borrower that it wishes to accept an offered Bid Rate Loan, Administrative Agent shall promptly notify the relevant Lender by telephone (confirmed immediately by telex, cable or telecopy), telecopy, telex or cable of the terms of the requested Bid Rate Loan, such written confirmation to be in the form of Exhibit K hereto (each, a "Bid Rate Loan Confirmation"). Each such Lender whose offered Bid Rate Loan was accepted shall, before (i) 12:00 noon, Hong Kong time, in the case of a Bid Rate Loan which is to be a Yen-Denominated Loan, (ii) 12:00 noon, London, England time, in the case of a Bid Rate Loan which is to be a Eurocurrency Loan other than a Yen-Denominated Loan, and, (iii) in all other cases, 12:00 noon, New York, New York time, on the Bid Rate Loan Borrowing Date, deposit with Administrative Agent (A) at its Payment Office for Dollars, and in immediately available funds, for any Bid Rate Loan denominated in Dollars, (B) at its Payment Office for Alternative Currencies, and in same day funds, for any Bid Rate Loan denominated in any currency other than Yen, and (C) at its Payment Office for Yen, and in same day funds, for any Bid Rate Loan which is a Yen-Denominated Loan, the amount of such Bid Rate Loan. Upon fulfillment of all applicable conditions set forth herein, including receipt by Administrative Agent of a duly executed Bid Rate Note for each Lender obligated to fund a Bid Rate Loan from the relevant Borrower and after receipt by Administrative Agent of such funds, Administrative Agent shall make such funds available to the relevant Borrower at the account specified in the Request for Bids and thereafter deliver a Bid Rate Note to each Lender funding a Bid Rate Loan. (e) Waivers Permitted. Notwithstanding anything set forth in this Section 2.3, the required notices and time periods set forth in this Section 2.3 as to Bid Rate Loans may be waived by agreement of any Borrower and any affected Lender. (f) Reliance. The Administrative Agent may rely and act upon notice given by telephone by individuals reasonably believed by the Administrative Agent to be those individuals designated to the Administrative Agent by the Borrower in writing from time to time to possess authority to give such notice, without waiting for receipt of written confirmation thereof, and EDS and each other Borrower hereby indemnifies and holds harmless the Administrative Agent from and against any and all losses, costs, expenses, damages, claims, actions and other proceedings relating to such reliance, except for losses, costs, expenses, damages, claims, actions and proceedings resulting from acts or omissions 20 constituting negligence, gross negligence or willful misconduct on the part of the Administrative Agent. If a written confirmation differs in any respect from the action taken by the Administrative Agent, the records of the Administrative Agent shall govern absent manifest error. 2.4. Optional Extension of the Commitment Termination Date. At any time after the date which is sixty-one (61) days prior to each anniversary of the date of this Agreement, EDS may request that the Commitment Termination Date be extended for one (1) calendar year and Lenders may, at their option, accept or reject such request. To request an extension, EDS shall notify Administrative Agent of EDS's request to extend the Commitment Termination Date, and Administrative Agent shall promptly notify the Lenders of each such request. Each Lender shall notify Administrative Agent in writing within thirty (30) days after such request (the "EXTENSION RESPONSE DATE") whether it consents to such extension. If any Lender shall fail to give such notice to Administrative Agent by the Extension Response Date, such Lender shall be deemed to have rejected the requested extension. If all Lenders consent to the requested extension by the Extension Response Date, the Commitment Termination Date shall be automatically extended for one (1) year. If fewer than all Lenders so consent (each Lender not consenting being referred to as a "TERMINATING LENDER"), EDS shall within five (5) days after the Extension Response Date notify Administrative Agent (which shall promptly notify each Lender) whether EDS elects to withdraw its request for an extension of the Commitment Termination Date or to extend the Commitment Termination Date for all Lenders that have consented to such extension. If EDS elects to extend the Commitment Termination Date as to fewer than all Lenders, Administrative Agent shall promptly notify the non-Terminating Lenders of EDS' decision, and each Lender which is not a Terminating Lender shall have the right, but not the obligation, to elect to increase its respective Committed Sum by an amount not to exceed the aggregate amount of the Committed Sums of the Terminating Lenders, which election shall be made by notice from each such non- Terminating Lender to the Administrative Agent and EDS given not later than five (5) Business Days after the date notified by Administrative Agent, and specifying the amount of such proposed increase in such non-Terminating Lender's Committed Sum. If the aggregate amount of the proposed increases in the Committed Sums of all such non-Terminating Lenders making such an election is in excess of the aggregate Committed Sums of the Terminating Lenders, (a) the Committed Sums of the Terminating Lenders shall be allocated pro rata among such non-Terminating lenders based on the respective amounts of the proposed increases to Committed Sums elected by each of such non-Terminating Lenders, and (b) the respective Committed Sums of such non-Terminating Lenders shall be increased by the respective amounts allocated pursuant to clause (a) above so that, after giving effect to such termination and increases, the amount of the Aggregate Committed Sum will be the same as prior to such termination. If the aggregate amount of the proposed increases to Committed Sums of all non-Terminating Lenders making such an election equals the aggregate Committed Sums of the Terminating Lenders, the respective Committed Sums of such non- Terminating Lenders shall be increased by the respective amounts of their proposed increases, so that after giving effect to such termination and increases, the amount of the Aggregate Committed Sum will be the same as prior to such termination. If the aggregate amount of the proposed increases to the Committed Sums of all non-Terminating Lenders making such an election is less than the aggregate Committed 21 Sums of the Terminating Lenders, (i) the respective Committed Sums of such non- Terminating Lenders shall be increased by the respective amounts of their proposed increases and (ii) EDS shall have the right to add one or more banks or other financial institutions (which are not Terminating Lenders) as purchasing lenders under this Agreement (in such capacity, each a "PURCHASING LENDER") to replace such Terminating Lenders, which Purchasing Lenders shall have aggregate Committed Sums not greater than those of the Terminating Lenders less the amounts thereof, if any, assumed by the non-Terminating Lenders pursuant to the above-described increases. The transfer of Committed Sums or outstanding Loans from Terminating Lenders to Purchasing Lenders or non-Terminating Lenders shall take place on the effective date of, and pursuant to the execution, delivery, acceptance and recording of, an Assignment and Acceptance in accordance with the procedures set forth in Section 11.12. To the extent that replacements are not obtained by EDS for any Terminating Lender, on the Commitment Termination Date applicable to such Terminating Lender, the Aggregate Committed Sum shall be reduced by the amount of the Committed Sum of such Terminating Lender and, concurrently with such reduction in the Aggregate Committed Sum, EDS shall pay, and cause any other relevant Borrower to pay, the principal amount of such Terminating Lender's Loans, all accrued and unpaid interest thereon, such Terminating Lender's ratable share of all accrued and unpaid facility fees relative to the Facility and any remaining Obligation owed to such Terminating Lender in relation to the Facility, in each case to the extent not assigned and purchased pursuant hereto, and the Commitment of such Terminating Lender shall thereupon terminate. Each Terminating Lender's Commitment shall expire no later than its Commitment Termination Date and each such Terminating Lender shall have no further rights or obligations under the Facility or Commitment hereunder following the effective date of the later to occur of (1) the transfer of all outstanding Loans from such Terminating Lender to Purchasing Lenders or non- Terminating Lenders, or (2) the payment in full of the Obligation owed to such Terminating Lender hereunder, other than any rights or obligations as to the Facility accruing prior to such date under this Agreement as provided herein, but in no event shall any such Terminating Lender have any obligation to make Advances after its Commitment Termination Date. 2.5 Several Obligations. The failure of any Lender to perform its obligations under this Agreement shall not affect the obligations of any Borrower toward any other Lender or the obligations of any Lender toward any Borrower, nor shall any other Lender be liable for the failure of such Lender to perform its obligations under this Agreement. 2.6 Determination of Availability. At or before thirty (30) minutes after the time for delivery of a Notice of Advance pursuant to Section 2.2(a) or a Request for Bids pursuant to Section 2.3(a), Administrative Agent will make a determination of the Dollar Equivalent Value of the outstanding Loans and Bid Rate Loans for purposes of calculating whether the making of the requested Loan or Bid Rate Loan would cause the aggregate outstanding amount of the Loans and the Bid Rate Loans, including the requested Loan or Bid Rate Loan, to exceed the Aggregate Committed Sum. 22 ARTICLE III ----------- TERMS OF PAYMENT ---------------- 3.1. Notes. Committed Loans and interest thereon shall be evidenced by promissory notes substantially in the form and upon the terms of Exhibit A in the case of EDS or Exhibit B in the case of any other Borrower, respectively, duly executed by the applicable Borrower (the "COMMITTED LOAN NOTES") and shall be due and payable in accordance with this Agreement and the terms of such Committed Loan Notes. Bid Rate Loans and interest thereon shall be evidenced by promissory notes substantially in the form and upon the terms of Exhibit C duly executed by the applicable Borrower (the "BID RATE NOTES") and shall be due and payable in accordance with this Agreement and the terms of such Bid Rate Notes. The Committed Loan Notes and the Bid Rate Notes are collectively called the "NOTES". 3.2. Payments on Committed Loan Notes and Bid Rate Notes. The unpaid principal balance of each Committed Loan Note, and all accrued but unpaid interest thereon, shall be due and payable on the Commitment Termination Date, in the case of Committed Loans. The unpaid principal balance of each Bid Rate Note, and all accrued and unpaid interest thereon, shall be due and payable in accordance with the terms of such Bid Rate Note, provided, however, that interest on any Bid Rate Note that evidences a Fixed Rate Loan shall be payable at least every ninety (90) days during the term of such Fixed Rate Loan and, provided, further, that such Bid Rate Note shall mature not later than the Commitment Termination Date. Administrative Agent shall deliver to each Borrower and EDS notice of each payment of interest, principal, facility fee or other payment required to be made on each Loan and Bid Rate Loan not less than three (3) Business Days or Eurocurrency Business Days, as applicable, prior to the due date thereof; provided, however, that failure to provide such notice will not affect any Borrower's Obligation hereunder. Each payment or prepayment on the Obligation and payments of fees must be paid at (i) Administrative Agent's Payment Office for Dollars, if the payment is due in Dollars, (ii) Administrative Agent's Payment Office for Alternative Currencies, if the payment is due in any currency other than Dollars or Yen, and (iii) at Administrative Agent's Payment Office for Yen, if the payment is due in Yen, in funds which are or will be available for immediate use by Administrative Agent at such address on or before (1) 1:00 p.m., New York, New York time, on the day due, in the case of Base Rate Loans, CD Loans and Eurodollar Loans, (2) 12:00 noon, London, England time, on the day due in the case of Eurocurrency Loans other than Yen- Denominated Loans, and (3) 12:00 noon, Tokyo, Japan time, on the day due in the case of Yen-Denominated Loans. Funds received after such time shall be deemed to have been received by Administrative Agent on the next following Business Day (in the case of Base Rate Loans and CD Loans) or Eurocurrency Business Day (in the case of Eurodollar Loans or Eurocurrency Loans). Amounts received by Administrative Agent for the account of another Person shall be promptly remitted in like funds to such other Person. If, in the case of Base Rate Loans and/or CD Loans, any action is required or any payment is to be made on a day which is not a Business Day, then such action or payment shall be delayed until the next succeeding Business Day. If, in the case of Eurodollar Loans or Eurocurrency Loans, any action is required on a day which is not a Eurocurrency Business Day, then such action or payment shall be delayed until the next Eurocurrency Business Day unless a payment by a Borrower of a Eurodollar Loan or a 23 Eurocurrency Loan is involved and the next Eurocurrency Business Day would fall in the succeeding calendar month, in which event such payment shall be made on the immediately preceding Eurocurrency Business Day. Any extension of time shall be included in the computation of payments of interest. Upon receipt of any payment of principal or interest from a Borrower hereunder (except payments and/or prepayments on Bid Rate Notes), Administrative Agent will promptly thereafter cause to be distributed (x) like funds relating to the payment of principal or interest or facility fees ratably (other than amounts payable pursuant to Sections 3.5, 3.8 (relative to Bid Rate Loans), 3.10, 3.11, 3.12 or 3.14) to the Lenders for the account of their respective Applicable Lending Offices and (y) like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon any assignment of any Lender's Commitment pursuant to Section 11.12 and after notification thereof to Administrative Agent, Administrative Agent shall make all payments hereunder in respect of the interest assigned thereby to the Assignee. 3.3. Interest. The Loans from day to day shall bear interest on the outstanding principal balance thereof at a rate per annum equal to the lesser of (a) the Highest Lawful Rate, or (b) (i) in the case of Base Rate Loans, the Base Rate, (ii) in the case of CD Loans, the CD Rate, (iii) in the case of Eurodollar Loans, the Eurodollar Rate and (iv) in the case of Eurocurrency Loans, the Eurocurrency Rate. Bid Rate Loans from day to day shall bear interest on the outstanding principal balance thereof at a rate per annum equal to the lesser of (A) the Highest Lawful Rate, or (B) the Bid Rate applicable thereto. Accrued interest on each Loan is payable in arrears, (x) in the case of Base Rate Loans, on each Interest Payment Date, and, (y) in the case of CD Loans, Eurodollar Loans and Eurocurrency Loans, on the last day of each Interest Period with respect to such Loan or if occurring earlier in any case, the Commitment Termination Date, provided, however, as to any Loan having an Interest Period longer than three (3) months, in the case of Eurodollar or Eurocurrency Loans, or ninety (90) days, in the case of CD Loans, interest shall also be payable on each day which is three (3) months, in the case of Eurodollar or Eurocurrency Loans, or ninety (90) days, in the case of CD Loans after the first day of such Interest Period. Interest accrued on the principal of each Loan and each Bid Rate Loan after the maturity thereof and, to the extent permitted by applicable Law, interest on other overdue amounts, shall be payable on demand. Each determination by Administrative Agent of the rate of interest applicable to any Loan shall be conclusive in the absence of manifest error and each change in the Base Rate and Highest Lawful Rate, subject to the terms hereof, will become effective, without notice to any Borrower, upon the effective date of such change. 3.4. Continuation/Conversion with Respect to Committed Loans. (a) Conversion of Loans. Any Borrower may elect at any time to convert all or any part (but, if less than all, not less than $15,000,000 or any greater integral multiple of $1,000,000) of any outstanding Base Rate Loan, CD Loan or Eurodollar Loan (other than a Bid Rate Loan) to a Base Rate Loan, CD Loan or Eurodollar Loan, as the case may be, by giving Administrative Agent an irrevocable notice of such election, in the form of Exhibit H hereto (the "NOTICE OF CONTINUATION/CONVERSION") not later than 12:00 noon, New York, New York time, on the second (2nd) Business Day before the date of 24 conversion, in the case of conversion into a Base Rate Loan or a CD Loan, or 12:00 noon, New York, New York time on the third (3rd) Eurocurrency Business Day before the date of the conversion, in the case of conversion into a Eurodollar Loan, specifying the date of conversion, the type of Loan into which each such Loan or specified portion thereof shall be converted and the duration of the Interest Period applicable thereto. Any conversion pursuant to this clause (a) other than a conversion from a Base Rate Loan to a CD Loan or a Eurodollar Loan, shall be made on the last day of an Interest Period. (b) Continuation of Loans. Any Borrower may elect to continue (on the last day of the applicable Interest Period) any CD Loan, Eurodollar Loan, or Eurocurrency Loan (other than a Bid Rate Loan) as the same type of Loan by giving Administrative Agent an irrevocable Notice of Continuation/ Conversion not later than (i) 12:00 noon, New York, New York time, the second (2nd) Business Day before the last day of such Interest Period, if continuing a CD Loan, (ii) 12:00 noon, New York, New York time, the third (3rd) Eurocurrency Business Day before the last day of such Interest Period, if continuing a Eurodollar Loan or Eurocurrency Loan, other than a Yen- Denominated Loan, or (iii) 12:00 noon, Hong Kong time, the third (3rd) Eurocurrency Business Day (in Hong Kong) before the last day of such Interest Period, if continuing a Yen-Denominated Loan. The Notice of Continuation/Conversion shall specify the portion of such Loan that shall be continued and the duration of the Interest Period applicable thereto. (c) Coordination with Interest Periods. Notwithstanding anything in clause (a) and (b) of this Section 3.4 to the contrary, but without limiting Section 3.5, each Borrower shall use its reasonable efforts to exercise its options with regard to electing to convert into or continue a Loan so that, on any date on which the Committed Sum is reduced pursuant to Section 4.2, it will not be necessary to prepay any Loan that does not have an Interest Period ending on such date. (d) Inapplicability of Conditions Precedent. Loans continued or converted pursuant to this Section 3.4 shall not constitute new Loans for purposes of Section 5.2 hereof. (e) Failure to Provide Notice. If no Notice of Continuation/ Conversion is given with respect to any Loan prior to the time specified in this Section 3.4 or if a Notice of Continuation/Conversion is given, but it is incomplete, Administrative Agent shall use good faith efforts to contact the relevant Borrower to obtain a Notice of Continuation/Conversion or to complete the information required thereby, but if a complete Notice of Continuation/Conversion is not provided in a timely fashion, the relevant Borrower shall be deemed to have converted such Loan, if denominated in Dollars, into a Base Rate Loan or, if a Eurocurrency Loan, to have continued such Loan as a Eurocurrency Loan having an Interest Period equivalent to the Interest Period then ending, on the last day of the applicable Interest Period and Administrative Agent shall promptly notify the relevant Borrower of such conversion or continuation. 25 (f) Continuation/Conversion in Default Situations. Notwithstanding anything to the contrary contained in this Section 3.4, no CD Loan, Eurodollar Loan or Eurocurrency Loan may be continued as such or converted into another type of Loan when any Default exists (other than a Default under Section 8.1(d) so long as EDS is diligently pursuing the cure thereof and the Commitments of the Lenders have not been terminated), but on the last day of the applicable Interest Period (i) each such CD Loan or Eurodollar Loan shall be automatically converted to a Base Rate Loan and (ii) each such Eurocurrency Loan shall be due and payable. 3.5. Funding Losses. If any Borrower makes any payment of principal with respect to any Loan or a Bid Rate Loan, other than a Base Rate Loan, on any day other than the last day of the Interest Period applicable thereto, or if any Borrower fails to borrow or prepay any Loan or any Bid Rate Loan after the applicable notice has been given to any Lender by Administrative Agent or if any Borrower converts a Loan from a CD Loan or a Eurodollar Loan at any time other than at the end of the relevant Interest Period, such Borrower shall reimburse each affected Lender, within ten (10) Business Days after demand, for any resulting loss or expense actually incurred by it, including (without limitation) any loss incurred in obtaining, liquidating, employing or redeploying deposits or foreign currencies from third parties, for the period after any such payment, conversion, or failure to borrow, through the end of such Interest Period (the calculation of such loss or expense shall include a credit (not in excess of such loss or expense) for the interest that could be earned by such Lender as a result of redepositing such amount), together with interest thereon at the Compensation Rate from the date of demand until paid in full; provided that, Administrative Agent shall have delivered to such Borrower a certificate of each affected Lender as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. 3.6 Default Rates. At Majority Lenders' option and to the extent permitted by Law, all of the past-due Obligation and accrued interest thereon and fees shall bear interest from maturity (stated or by acceleration) at a rate per annum from day to day equal to the lesser of (i) the Highest Lawful Rate or (ii) the greater of (x) the interest rate then being charged on such Obligation or portion thereof hereunder or (y) the sum of the Base Rate plus one percent (1%) per annum. Any sum referred to in Section 8.1(a)(ii) not paid when due in accordance with the terms of the Loan Documents shall bear interest at the Compensation Rate from the due date thereof until the earlier of (i) the date such sum is paid in full, or (ii) the date any applicable grace period expires. 3.7 Interest and Fee Calculations. All payments of interest and fees shall be calculated on the basis of actual number of days (including the first day but excluding the last day) elapsed during the period for which such interest or fee is payable but computed as if each calendar year consisted of 360 days, provided, however, that the Base Rate shall be computed on the basis of a calendar year of 365 (or 366, as the case may be) days. 3.8 Mandatory Principal Prepayments. If Administrative Agent determines that, as a result of fluctuations in exchange rates the Dollar Equivalent Value of the outstanding principal amount of (a) the Committed Loans of any Lender ever exceeds 105% of the Committed Sum of 26 such Lender, as reduced pursuant to Section 4.2, or (b) the aggregate outstanding principal amount of the Loans and the Bid Rate Loans exceeds 105% of the Aggregate Committed Sum, as reduced pursuant to Section 4.2, Administrative Agent shall provide notice thereof to EDS and EDS (or, if no Committed Loans or Bid Rate Loans are then outstanding to EDS, any other Borrower) shall make a mandatory principal prepayment, in Dollars (or if such determination has been made pursuant to clause (a) above, in any other Primary Currency then owing by EDS or any other Borrower to such Lender), of the amount of such excess within ten (10) Eurocurrency Business Days after notice from Administrative Agent requesting such prepayment. Any Lender may request at any time or from time to time that Administrative Agent determine the Dollar Equivalent Value of the principal amount of all outstanding Committed Loans made by such Lender for purposes of evaluating whether the Dollar Equivalent Value of the outstanding principal amount of all outstanding Committed Loans of such Lender exceeds the Committed Sum of such Lender. Administrative Agent shall notify such Lender and EDS of its conclusion. 3.9. Voluntary Principal Prepayments. Upon giving Administrative Agent, in the case of a prepayment of a Committed Loan, or the relevant Lender, in the case of a Bid Rate Loan, two (2) Business Days' notice, in the case of a prepayment of a CD Loan or Base Rate Loan, two (2) Eurocurrency Business Days' notice, in the case of a prepayment of a Eurodollar Loan, or three (3) Eurocurrency Business Days' notice, in the case of prepayment of a Eurocurrency Loan, each Borrower shall be entitled to prepay any Committed Loan or Bid Rate Loan from time to time and at any time, in whole or in part, without premium or penalty (subject, however, to Borrowers' other obligations hereunder in respect of funding losses and other matters); provided that (a) each partial prepayment shall equal or exceed the principal amount of (i) $100,000, or any integral multiple thereof (or the Dollar Equivalent Value thereof if such prepayment is made in any currency other than Dollars), for each Bid Rate Loan, (ii) $10,000,000 (or the Dollar Equivalent Value thereof if such prepayment is made in any currency other than Dollars) in the aggregate for Committed Loans, or (iii) the unpaid principal balance of any Committed Loan or Bid Rate Loan being prepaid in full, (b) a Borrower shall only be entitled to make a prepayment if all accrued interest on the amount prepaid (including, without limitation, past due interest, if any) payable to such Lender hereunder shall be paid to the date of such prepayment and (c) except as otherwise set forth herein, prepayments of CD Loans shall only be made on a Business Day and prepayments of Eurodollar Loans or Eurocurrency Loans shall only be made on a Eurocurrency Business Day. Prior to the Commitment Termination Date, the Loans prepaid may, subject to the conditions of this Agreement, be reborrowed hereunder, and this Agreement shall not be deemed to be terminated or canceled prior to the expiration or termination of Lenders' Commitments solely because the Obligation may from time to time be paid in full. 3.10. Inadequacy of Eurodollar, Eurocurrency or CD Loan Pricing. If with respect to any Interest Period for any Eurodollar Loan or any Eurocurrency Loan (i) Administrative Agent determines (which determination shall be binding and conclusive on all parties) that by reason of circumstances affecting the interbank Eurocurrency market generally, deposits in any Primary Currency or Secondary Currency in which a Loan or a Bid Rate Loan is then outstanding (in the applicable amounts) are not being offered to the relevant Lenders in the interbank Eurocurrency market for such Interest Period or (ii) Majority Lenders advise Administrative Agent that the Eurodollar Rate or the Eurocurrency Rate, as the case may be, will not adequately and fairly 27 reflect the cost to such Lenders of maintaining or funding such Eurodollar Loan or such Eurocurrency Loan for such Interest Period, and Administrative Agent shall forthwith give notice thereof to EDS and all affected Borrowers and Lenders, whereupon until Administrative Agent notifies EDS and such affected Borrowers that the circumstances giving rise to such suspension no longer exist, (A) the obligation of Lenders to make Eurodollar Loans or Eurocurrency Loans in the relevant currency shall be suspended, and (B) all affected Borrowers shall either (1) repay in full the then outstanding principal amount of the affected Loans, together with accrued interest thereon, on the last day of the then- current Interest Period applicable thereto, (2) convert such affected Loans (if such affected Loans are Eurodollar Loans) to CD Loans or Base Rate Loans in accordance with Section 3.4 of this Agreement at the end of the then-current Interest Period applicable to such affected Loans or (3) exercise the option set forth in Section 3.17(b). If with respect to any Interest Period for any CD Loan, Majority Lenders advise Administrative Agent that the CD Rate will not adequately and fairly reflect the cost to such Lenders of maintaining or funding CD Loans, then Administrative Agent shall forthwith give notice thereof to all affected Borrowers and Lenders, whereupon, until Administrative Agent shall notify Borrowers that the circumstances giving rise to such suspension no longer exist (A) the obligation of Lenders to make CD Loans shall be suspended and (B) all affected Borrowers shall either (1) repay in full the then outstanding principal amount of any CD Loans, together with accrued interest thereon on the last day of the then-current Interest Period(s) applicable thereto, (2) convert all outstanding CD Loans to Eurodollar Loans or Base Rate Loans in accordance with Section 3.4 at the end of the then-current Interest Period applicable to such CD Loans or (3) exercise the option set forth in Section 3.17(b). 3.11. Illegality. If, after the date of this Agreement, the adoption of any applicable Law or any change therein, or any change in the interpretation or administration thereof by any Tribunal charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive of any such authority, central bank or comparable agency, shall make it unlawful or impossible for any Lender to make, maintain or fund its Eurodollar Loans or Eurocurrency Loans or any of them, and such Lender shall so notify Administrative Agent, which shall notify EDS (and, if EDS shall so request, such Lender shall provide EDS with reasonable evidence of such illegality or impossibility), then, until such Lender notifies EDS, via Administrative Agent, that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Eurodollar Loans and/or Eurocurrency Loans, as the case may be, or to convert Base Rate Loans or CD Loans to Eurodollar Loans, shall be suspended, provided, however, if such unlawfulness or impossibility affects only a Lender's ability to make, maintain or fund Loans in certain currencies, such Lender's obligations hereunder in respect of other currencies shall not be affected. Subject to the provisions of Section 3.17(a), if such Lender shall determine that it may not lawfully continue to maintain and fund any of its outstanding Eurodollar Loans or Eurocurrency Loans or any of them to maturity and shall so specify in such notice, each affected Borrower shall immediately prepay in full the then outstanding principal amount of each such Loan or Bid Rate Loan together with accrued interest thereon without premium or penalty (subject, however, to Borrowers' other obligations hereunder in respect of funding losses and other matters); provided that, concurrently with prepaying each such Committed Loan the affected Borrower may (i) borrow a Base Rate Loan or a CD Loan in an equal principal amount (or, if the Loan being prepaid is denominated in a currency other than 28 Dollars, a Base Rate Loan or a CD Loan in the Dollar Equivalent Value of the Loan so prepaid) from such Lender or, if such circumstances affect only certain Primary Currencies borrow a Eurocurrency Loan in a Primary Currency other than the affected Primary Currency and in any amount substantially equivalent to the Loan being prepaid. Any Lender that has given a notice of unlawfulness pursuant to this Section 3.11 shall rescind such notice promptly upon the cessation of such unlawfulness by giving notice to the Administrative Agent, EDS and the affected Borrower(s). 3.12. Increased Cost and Reduced Return. (a) Increases in Reserve Requirements. If, after the date hereof, the adoption of any applicable Law or any change therein, or any change in the interpretation or administration thereof by any Tribunal charged with the interpretation or administration thereof, or compliance by any Lender (or its lending office) with any request or directive of general applicability (whether or not having the force of Law) of any such Tribunal shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (A) with respect to any CD Loan or Bid Rate Loan any such requirement included in an applicable Domestic Reserve Percentage, and (B) with respect to any Eurodollar Loan, Eurocurrency Loan, or Bid Rate Loan any such requirement included in an applicable Eurocurrency Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by such Lender (or its Applicable Lending Office), or shall impose on such Lender (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its CD Loans, Eurodollar Loans, Eurocurrency Loans, Bid Rate Loans, its Notes evidencing such Loans or Bid Rate Loans, or its obligation to make such Loans and the result of any of the foregoing is actually to increase the cost to (or to impose a cost on) such Lender (or its Applicable Lending Office) of making or maintaining any such Loan or Bid Rate Loan, or to reduce the amount of any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or under its Notes with respect thereto by an amount deemed by such Lender to be material, then, subject to the provisions of Section 3.17(a), if such Lender is generally imposing payments for increased costs on its similarly situated customers, within ten (10) Business Days after demand by such Lender, made via Administrative Agent, accompanied by the certificate required by Section 3.12(c), any affected Borrower or EDS shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction actually incurred by it in connection with this Agreement and EDS may reduce the Commitment of that Lender and prepay (or cause any other Borrower to prepay) Loans from that Lender without premium or penalty (subject, however, to Borrowers' other obligations hereunder in respect of funding losses and other matters). (b) Capital Adequacy Rules. If, after the date hereof, the adoption or phase-in of any Law of general applicability regarding capital adequacy, or any change in existing or future Laws regarding capital adequacy, or any change in the interpretation or 29 administration of any such Law by any Tribunal charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office or any corporation controlling such Lender) with any request or directive of general applicability regarding capital adequacy (whether or not having the force of Law) of any such Tribunal, shall, in the reasonable determination of any Lender, have the effect of reducing the rate of return on such Lender's capital or on the capital of the corporation controlling such Lender as a consequence of such Lender's obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change, or compliance (taking into consideration such Lender's policies with respect to capital adequacy), then from time to time if Lender is generally imposing payments for such reduction on its similarly situated customers, within ten (10) Business Days after demand by such Lender, made via Administrative Agent, all affected Borrowers or EDS shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction, net of the savings, if any, which may be reasonably projected to be associated with any such increased capital requirement. (c) Procedure for Claiming Compensation. Any affected Lenders will promptly notify Borrowers, via Administrative Agent, of any event of which such Lender has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section 3.12 and will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of such Lender, delivered via Administrative Agent, claiming compensation under this Section 3.12 and setting forth the additional amount or amounts to be paid to it, as well as the manner in which such amount or amounts were calculated, hereunder shall be conclusive in the absence of manifest error. In determining such amount, the affected Lender may use any reasonable averaging and attribution methods. 3.13. Several Obligations. Except as otherwise expressly set forth herein and in the Guaranty, the obligations of Borrowers hereunder are several and not joint and each Borrower shall be liable only in respect of Loans and Bid Rate Loans made to such Borrower and the Obligation of such Borrower related thereto. 3.14. Taxes. (a) Payments to be Free and Clear. All payments made by any Borrowers under this Agreement shall be made, in accordance with Sections 3.2 and 3.3, free and clear of and without any deduction or withholding for or on account of any Tax, by way of setoff or otherwise, except as otherwise provided by this Section 3.14 and by Section 11.16. (b) Grossing-up of Payments. If any Borrower shall be required by Law to deduct any Tax (other than an Excluded Tax) from or in respect of any sum payable hereunder to any Lender or the Administrative Agent: 30 (i) as soon as such Borrower is aware that any such deduction, withholding or payment of a Tax (other than an Excluded Tax) is required, or of any change in any such requirement, it shall notify Administrative Agent; (ii) the sum payable by such Borrower shall be increased to the extent necessary so that, after the Borrower has made all required deductions (including deductions applicable to additional sums payable under this Section), such Lender or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made; provided, however, that such Borrower shall not be required to increase any such sums payable to any Lender if such Lender fails to comply with the requirements of Section 3.14(e); (iii) such Borrower shall make such deductions, or pay such Tax (other than an Excluded Tax), before any interest or penalty becomes payable or, if such Tax (other than an Excluded Tax) is paid by the Administrative Agent or any Lender, shall reimburse the Administrative Agent or such Lender (as the case may be) on demand for the amount paid by it; (iv) such Borrower shall pay the full amount deducted to the relevant taxing authority or other authority in accordance with applicable Law; and (v) within thirty (30) days after paying any such Tax (other than an Excluded Tax), the relevant Borrower shall deliver to Administrative Agent, at its address referred to in Section 11.4 satisfactory evidence of that deduction, withholding or payment and (where remittance is required) of the remittance thereof to the relevant taxing or other authority. (c) Stamp and Other Taxes. Each Borrower shall pay any present and future stamp or documentary taxes or any other excise or property Taxes which arise from any payment made by such Borrower or by the Administrative Agent hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement. (d) Indemnification. Within thirty (30) days from the date of written demand therefor from any Lender or the Administrative Agent, each Borrower will indemnify and hold harmless each Lender and the Administrative Agent from and against the full amount of Taxes (other than Excluded Taxes), including, without limitation, Taxes imposed by any jurisdiction on amounts payable under this Section 3.14(d), paid by such Lender or the Administrative Agent (as the case may be) and any liability, including penalties, interest and expenses, arising therefrom or with respect thereto whether or not such Taxes were correctly or legally asserted by such jurisdiction, provided, however, that any Lender receiving indemnification from any Borrower under this Section 3.14(d) shall (i) at the request, direction and expense of such Borrower challenge and contest the imposition of such Taxes, if such Lender is the appropriate party in interest to initiate and pursue such a challenge, or (ii) cooperate fully with and assist such Borrower in any challenge or contest 31 by such Borrower relating to such Taxes, if such Borrower is the appropriate party in interest to initiate and pursue such a challenge, which challenge shall be pursued at such Borrower's expense except that, in either case, Borrowers have no right hereunder to participate in the internal tax affairs of any Lender. (e) Tax Certificates. (i) In the event a Borrower is incorporated under the laws of the United States or a state or jurisdiction thereof, then each Lender that is not incorporated under the laws of the United States or a state thereof shall, so long as it is lawfully able to do so: (A) deliver to the relevant Borrower and Administrative Agent (A) two (2) duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or successor applicable form, as the case may be, and (B) one (1) duly completed copy of Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be; (B) deliver to the relevant Borrower and Administrative Agent two (2) further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the applicable Borrower; and (C) obtain such extensions of time for filing and completing such forms or certifications as may reasonably be requested by the relevant Borrower or Administrative Agent. Such Lender shall certify (I) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal or state income taxes and (II) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. Each Person not incorporated under the laws of the United States or a state thereof that is an Assignee hereunder pursuant to Section 11.12 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this Section 3.14. (ii) In the event a Borrower is not incorporated under the laws of the United States of America or a state thereof, then each Lender (and any Assignee hereunder pursuant to Section 11.12) shall deliver any statements, declarations, certifications, or other documentation that may be reasonably requested by such Borrower in accordance with Section 3.14(f). (f) Statements and other Documentation. Each Lender shall honor all reasonable requests from any Borrower to file or to provide such Borrower with such 32 statements, declarations, certifications or other documentation as shall enable such Borrower to claim on behalf of such Lender a reduced rate of Tax or exemption from any Taxes, provided that no Lender shall be required to file or provide any such statement, declaration, certification or other documentation unless (i) such Borrower shall have provided to such Lender, within a reasonable time prior to the date such Borrower wishes to receive or have such Lender file such statement or other documentation, a written request describing such statement or other documentation and, if available, a blank copy thereof with instructions for completion thereof and (ii) the information necessary for completion of such statement or other documentation is within the control of such Lender, and, provided, further, that any Borrower receiving information or documentation pursuant to this Section 3.14 shall keep such information and documentation confidential and disclose the same only to appropriate Tribunals in furtherance of the purposes of this Section 3.14. 3.15. Application of Principal Payments. (a) Payment of Committed Loans. Each repayment or prepayment of the principal of Committed Loans in any currency by any Borrower shall be applied (except as EDS may otherwise specify by notice to the Administrative Agent when no Default shall be continuing), to the extent of such payment, Pro Rata to the Committed Loans: (i) first, to the Committed Loans in such currency to such Borrower having an Interest Period ending on the date of such payment, (ii) second, to any outstanding Base Rate Loans in such currency to such Borrower, (iii) third, to any outstanding CD Loans in such currency to such Borrower, and (iv) fourth, to any outstanding Eurodollar Loans or Eurocurrency Loans in such currency to such Borrower, or, if there are no Eurodollar Loans or Eurocurrency Loans outstanding in such currency to such Borrower on the date of such repayment or prepayment, such amount shall be applied to the repayment or prepayment of any Loans to such Borrower selected by Administrative Agent. Notwithstanding the foregoing or any other provision of this Agreement, no Eurodollar Loans or Eurocurrency Loans shall be prepaid on any day other than the last day of the Interest Period therefor except pursuant to the provisions of Sections 3.5, 3.8, 3.9, 3.10, 3.11, 3.12 or 3.14 or upon acceleration pursuant to this Agreement. (b) Payment of Bid Rate Loans. Each repayment or prepayment of the principal of Bid Rate Loans by any Borrower shall be applied (except as EDS may otherwise specify by notice to the relevant Lender when no Default shall be continuing), to the extent of such repayment or prepayment; 33 (i) first, to the Bid Rate Loans made by the Lender receiving such payment having an Interest Period ending on the date of such payment, and (ii) second, if any such repayment or prepayment is made in a currency other than Dollars, such amount shall be applied to the repayment or prepayment of any Loans selected by the Lender receiving such payment which are denominated in such currency. Notwithstanding the foregoing or any other provision of this Agreement, no Bid Rate Loans which are Eurodollar Loans or Eurocurrency Loans shall be prepaid on any day other than the last day of the Interest Period therefor except pursuant to the provisions of Sections 3.5, 3.8, 3.9, 3.10, 3.11, 3.12 or 3.14 or upon acceleration pursuant to this Agreement. 3.16. Payments, Computations, Judgments, etc. All payments by any Borrower pursuant to this Agreement or any other Loan Document, whether in respect of principal or interest or otherwise, shall be made by such Borrower in the currency in which such Obligation was denominated (the "REQUIRED CURRENCY"); provided that failure by any Borrower to make any payment of principal or interest with respect to any Loan (excluding any Loan denominated in Dollars) in the Required Currency on the due date therefor because such Required Currency has ceased to be freely transferable and convertible into Dollars in the relevant interbank market shall not constitute a Default if such Borrower pays the Dollar Equivalent Value (as calculated by Administrative Agent in good faith) of such Required Currency on such due date. In addition to any such Dollar payment, not later than ten (10) Business Days after demand by any Lender, made via Administrative Agent, such Borrower shall pay to such Lender, via Administrative Agent, such amount as will (in the reasonable determination of such Lender) reimburse such Lender for any loss or expense caused by the failure of such Borrower to make any payment in the Required Currency on the due date therefor. A statement as to any such loss or expense (including calculations thereof in reasonable detail) shall be submitted by such Lender to Administrative Agent and the affected Borrower, and such statement shall, in the absence of manifest error, be conclusive and binding on such Borrower. 3.17. Mitigation of Circumstances; Replacement of Affected Lenders. (a) Mitigation of Circumstances. Each Lender agrees to use reasonable efforts to mitigate or avoid (i) an obligation by any Borrower to withhold or deduct any Taxes pursuant to Section 3.14, pay any amounts pursuant to Section 3.16, or pay any costs pursuant to Section 3.12 or (ii) the occurrence of any circumstances of the nature described in Section 3.10 or Section 3.11 (including by changing the office through which it has booked or funded its Commitment or any Loan or Bid Rate Loan or by making any other mechanical change in funding Loans or Bid Rate Loans), in each case prior, if possible, to the occurrence of such circumstances or the incurrence of any obligation of any Borrower to compensate such Lender for amounts payable pursuant to any such Section, provided, however, that, in the reasonable judgment of such Lender, such efforts 34 are consistent with legal and regulatory restrictions and are not materially disadvantageous to such Lender. (b) Replacement of Affected Lenders. At any time any Lender is affected by any condition or circumstance set forth in Sections 3.10, 3.11, 3.12 or 3.14, and so long as no Default or Potential Default exists, (i) EDS may replace such affected Lender as a party to this Agreement with one or more other bank(s) or financial institution(s), (and upon notice from EDS such affected Lender shall assign, pursuant to Section 11.12, without recourse or warranty, its Commitment, its Loans and Bid Rate Loans, its Note(s) and all of its other rights and obligations hereunder to such replacement bank(s) or other financial institution(s) for a purchase price equal to the sum of the principal amount of the Loans and Bid Rate Loans so assigned, all accrued and unpaid interest thereon, its ratable share of all accrued and unpaid facility fees and its ratable share of the remaining unpaid Obligation owed to such affected Lender) and/or (ii) EDS may (and, if EDS replaces any affected Lender in part as provided in clause (i) above, concurrently with such replacement EDS shall) cause such affected Lender to cease to be a party hereto by terminating the Commitment of such Lender (whereupon the Aggregate Committed Sum shall be reduced by the amount of such affected Lender's Committed Sum less any portion thereof assigned pursuant to clause (i) above) by paying, and causing any other relevant Borrower to pay, the principal amount of such affected Lender's Loans and Bid Rate Loans, all accrued and unpaid interest thereon, all accrued and unpaid commitment fees owed to such affected Lender and the remaining unpaid Obligations owed to such affected Lender, in each case to the extent not assigned and purchased pursuant to clause (i) above, and such affected Lender shall thereupon cease to be a party hereto. Notwithstanding anything to the contrary set forth in this Section 3.17, EDS may not require any assignment or effect the termination of any Lender's Commitment pursuant to this Section 3.17 if such assignment or termination would conflict with any applicable Law. 3.18. Failure to Pay Additional Amounts. Notwithstanding anything to the contrary set forth herein, the failure of any Borrower to pay any amount demanded by any Lender pursuant to Sections 3.5, 3.8, 3.10, 3.11, 3.12, 3.14 or 11.17 shall not be deemed to constitute a Default hereunder to the extent that such Borrower is contesting in good faith its obligations to pay such amount by ongoing discussions diligently pursued with such Lender or by appropriate proceedings provided, however, that under no circumstances shall any such failure to pay continue for more than forty (40) days from the date on which the related amount is demanded consistent with the terms of this Agreement, at which date such failure to pay shall become a Default. ARTICLE IV ---------- FEES; MODIFICATION OF COMMITMENTS --------------------------------- 4.1. Facility Fee. EDS will pay Administrative Agent, for the account of each Lender, in Dollars, a facility fee on the average daily Committed Sum of such Lender from the Availability Date through and including the Commitment Termination Date at a rate of 0.08 percent per annum, computed on a daily basis for the actual number of days elapsed over a year of 360 days, 35 including the first day but excluding the last day. The facility fee will be payable quarterly in arrears on each Quarterly Date and Commitment Termination Date and the Administrative Agent shall notify EDS, not less than ten (10) days prior to each such date, of the amount of the facility fee then payable. 4.2. In addition to its rights under Section 2.4, upon three (3) Business Days' prior written and irrevocable notice to Administrative Agent, EDS may from time to time permanently reduce in whole or in part the Aggregate Committed Sum, provided that, any reduction in part must be in the amount of at least $10,000,000 or a greater integral multiple of $10,000,000 and, provided, further, that no such notice may be given or become effective at any time when a Notice of Advance or a Request for Bids is outstanding and, provided, further, that no such reduction shall cause the Aggregate Committed Sum to be less than the total principal amount of all Loans plus all Bid Rate Loans then outstanding. Any such reduction shall be effective as of the date set forth in the notice and shall reduce the Committed Sum of each Lender in proportion to each Lender's Percentage unless such reduction shall be made (i) because one or more Lenders has declined to extend the Commitment Termination Date pursuant to Section 2.4, in which case the Committed Sum of such Terminating Lender(s) may be eliminated by EDS on such Terminating Lender's Commitment Termination Date, or (ii) pursuant to Section 3.17. EDS may, in its sole discretion, replace any Lender at any time upon three (3) Business Days' prior notice to Administrative Agent and such Lender, which notice shall be irrevocable, provided, however, that no such notice may be given or become effective at any time when a Notice of Advance or a Request for Bids is outstanding, and, provided, further, that such Lender's Commitment is assigned to another bank effective as of the date of such replacement pursuant to Section 11.12 and any amounts due to such Lender as a result of such termination have been paid in full. Any reduction in the Aggregate Committed Sum and any replacement of any Lender shall have no effect upon any Loans then outstanding hereunder, except as otherwise provided in Section 2.4. ARTICLE V --------- CONDITIONS PRECEDENT -------------------- 5.1. Initial Availability. Lenders will not be obligated to make any Loan hereunder unless, on or before the date of such Loan, Administrative Agent has received, in addition to this Agreement, executed by EDS, all of the items described below in form and substance reasonably satisfactory to Administrative Agent: (a) Note(s). The applicable Note(s) executed by EDS. (b) Guaranty. The Guaranty, executed by EDS. (c) Articles of Incorporation. A recent copy of the articles or certificate of incorporation and all amendments thereto, of EDS certified by the Secretary of State of Texas. 36 (d) Good Standing. A recent certificate of existence and good standing from appropriate officials of the State of Texas. (e) Officers' Certificate. An Officers' Certificate certifying as to (i) bylaws, (ii) resolutions and (iii) incumbency of all officers of EDS who will be authorized to execute or attest to any Loan Document substantially in the form of Exhibit L. The Administrative Agent may conclusively rely on such certificate until it shall receive a further certificate canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate. (f) Opinion of Counsel. An opinion of Hughes & Luce, L.L.P., or Counsel - Corporate Acquisitions and Finance, EDS, substantially in the form attached hereto as Exhibit J, and an opinion of special New York counsel to EDS regarding the enforceability under New York law of the Loan Documents executed on or before the Availability Date by EDS. 5.2. Each Advance. In addition, Lenders will not be obligated to make any Loan or Bid Rate Loan unless (a) each statement or certification made by the relevant Borrower in its Notice of Advance shall be true and correct in all material respects on the Borrowing Date; (b) at the time of each Loan or Bid Rate Loan no Default or Potential Default shall exist; (c) the Administrative Agent shall have received a Notice of Advance or a Request for Bids and a Notice of Acceptance related thereto, as applicable, and each statement or certification made therein shall be true and correct in all material respects on the Borrowing Date; (d) the Administrative Agent shall have received a Note duly executed by the relevant Borrower (other than EDS) complying with the terms and provisions hereof; and (e) no event or circumstance analogous or similar to any of the events or circumstances described in Sections 8.1(e) and/or (f) shall have occurred and be continuing with respect to the relevant Borrower. 5.3. Waiver of Conditions to Bid Rate Loans. Any Lender may, at its election, waive any condition to the making of its Bid Rate Loan (except the existence of a Default), but no such waiver shall be deemed to be a waiver of the requirement that each such condition precedent be satisfied as a prerequisite for any subsequent Bid Rate Loan or any Loan. ARTICLE VI ---------- REPRESENTATIONS AND WARRANTIES ------------------------------ 6.1. EDS Representations and Warranties. To induce Lenders to enter into this Agreement and make Loans and Bid Rate Loans hereunder, EDS represents and warrants to Lenders as follows: (a) Corporate Existence and Authority. Each Borrower (i) is duly organized, validly existing, and in good standing under the Laws of its jurisdiction of organization (ii) is duly qualified to transact business and is in good standing in each jurisdiction where the failure to do so would have a Material Adverse Effect, and (iii) has all requisite power and 37 authority (x) to own its assets and to carry on the business in which it is engaged, (y) to execute, deliver and perform its obligations under each Loan Document to which it is a party, and (z) to issue the Notes to which it is a party in the manner and for the purpose contemplated by this Agreement. (b) Binding Obligations. The execution and delivery of the Loan Documents have been duly authorized and approved by all necessary corporate or partnership action and the Loan Documents constitute the legal, valid, and binding obligations of each Borrower having executed the Loan Documents, enforceable against it in accordance with their respective terms except as the enforceability thereof may be limited by applicable Debtor Relief Laws. (c) Compliance with Laws and Documents. Each Borrower is not, nor will the execution, delivery, and the performance of and compliance with the terms of the Loan Documents cause any Borrower to be, in violation of (i) any Laws, other than such violations which could not, individually or collectively, cause a Material Adverse Effect, or (ii) its organizational documents, including, where relevant, its bylaws or articles or certificate of incorporation (as amended) other than such violations which could not, individually or collectively, cause a Material Adverse Effect. The execution, delivery, and the performance of and compliance with the terms of the Loan Documents are not inconsistent with, and will not conflict with or result in any breach of, or constitute a default (excluding breaches and defaults which individually or collectively could not have a Material Adverse Effect) under, or result in the creation or imposition of any lien upon any of the material property or assets of any Borrower pursuant to the terms of its organizational documents, any material indenture, mortgage, lease, deed of trust, agreement, contract, or instrument to which any Borrower is a party or by which any Borrower or any of its property or assets is bound or to which it is subject. No Default or Potential Default has occurred or is continuing. (d) Financial Statements. EDS has delivered to Administrative Agent a copy of the Financial Statements as of the period ended December 31, 1994. Such Financial Statements were prepared in accordance with GAAP and present fairly the financial condition and the results of operations of EDS and its consolidated Subsidiaries as of, and for the portion of the fiscal year ending on, the date or dates thereof. All material liabilities (direct or indirect, fixed or contingent) of EDS and its consolidated Subsidiaries as of the date or dates of such Financial Statements are reflected therein or in the notes thereto. Between the date or dates of such Financial Statements and the date hereof, there has been no material adverse change in the financial condition of EDS and its consolidated Subsidiaries. (e) Litigation. Except for the Litigation described on Schedule 6.1, EDS and its Subsidiaries are not involved in, nor, to the best of EDS's knowledge, are they aware of, any Litigation which could, collectively or individually, have a Material Adverse Effect, if determined adversely to EDS and its Subsidiaries, nor are there any outstanding or unpaid judgments against EDS or its Subsidiaries in excess of $25,000,000 (calculated, in 38 the case of judgments denominated in currencies other than Dollars, by reference to the Dollar Equivalent Value of the amount of such judgment in such other currency), in the aggregate. (f) Taxes. All tax returns and reports of EDS required by Law to be filed have been filed, and all Taxes imposed upon EDS which are due and payable have been paid, other than Taxes being contested in good faith and for which reserves have been established to the extent required by GAAP. (g) Guaranty Authorization. All requisite corporate action has been taken by EDS to authorize the Guaranty. (h) No Approvals, etc. No authorization, consent, approval, license or formal exemption from, nor any filing, declaration or registration with, any Tribunal, including the Securities and Exchange Commission or any securities exchange, is required in connection with the execution, delivery or performance by EDS of any Loan Document. (i) Investment Company. Neither EDS nor any other Borrower is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940. (j) ERISA Compliance. EDS is in compliance with all material provisions of ERISA except to the extent that all failures to be in compliance could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. ARTICLE VII ----------- COVENANTS --------- So long as Lenders have any commitment to make Loans under this Agreement and thereafter until the Obligation is paid and performed in full, unless Majority Lenders shall otherwise consent in writing: 7.1. Use of Proceeds. EDS covenants and agrees that it shall, and shall cause each Borrower to, and each Borrower covenants and agrees to, use the proceeds of Loans for general corporate or partnership purposes and working capital needs, including, without limitation, capital expenditures, purchase of capital stock and support of EDS's or such Borrower's commercial paper facilities (or any commercial paper facilities of any EDS Affiliate guaranteed by EDS). 7.2. Accounting Books and Financial Records; Inspections. EDS covenants and agrees that it shall (a) keep, in accordance with GAAP, proper and complete accounting books, and financial records and permit Lenders to inspect the same during reasonable business hours, (b) allow Lenders to inspect any of its properties during reasonable business hours and (c) allow Lenders to discuss its affairs, condition, and finances with its directors or officers from time to 39 time during reasonable business hours; provided, that all information obtained pursuant to this Section 7.2 shall be kept confidential. 7.3. Items to be Furnished. EDS covenants and agrees that it shall cause to be furnished to Administrative Agent, with a copy for each Lender, each of the following: (a) Annual Financial Statements. As soon as available, but no later than one hundred twenty (120) days after the last day of each fiscal year of EDS, audited Financial Statements as of, and for the year ended on, such last day, in each case setting forth, in comparative form, the corresponding figures for the previous fiscal year, accompanied by the opinion of independent certified public accountants, without qualification, that such Financial Statements were prepared in accordance with GAAP and present fairly the financial condition and results of operations of EDS and its consolidated Subsidiaries, accompanied by a certificate signed by the Treasurer or the Chief Financial Officer of EDS, which certificate shall state that, to the best of his or her knowledge, EDS has fulfilled all its obligations under the Loan Documents and, at the end of such fiscal period, no Default or Potential Default exists, and further sets forth the then- current calculation of the covenant contained in Section 7.8. (b) Quarterly Financial Statements. As soon as available, but no later than sixty (60) days after the last day of each of the first three fiscal quarters of EDS, Financial Statements showing the financial condition and result of operations of EDS and its consolidated Subsidiaries as of, and for the period from the beginning of the current fiscal year to, such last day, in each case setting forth, in comparative form, the corresponding figures for the corresponding dates and periods of the preceding fiscal year, accompanied by a certificate signed by the Treasurer or Chief Financial Officer of EDS, which certificate shall state that, to the best of his or her knowledge, at the end of such fiscal period, no Default or Potential Default exists, and further sets forth the then- current calculation of the covenant contained in Section 7.8. (c) SEC Filings. In the event that EDS shall be required to file reports with the Securities and Exchange Commission pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, promptly upon transmission thereof, copies of all such financial statements, proxy statements, notices and reports as it shall send to its public stockholders generally and copies of all registration statements (without exhibits) and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission), but excluding any filings relating to shelf registrations or Debt issuances. (d) Notices of Significant Events. Notice, promptly after EDS knows or has reason to know, of (i) the commencement or change in status of any Litigation with respect to EDS which could have a Material Adverse Effect, (ii) any change in any material fact or circumstance represented or warranted in any Loan Document, (iii) a Default or Potential Default, specifying the nature thereof and what action EDS has taken, is taking, or proposes to take with respect thereto. 40 7.4. Taxes. EDS covenants and agrees that it shall promptly pay when due any and all Taxes due, except Taxes being contested in good faith by appropriate proceedings so long as reserves have been established to the extent required by GAAP. 7.5. Maintenance of Corporate Existence, Assets, Business and Insurance. EDS covenants and agrees that it (or any successor corporation of EDS permitted by Section 7.9) shall at all times: maintain its corporate existence and authority to transact business and good standing in its jurisdiction of incorporation and all other jurisdictions where the failure to do so might have a Material Adverse Effect; maintain all licenses, permits, and franchises necessary for its businesses and where the failure to do so might have a Material Adverse Effect; maintain, preserve and keep all of its assets which are useful in and necessary to its businesses in good working order and condition and from time to time make all necessary and proper repairs, replacements, and renewals thereto and replacements thereof where the failure to do so might have a Material Adverse Effect; and maintain insurance with financially sound and reputable insurance companies or associations or self insure as deemed appropriate in the reasonable judgment of EDS, in such amounts and covering such risks as are usual to companies with comparable assets engaged in similar businesses and owning properties in the same general areas in which EDS operates, and where the failure to do so might have a Material Adverse Effect. 7.6. Compliance with Laws and Documents. EDS covenants and agrees that it will not, directly or indirectly, violate the provisions of any material Laws, its articles or certificate of incorporation or bylaws or any material agreements if such violation alone, or when aggregated with all other such violations, could cause a Material Adverse Effect. 7.7. Regulation U. EDS covenants and agrees that neither the making of any Advance hereunder nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System as now or from time to time hereafter in effect. 7.8. Net Worth. EDS covenants and agrees that, at all times, the Net Worth of EDS and its consolidated Subsidiaries shall exceed the sum of (a) $3,070,050,000 plus (b) fifty percent (50%) of the Net Income of EDS and its consolidated Subsidiaries for each fiscal quarter commencing on or after June 30, 1995. 7.9. Mergers; Consolidations; Transfers of Assets. EDS covenants and agrees that it shall not consolidate with, or sell or convey all or substantially all of its assets to, or merge with or into any other Person or Persons, in a single transaction or a series of transactions, unless (a) either EDS is the continuing corporation, or the successor corporation(s) is(are) organized under the laws of the United States or a state thereof and the successor corporation(s) expressly assume(s) all obligations of EDS under the Facility and the due and punctual performance and observance of all of the covenants and conditions of EDS under the Facility; and (b) EDS or the successor corporation(s), as the case may be, will not, immediately after the merger, consolidation, sale or conveyance, be in Default under the Facility and no Potential Default under the Facility will have occurred and be continuing. 41 7.10. Pari Passu. EDS covenants and agrees that all obligations of EDS under this Agreement shall rank at least pari passu with all other unsecured Debt of EDS. 7.11. EDS covenants and agrees that if, at any time when there shall exist a deficiency in excess of $25,000,000 in the assets of any Pension Plan which are available to satisfy the benefits guaranteeable under ERISA with respect to such Pension Plan, (i) the PBGC institutes proceedings to terminate such Pension Plan or notice of intent to terminate such Pension Plan is filed under Title IV of ERISA by EDS or any Subsidiary having liability with respect thereto, or (ii) any Reportable Event for which the PBGC has not waived the 30-day notice requirement shall occur with respect to such Pension Plan and such Reportable Event shall present a material risk of termination with respect to such Pension Plan, EDS shall (A) give Administrative Agent prompt written notice thereof, (B) within fifteen (15) days after the date of such event, propose to Administrative Agent a plan for bringing such Pension Plan into compliance with ERISA or reducing such deficiency to $25,000,000 or less and (C) within thirty (30) days after the date of such event, cause such deficiency to be reduced to $25,000,000 or less, or cause such Pension Plan to be brought into compliance with ERISA. ARTICLE VIII ------------ DEFAULT ------- 8.1. Default. A "DEFAULT" shall exist if any one or more of the following events shall occur and be continuing: (a) Payment of Obligation. (i) The failure or refusal of any Borrower to pay any principal installment when due in accordance with the terms of the Loan Documents or (ii) the failure or refusal of any Borrower to pay any interest installment, any fee or any other sum (other than principal) payable hereunder to any Lender or the Administrative Agent when due in accordance with the terms of the Loan Documents and such failure or refusal continues for a period of five (5) Business Days. (b) Representations and Warranties. Any representation or warranty made by a Borrower is untrue in any material respect on the date as of which made or deemed to be made. (c) Certain Covenants. The failure or refusal of EDS punctually and properly to perform, observe, and comply with Sections 7.9, 7.10 or 7.11 or to maintain its corporate existence, except as the result of an action permitted by Section 7.9. (d) Other Covenants. The failure or refusal of any Borrower punctually and properly to perform, observe, and comply with any covenant, agreement, or condition contained in any of the Loan Documents, other than the agreements described in Sections 8.1(a) or 8.1(c), and such failure or refusal continues for a period of thirty (30) days (or, in the case of Section 7.8, twenty (20) days) after the earlier of (i) EDS's having 42 knowledge thereof, or (ii) written notice thereof is given by Administrative Agent or any Lender to such Borrower and EDS. (e) Voluntary Debtor Relief. EDS shall (i) execute an assignment for the benefit of creditors, (ii) admit in writing its inability to or generally fail to pay its debts generally as they become due, (iii) voluntarily seek the benefits of any Debtor Relief Law which could suspend or otherwise affect any of Lender's Rights under any of the Loan Documents, or (iv) take any action to authorize any of the foregoing. (f) Involuntary Proceedings. An order, judgment or decree shall be entered against EDS by any Tribunal pursuant to any Debtor Relief Law, the effect of which could be to suspend or otherwise affect any Lenders' Rights under any of the Loan Documents or a petition shall be filed against EDS seeking the benefit or benefits provided for by any Debtor Relief Law, the effect of which could be to suspend or otherwise affect any of Lenders' Rights under any of the Loan Documents, and such order, judgment, decree, or petition is not discharged within ninety (90) days after the entry or filing thereof. (g) Payment of Judgments. EDS shall fail to pay any money judgment in excess of $25,000,000 (or, in the case of a money judgment denominated in a currency other than Dollars, any money judgment having a Dollar Equivalent Value in excess of $25,000,000) against it or its assets at least ten (10) days prior to the date on which its assets may be sold lawfully to satisfy such judgment. (h) Default Under Other Debt. EDS shall default in the due and punctual payment of the principal of or the interest on any Debt, which Debt is in excess of $25,000,000 (or, in the case of Debt denominated in a currency other than Dollars, any Debt having a Dollar Equivalent Value in excess of $25,000,000) in aggregate principal amount, secured or unsecured, or in the due performance or observance of any covenant or condition of any indenture or other agreement executed in connection therewith, and as a consequence thereof such Debt shall be declared to be due and payable or required to be repaid prior to its stated maturity (other than by a regularly scheduled required prepayment). (i) Change of Control. A Change of Control shall occur, provided, however, that such a Change of Control shall not constitute a Default if immediately thereafter, the long-term indebtedness of EDS is rated at least BBB- or the equivalent thereof by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or Baa3 or the equivalent thereof by Moody's Investors Services, Inc., or if such rating is not made, then the commercial paper of EDS is rated at least A-2 or the equivalent thereof by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or P-2 or the equivalent thereof by Moody's Investors Services, Inc. (j) Default Under Certain Other Debt. A Default, as defined therein, shall exist under that certain Revolving Credit and Term Loan Agreement dated as of October 43 4, 1995, among EDS, Citibank, N.A., as administrative agent, and the lenders named therein, as hereafter amended or extended from time to time. ARTICLE IX ---------- RIGHTS AND REMEDIES UPON DEFAULT -------------------------------- 9.1. Remedies Upon Default. Should a Default exist, Majority Lenders may, at their election, do any one or more of the following without notice of any kind, including, without limitation, notice of acceleration or of intention to accelerate, presentment and demand or protest, all of which are hereby expressly waived by each Borrower: (a) declare the entire unpaid balance of the Obligation, or any part thereof, immediately due and payable, whereupon it shall be due and payable (provided that, upon the occurrence of a Default under Section 8.1(e) or (f), the entire Obligation shall automatically become due and payable without notice or other action of any kind whatsoever); (b) terminate all or any portion of their Commitments hereunder; (c) reduce any claim to judgment; (d) exercise the Rights of offset or banker's lien against the interest of each Borrower in and to every account and other property of Borrower which are in the possession of any Lender to the extent of the full amount of the Obligation; and (e) exercise any and all other legal or equitable Rights afforded by the Loan Documents or applicable Laws as Majority Lenders shall deem appropriate. 9.2. Waivers by Borrower and Others. Each Borrower and each surety, endorser, guarantor, and other party ever liable for payment of any of the Obligation jointly and severally waive notice, presentment, demand for payment, protest, notice of intention to accelerate, notice of acceleration, and notice of protest and nonpayment, and agree that their liability with respect to the Obligation, or any part thereof, shall not be affected by any renewal or extension in the time of payment of the Obligation, by any indulgence, or by any release or change in any security for the payment of the Obligation, and hereby consent to any and all renewals, extensions, indulgences, releases, or changes, regardless of the number thereof. 9.3. Delegation of Duties and Rights. Each Lender may perform any of its duties or exercise any of its Rights under the Loan Documents by or through its officers, directors, employees, attorneys, agents, or other representatives. 9.4. Lenders Not in Control. None of the covenants or other provisions contained in this Agreement shall, or shall be deemed to, give Lenders the Right or power to exercise control over the affairs or management of any Borrower, the power of Lenders being limited to the Rights of creditors generally and the Right to exercise the remedies provided in this Article IX. 9.5. Cumulative Remedies. The Rights provided for in this Agreement and the other Loan Documents are cumulative and not intended to be exclusive of any other Right given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. 9.6. Expenditures by Lenders. Following any Default hereunder, all court costs, reasonable attorneys' fees, other costs of collection, and other sums spent by Lenders pursuant to 44 the exercise of any Right (including, without limitation, any effort to collect or enforce the Notes) provided herein shall be payable by Borrowers to Lenders on demand, shall become part of the Obligation, and shall bear interest at a rate per annum that is one percent (1%) above the Base Rate from the date spent until the date repaid. 9.7 Performance by Administrative Agent. Should EDS or any other Borrower fail to perform any covenant, duty, or agreement contained herein or in any of the Loan Documents, the Administrative Agent, after giving ten (10) days' notice to EDS and such Borrower, may, but shall not be obligated to, perform or attempt to perform such covenant, duty, or agreement on behalf of such Borrower. In such event, such Borrower shall, at the request of the Administrative Agent promptly pay any amount expended by the Administrative Agent in such performance or attempted performance to the Administrative Agent at the Payment Office for Dollars together with interest thereon at the default rate from the date of such expenditure until paid. Notwithstanding the foregoing, it is expressly understood that neither Administrative Agent nor Lenders assume any liability or responsibility for the performance of any duties of any Borrower hereunder or under any of the Loan Documents or other control over the management and affairs of any Borrower, nor by any such action shall the Administrative Agent or the Lenders be deemed to create a partnership arrangement with any Borrower. ARTICLE X --------- THE ADMINISTRATIVE AGENT ------------------------ 10.1. Appointment and Authorization. Each Lender hereby irrevocably appoints and authorizes Administrative Agent to take such action on its behalf and to exercise such powers under the Loan Documents as are delegated to Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto. With respect to its Committed Sum, the Committed Loans and Bid Rate Loans made by it and the Notes issued to it, Administrative Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not Administrative Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include the Administrative Agent in its capacity as a Lender. Administrative Agent and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, any of Borrowers, and any Person which may do business with any of Borrowers, all as if Administrative Agent were not Administrative Agent hereunder and without any duty to account therefor to Lenders. 10.2. Note Holders. Administrative Agent may treat the payee of any Note as the holder thereof until written notice of transfer shall have been filed with it signed by such payee and in form satisfactory to Administrative Agent. 10.3. Consultation with Counsel. Lenders agree that Administrative Agent may retain legal counsel, accountants and other professionals and may consult with such professionals selected by it and shall not be liable for any action taken or suffered in good faith by it in accordance with the advice of such professionals. 45 10.4. Documents. Administrative Agent shall not be under a duty to examine or pass upon the validity, effectiveness, enforceability, genuineness or value of any of the Loan Documents or any other instrument or document furnished pursuant thereto or in connection therewith, and Administrative Agent shall be entitled to assume that the same are valid, effective, enforceable and genuine and what they purport to be. 10.5. Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, Administrative Agent may resign at any time by giving thirty (30) days' prior written notice thereof to Lenders, EDS and Borrowers and the Administrative Agent may be removed at any time with or without cause by EDS. Upon any such resignation or removal, EDS shall appoint a successor Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article X shall continue in effect for its benefit in respect to any actions taken or omitted to be taken by it while it was acting as Administrative Agent. 10.6. Responsibility of Administrative Agent. It is expressly understood and agreed that the obligations of Administrative Agent under the Loan Documents are only those expressly set forth in the Loan Documents and that Administrative Agent shall be entitled to assume that no Default exists, unless Administrative Agent has actual knowledge of such fact or has received notice from a Lender that such Lender considers that a Default exists and specifying the nature thereof. Lenders recognize and agree that Administrative Agent has no responsibility for confirming the accuracy of any statements made by Borrowers, or to inspect the property, including the books and financial records, of any Borrower, and in disbursing funds to Borrowers, Administrative Agent may rely fully upon statements contained in the relevant Notice of Advance. Neither Administrative Agent nor any of its directors, officers or employees shall be liable for any action taken or omitted to be taken by it under or in connection with the Loan Documents, except for its own gross negligence or willful misconduct. In the absence of gross negligence or willful misconduct, Administrative Agent shall incur no liability under or in respect of any of the Loan Documents by acting upon any notice, consent, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything which it may do or refrain from doing in the reasonable exercise of its judgment, or which may seem to it to be necessary or desirable in the premises. Administrative Agent shall not be responsible to Lenders for any recitals, statements, representations or warranties contained in this Agreement, or in any certificate or other document referred to or provided for in, or received by any Lender under, this Agreement, or for the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any document referred to or provided for herein or for any failure by Borrowers to perform any of their obligations hereunder. Administrative Agent may employ agents and attorneys-in-fact and 46 shall not be answerable, except as to money or securities received by it or its authorized agents, for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. The relationship between Administrative Agent and each of the Lenders is only that of agent and principal and has no fiduciary aspects, and Administrative Agent's duties hereunder are acknowledged to be only ministerial and not involving the exercise of discretion on its part. Nothing in this Agreement or elsewhere contained shall be construed to impose on Administrative Agent any duties or responsibilities other than those for which express provision is herein made. In performing its duties and functions hereunder, Administrative Agent does not assume and shall not be deemed to have assumed, and hereby expressly disclaims, any obligation or responsibility toward or any relationship of agency or trust with or for Borrowers. As to any matters not expressly provided for by this Agreement (including, without limitation, enforcement or collection of the Notes), Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of Majority Lenders and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that Administrative Agent shall not be required to take any action which exposes Administrative Agent to personal liability or which is contrary to this Agreement or applicable law. 10.7. Notices of Default. In the event that Administrative Agent shall have acquired actual knowledge of any Default or any Potential Default, Administrative Agent shall promptly give notice thereof to Lenders. 10.8. Independent Investigation. Each of Lenders severally represents and warrants to Administrative Agent that it has made its own independent investigation and assessment of the financial condition and affairs of EDS in connection with the making and continuation of its participation in the Loans hereunder and has not relied exclusively on any information provided to such Lender by Administrative Agent in connection herewith, and each Lender represents, warrants and undertakes to Administrative Agent that it shall continue to make its own independent appraisal of the creditworthiness of EDS while the Loans are outstanding or while it has any obligation to make Loans hereunder to Borrowers. 10.9. Indemnification of Administrative Agent. Lenders agree to indemnify Administrative Agent (to the extent not reimbursed by Borrowers), Pro Rata, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Administrative Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by Administrative Agent under the Loan Documents, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Administrative Agent's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent, on a Pro Rata basis, promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, 47 delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Administrative Agent is not reimbursed for such expenses by the Borrowers. 10.10. Arrangers and Managers. None of the Lenders identified on the cover page or signature pages of this Agreement as an "arranger" or "manager" shall have any right, power, obligation, liability, responsibility or duty, including, without limitation, any fiduciary duty, under this Agreement other than those applicable to all Lenders as such. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. 10.11. Benefit of Article X. The agreements contained in this Article X are solely for the benefit of Administrative Agent and Lenders, and are not for the benefit of, or to be relied upon by, Borrowers or any third party. ARTICLE XI ---------- MISCELLANEOUS ------------- 11.1. Number and Gender of Words. Whenever in any Loan Document the singular number is used, the same shall include the plural where appropriate, and vice versa; and words of any gender in any Loan Document shall include each other gender where appropriate. 11.2. Headings. The headings, captions, and arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify, or modify the terms of the Loan Documents, nor affect the meaning thereof. 11.3. Exhibits. If any Exhibit which is to be executed and delivered contains blanks, the same shall be completed correctly and in accordance with the terms and provisions contained and as contemplated herein prior to, at the time of, or after the execution and delivery thereof. 11.4. Communications. Unless specifically otherwise provided, whenever any Loan Document requires or permits any consent, approval, notice, request, or demand from one party to another, such communication must be in writing (which may be by telecopier) to be effective and shall be deemed to have been given on the day actually delivered or telecopied, or, if mailed, on the third Business Day after it is enclosed in an envelope, addressed to the party to be notified at the address stated below, properly stamped for first class delivery, sealed, and deposited in the appropriate official postal service. Until changed by notice pursuant hereto (any party being entitled to change its address for purposes of this Section 11.4 by notice to all other parties hereto), the address, and telecopy number for each party for purposes hereof are as follows: 48 BORROWERS: Electronic Data Systems Corporation 5400 Legacy Drive Plano, Texas 75024 Telecopy No.: (214) 605-3005 Telephone No.: (214) 605-3002 Attention: Manager, Corporate Finance COPY TO: Electronic Data Systems Corporation 5400 Legacy Drive Plano, Texas 75024 Telecopy No.: (214) 605-5613 Telephone No.: (214) 605-5500 Attention: General Counsel LENDERS: See Schedule 1 ADMINISTRATIVE AGENT: FOR NOTICES UNDER ARTICLES II AND III AND SECTION 4.2: Citibank, N.A. Bank Loan Syndications One Court Square, 7th Floor Long Island City, NY 11120 Attention: Mr. Phil Green Telecopy No.: (718) 248-4844/45 Telephone No.: (718) 248-4529 IN ALL CASES WITH A HARD COPY TO: Citibank, N.A. Central Customer Service One Court Square, 7th Floor Long Island City, NY 11120 Attention: Ms. Angela Valentin FOR ALL OTHER NOTICES: Citibank, N.A. 399 Park Avenue 8th Floor, Zone 12 New York, NY 10043 Attention: Mr. William G. McKnight, III Telecopy No.: (212) 826-2375 Telephone No.: (212) 559-8851 49 PROCESS AGENT: Prentice Hall Systems, Inc. 15 Columbus Circle New York, New York 10023-7773. COPY TO: Electronic Data Systems Corporation 5400 Legacy Drive Plano, Texas 75024 Telecopy No.: (214) 605-5613 Attention: General Counsel 11.5. Exceptions to Covenants. No Borrower shall take any action or fail to take any action which is permitted as an exception to any of the covenants contained in any of the Loan Documents if such action or omission would result in the breach of any other covenant contained in any of the Loan Documents. 11.6. Survival. All covenants, agreements, undertakings, representations, and warranties made in any of the Loan Documents shall survive all closings under the Loan Documents and, except as otherwise indicated, shall not be affected by any investigation made by any party. 11.7. GOVERNING LAW. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (OTHER THAN THE CONFLICT OF LAWS PROVISIONS THEREOF), EXCEPT TO THE EXTENT THAT FEDERAL LAWS MAY APPLY. 11.8. Maximum Interest Rate. Regardless of any provision contained in any of the Loan Documents, no Lender shall ever be entitled to contract for, charge, take, reserve, receive, or apply, as interest on the Obligation, or any part thereof, any amount in excess of the Highest Lawful Rate, and, in the event any Lender ever contracts for, charges, takes, reserves, receives, or applies as interest any such excess, it shall be deemed a partial prepayment of principal and treated hereunder as such and any remaining excess shall be refunded to the relevant Borrower. In determining whether or not the interest paid or payable, under any specific contingency, exceeds the Highest Lawful Rate, Borrowers and Lenders shall, to the maximum extent permitted under applicable Law, (a) treat all Advances as but a single extension of credit (and Lenders and Borrowers agree that such is the case and that provision herein for multiple Advances and for one or more Notes is for convenience only), (b) characterize any nonprincipal payment as an expense, fee, or premium rather than as interest, (c) exclude voluntary prepayments and the effects thereof, and (d) "spread" the total amount of interest throughout the entire contemplated term of the Obligation; provided that, if the Obligation is paid and performed in full prior to the end of the full contemplated term thereof, and if the interest received for the actual period of existence thereof exceeds the Highest Lawful Rate, any Lender receiving such excess interest shall refund such excess, and, in such event, such Lender shall not be subject to any penalties provided by any Laws for contracting for, charging, taking, reserving, or receiving interest in excess of the Highest 50 Lawful Rate. To the extent the Laws of the State of Texas are applicable for purposes of determining the "Highest Lawful Rate," such term shall mean the "indicated rate ceiling" from time to time in effect under Article 1.04, Title 79, Revised Civil Statutes of Texas, as amended. 11.9. ENTIRETY AND AMENDMENTS. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. This Agreement and the other Loan Documents embody the entire agreement between Borrowers and Lenders and supersedes all prior proposals, agreements and understandings relating to the subject matter hereof. Borrowers certify that they are relying on no representation, warranty, covenant or agreement except for those set forth herein and the other Loan Documents of even date herewith. This Agreement and the other Loan Documents may be amended, or the provisions hereof waived, only by an instrument in writing executed jointly by an authorized officer of EDS and Administrative Agent, acting on behalf of Majority Lenders, and supplemented only by documents delivered or to be delivered in accordance with the express terms hereof. Notwithstanding anything to the contrary set forth herein, no change in the Loan Documents or waiver of the provisions thereof which has the effect of (a) extending the maturity or decreasing the amount of any payment on any Notes or payment of any fee, (b) decreasing any rate or amount of interest or other sums payable to any Lender under the Loan Documents, (c) changing the definition of the term "Majority Lenders", (d) amending or waiving Sections 5.2 (except with respect to a Bid Rate Loan as set forth in Section 5.3), 7.8, 11.9 or 11.12 or (e) discharging any guarantor shall be effective absent the concurrence of all Lenders. No increase to the Committed Sum of any Lender, no extension of the Commitment Termination Date of any Lender and no imposition of any additional obligations upon any Lender, except as expressly provided herein, shall be effective without the consent of such Lender. Notwithstanding the foregoing, EDS or any other Borrower and any Lender of a Bid Rate Loan may, from time to time, and at any time, enter into an amendment of such Bid Rate Loan and the Bid Rate Note related thereto. EDS and Administrative Agent may, from time to time and at any time, enter into an amendment hereof, for the purpose of adding as a Lender hereunder any commercial lending institution. 11.10. Waivers. The acceptance by Lenders at any time and from time to time of partial payment on the Obligation shall not be deemed to be a waiver of any Default or Potential Default then existing. No failure to exercise and no delay on the part of Lenders or their respective officers, directors, employees, agents, representatives or attorneys in exercising any Right under this Agreement or any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any Right under this Agreement preclude any other or further exercise thereof or the exercise of any other Right. Any waiver or consent allowed hereunder and in conformity with the provisions hereof shall be effective only in the specific instance to which it relates and for the purpose for which it is given. 11.11. Multiple Counterparts. This Agreement may be executed in any number of identical counterparts, and by different parties hereto on separate counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one 51 Agreement; but, in making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. 11.12. Parties Bound; Participations and Assignments. (a) Successors and Assigns. This Agreement is binding upon, and inures to the benefit of, each Lender, each Borrower, and their respective successors and assigns; provided that, unless otherwise permitted by this Section 11.12, no Lender may transfer, pledge, assign, sell participations in or otherwise encumber its Commitment or Loans hereunder; and provided further that, except as otherwise expressly provided herein, the Borrowers shall not have any right to assign their rights or obligations hereunder or any interest herein without the prior written consent of the Lenders. (b) Participations. Any Lender may, in accordance with applicable Law, at any time sell to one or more banks or other entities (each, a "PARTICIPANT") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder; provided that such Lender shall have given prior written notice to EDS of the identity of each such Participant and provided, further, that no Lender shall transfer, grant or assign any participation under which any Participant shall have rights to approve any amendment, supplement or modification to or waiver of this Agreement except to the extent such amendment, supplement, modification or waiver would (i) increase the amount of the Participant's funding obligations in respect of such Lender's Commitment, (ii) reduce the principal of, or interest on, any of the Participant's interest in such Lender's Notes or any fees or other amounts payable to such Lender hereunder (to the extent an interest therein has been sold to the Participant) or (iii) postpone the date fixed for any payment of principal of, or interest on, any of such Lender's Notes or any fees or other amounts payable to such Lender hereunder (to the extent an interest therein has been sold to the Participant). In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any obligation owing to it hereunder for all purposes under this Agreement, and Borrowers and the Administrative Agent shall continue to be entitled to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Borrowers hereby agree that each Participant shall be entitled to the benefits of Sections 3.5, 3.10, 3.11, 3.12 and 3.14 with respect to its participation in the Commitment and the Loans outstanding from time to time as if it were a Lender; provided that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Assignments. Any Lender may, in the ordinary course of its commercial lending business and in accordance with applicable Law, at any time and from time to time, assign to any Lender or any Affiliate thereof or, with the prior written consent of 52 EDS (which consent shall not be unreasonably withheld), to an additional bank or financial institution (each such Lender, Affiliate, bank or financial institution, an "ASSIGNEE") all or any part of its rights and obligations under this Agreement pursuant to an Assignment and Acceptance, substantially in the form of Exhibit I, executed by such Assignee, such assigning Lender and EDS and delivered to the Administrative Agent for its acceptance and recording in the Register; provided that, unless EDS otherwise consents, any such assignment to any Assignee that is not a Lender, or an Affiliate of a Lender shall be an undivided share of the assigning Lender's Committed Sum and Loans, in a minimum amount of $17,500,000 and shall not exceed fifty percent (50%) of the assigning Lender's Committed Sum as of the date such Lender became a Lender hereunder and provided, further, that no Assignee shall be entitled to receive any greater amount pursuant to Sections 3.12(a) or 3.14 than the assignor Lender would have been entitled to receive in respect of the amount of the Loan(s) assigned had no such assignment occurred. Upon such execution, delivery, acceptance and recording from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of (and be) a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement. Notwithstanding anything to the contrary contained herein, any Lender may sell, transfer, assign or grant participations in all or any part of the Bid Rate Loans made by it to any Assignee without requirement of notice or consent and without limitation of any kind, provided that no Assignee of any Bid Rate Loan shall be entitled to receive any greater amount pursuant to Sections 3.12(a) or 3.14 than the assignor Lender would have been entitled to receive in respect of the amount of the Bid Rate Loan(s) assigned had no such assignment occurred. (d) Maintenance of Register. The Administrative Agent shall maintain at its address referred to in Section 11.4 a copy of each Assignment and Acceptance delivered to it and a register (the "REGISTER") for the recordation of the name and address of each of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be prima facie evidence of the existence and amounts of the obligations of Borrowers therein recorded, and Borrowers, Administrative Agent and Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection and copying by Borrowers or any Lender at any reasonable time and from time to time upon reasonable prior notice. The Administrative Agent shall provide a copy of the Register to EDS on a monthly basis. (e) Payment of Costs. Upon its receipt of an Assignment and Acceptance executed by an assigning Lender, an Assignee, Administrative Agent and EDS and payment by the assigning Lender to Administrative Agent and EDS of all of their reasonable costs in connection with such assignment, including without limitation a processing and recordation fee of $3,000 to Administrative Agent, Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date 53 determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the assigning Lender, its Assignee and EDS. (f) Delivery of Notes. Within five (5) Business Days after its receipt of an Assignment and Acceptance, together with an execution copy of each replacement Note, the applicable Borrower, shall execute and deliver to the Administrative Agent in exchange for the surrendered Note or Notes such replacement Note or Notes, duly executed, and payable to the order of such Assignee in an amount equal to the amount assigned to it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained a portion of the Obligation hereunder, a replacement Note or Notes to the order of the assigning Lender in an amount equal to the portion of the Obligation retained by it hereunder. Such replacement Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of the surrendered Note or Notes. (g) Disclosure of Borrower Information. Borrowers authorize each Lender to disclose to any prospective Participant, any Participant or any prospective Assignee (each, a "TRANSFEREE") any and all financial information in such Lender's possession concerning Borrowers which has been delivered to such Lender by or on behalf of Borrowers pursuant to this Agreement or which has been delivered to all Lenders by or on behalf of Borrowers in connection with their respective credit evaluations of Borrowers prior to becoming a party to this Agreement; provided that each Lender disclosing such information notifies EDS in advance that it is doing so, and, prior to any such disclosure, the Transferee shall agree to preserve the confidentiality of any information relating to Borrowers received from such Lender. Nothing contained in this Section 11.12(f) shall be deemed to prohibit the delivery to any Transferee of any financial information which is otherwise publicly available or to subject the delivery of any such publicly available information to the notice and consent procedures hereinabove set forth. (h) Pledges and Assignments to Federal Reserve Banks. Nothing herein shall prohibit any Lender from pledging or assigning all or any portion of its Loans or Bid Rate Loans to any Federal Reserve Bank in accordance with applicable Law but such Lender shall remain liable for performance of its obligations hereunder. 11.13. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. BORROWERS HEREBY AGREE THAT ANY SUIT, ACTION OR PROCEEDING AGAINST BORROWERS WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF, MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK, BOROUGH OF MANHATTAN, OR IN THE UNITED STATES COURTS LOCATED IN THE STATE OF NEW YORK, BOROUGH OF MANHATTAN AS MAJORITY LENDERS IN THEIR SOLE DISCRETION MAY ELECT AND THE BORROWERS HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THE PURPOSE OF 54 ANY SUCH SUIT, ACTION OR PROCEEDING. BORROWERS HEREBY AGREE THAT SERVICE OF ALL WRITS, PROCESS AND SUMMONSES IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN THE STATE OF NEW YORK MAY BE MADE UPON PROCESS AGENT AT ITS ADDRESS AS SET FORTH IN SECTION 11.4 (AS SUCH ADDRESS MAY BE CHANGED FROM TIME TO TIME) AND EACH OF THE BORROWERS HEREBY IRREVOCABLY APPOINTS PROCESS AGENT AS ITS TRUE AND LAWFUL ATTORNEY-IN-FACT IN THE NAME, PLACE AND STEAD OF SUCH BORROWER TO ACCEPT SUCH SERVICE OF ANY AND ALL SUCH WRITS, PROCESS AND SUMMONSES, AND AGREES THAT THE FAILURE OF THE PROCESS AGENT TO GIVE ANY NOTICE OF SUCH SERVICE OF PROCESS TO IT SHALL NOT IMPAIR OR AFFECT THE VALIDITY OF SUCH SERVICE OR OF ANY JUDGMENT BASED THEREON. BORROWERS HEREBY IRREVOCABLY CONSENT TO THE SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN SAID COURTS BY THE MAILING THEREOF BY ADMINISTRATIVE AGENT OR ANY LENDER BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWERS' ADDRESS SET FORTH IN SECTION 11.4 HEREOF. EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY NOTE BROUGHT IN THE COURTS LOCATED IN THE STATE OF NEW YORK, BOROUGH OF MANHATTAN, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, WHICH WAIVER IS INFORMED AND VOLUNTARY. 11.14. Payment of Expenses. EDS agrees to pay (a) all costs and expenses of Lenders, including attorneys' fees and expenses, incurred by Lenders in connection with the preservation and enforcement of Lenders' rights under this Agreement, the Notes and/or the other Loan Documents and (b) the legal fees and expenses of Haynes and Boone, L.L.P., in connection with the negotiation, preparation, execution and delivery of this Agreement, the Notes and the other Loan Documents. 11.15. Invalid Provisions. If any provision of any of the Loan Documents is held to be illegal, invalid or unenforceable under present or future laws during the term of this Agreement, such provision shall be fully severable; such Loan Document shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of such Loan Document; and the remaining provisions of such Loan Document shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from such Loan Document. Furthermore, in lieu of each such illegal, invalid or unenforceable provision there shall be added as part of such Loan Document a provision mutually agreeable to Borrowers, Administrative Agent and Majority Lenders as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 55 In the event Borrowers, Administrative Agent and Majority Lenders are unable to agree upon a provision to be added to the Loan Document in question within a period of ten (10) Business Days after a provision of any Loan Document is held to be illegal, invalid or unenforceable, then a provision acceptable to Administrative Agent and Majority Lenders as similar in terms to the illegal, invalid or unenforceable provision as is possible and be legal, valid and enforceable shall be added automatically to such Loan Document. In either case, the effective date of the added provision shall be the date upon which the prior provision was held effectively to be illegal, invalid or unenforceable. 11.16. Borrowers' Right of Offset. (a) Offset Against Accounts. Each of Lenders and the Borrowers hereby agree, with respect to the Obligation, that, automatically and without any action by or notice to the Borrowers, upon the occurrence of the appointment of a conservator or receiver for a Lender or, if a Lender's deposits are insured by the Federal Deposit Insurance Corporation on the date of an Advance by such Lender, the termination of federal deposit insurance of such Lender's deposits by the Federal Deposit Insurance Corporation, or any successor thereto, each Borrower's unpaid payment obligations under the Obligation, including any unpaid principal and interest thereunder, shall be offset, Dollar for Dollar, against any and all funds of such Borrower on deposit with such Lender in any and all accounts which such Borrower maintains at such Lender in the name of such Borrower, whether individually, or jointly with any of its Affiliates, and which have not been previously pledged to a party other than such Lender (the "Accounts"). The Accounts shall in such circumstance be applied against the Obligation in such order as each Borrower elects or, if no such election is made, in such order as the Lender or the entity applying such Accounts elects. (b) Lender Representations. Each Lender whose deposits are insured by the Federal Deposit Insurance Corporation represents and warrants that the execution of this Agreement by such Lender and the obligations herein undertaken by it have been approved in compliance with applicable regulations of the Federal Deposit Insurance Corporation. 11.17. Indemnification of Lenders. EDS agrees to indemnify and hold Administrative Agent and each Lender and their respective directors, officers, shareholders, employees, attorneys and agents, and Affiliates (each, an "INDEMNITEE") harmless from and against any and all liabilities, obligations, losses, actions, judgments, suits, disbursements, penalties, damages (other than consequential damages) and related expenses, including attorneys' fees and expenses, with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the Notes, and the other Loan Documents (collectively, the "INDEMNIFIED LIABILITIES" and, individually, an "INDEMNIFIED LIABILITY"), provided, however, that EDS and the Borrowers shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities arising from (a) the gross negligence or willful misconduct of any Indemnitee, (b) any legal proceedings commenced against any Indemnitee by any other Indemnitee or by any Participant or Assignee, (c) any violation or claimed violation by any Indemnitee of any material banking Law of the jurisdiction of its or its related Lender's Applicable Lending Office, or (d) any 56 action by Administrative Agent or any Lender not required or contemplated by the Agreement or the Loan Documents or necessary for the performance of Administrative Agent's or any Lender's obligations, Administrative Agent's or any Lender's duties or enforcement of Administrative Agent's or any Lender's rights thereunder. The provisions of this Section 11.17 shall remain operative and in full force and effect regardless of the termination of the Commitments, the consummation of the transactions contemplated hereby, the repayment of the Loans, the occurrence of the Commitment Termination Date, the invalidity, illegality, or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of Administrative Agent or the other Lenders. All amounts due under this Section 11.17 shall be payable within ten (10) days after written demand therefor, delivered to EDS and the relevant Borrower (if other than EDS) through the Administrative Agent as promptly as practical after the Indemnitee in question obtains knowledge of any Indemnified Liability, which notice shall be certified by an authorized officer of Administrative Agent or Lender (if Administrative Agent or such Lender is the Indemnitee making such claim) and shall reasonably identify the basis upon which such claim is made. 11.18. Designation of EDS Affiliates as Borrowers. EDS may, at any time or from time to time, supplement or amend Schedule 2 hereto to add an EDS Affiliate or delete a Designated EDS Affiliate by delivering to Administrative Agent a revised Schedule 2 together, in the case of an addition of an EDS Affiliate, with a certificate executed by the Treasurer, Assistant Treasurer or Chief Financial Officer of EDS stating that the guaranty by EDS of the obligations of such EDS Affiliate may reasonably be expected to benefit, directly or indirectly, EDS. 11.19 Judgment Currency. (a) If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or under the Notes from a currency (the "ORIGINAL CURRENCY") into another currency (the "OTHER CURRENCY"), the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the Original Currency with the Other Currency at its Payment Office in London, England on the second Eurocurrency Business Day preceding the day on which final judgment is given. (b) The obligation of any Borrower in respect of any sum due in the Original Currency from it to any Lender or the Administrative Agent hereunder or under the Note held by such Lender shall, notwithstanding any judgment in any Other Currency, be discharged only if and to the extent that on the Eurocurrency Business Day following receipt by such Lender or the Administrative Agent of any sum adjudged to be so due in such Other Currency such Lender or the Administrative Agent may in accordance with normal banking procedures purchase such amount of the Original Currency with such Other Currency at its Payment Office in London, England which the Administrative Agent could have purchased on the second Eurocurrency Business Day preceding the day on which the final judgment referred to in Section 11.19(a) is given; if the amount of the Original Currency so purchased is less than the amount of the Original Currency which the 57 Administrative Agent could have purchased on the second Eurocurrency Business Day preceding the day on which such final judgment is given, such Borrower agrees, as a separate Obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent against such difference, and if the amount of the Original Currency so purchased exceeds the amount of the Original Currency which the Administrative Agent could have purchased on the second Eurocurrency Business Day preceding that on which such final judgment is given, such Lender or the Administrative Agent agrees to remit to such Borrower such excess. 11.20 Lenders' Right of Setoff; Payments Set Aside; Sharing of Payments. (a) Right of Setoff. Should a Default exist, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of a Borrower against any and all of the obligations of such Borrower now or hereafter existing under this Agreement and the Notes, irrespective of whether or not demand shall have been made under this Agreement or any such Note and although such obligations may be unmatured. Each Lender agrees promptly to notify any affected Borrower after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section 11.20 are in addition to other rights and remedies (including, without limitation, other rights of setoff) which such Lender may have. (b) Payments Set Aside. To the extent that EDS or any other Borrower makes a payment or payments to a Lender or a Lender exercises its right of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other person under any Debtor Relief Law or equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all rights and remedies therefor, shall be revived and shall continue in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred. (c) Sharing of Payments. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of the Loans made by it (other than costs or losses paid pursuant to Sections 3.5, 3.10 or 3.12) in excess of its ratable share of payments on account of the Loans obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders such participations in the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the 58 amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. EDS and each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 11.20(c) may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation. [The remainder of this page is intentionally left blank.] 59 EXECUTED as of the day and year first above written. BORROWER: ELECTRONIC DATA SYSTEMS CORPORATION By:______________________________________ Name:____________________________________ Title:___________________________________ ADMINISTRATIVE AGENT: CITIBANK, N.A., in its individual capacity as a Lender and as Administrative Agent By:______________________________________ Name:____________________________________ Title:___________________________________ ARRANGERS/LENDERS: BANCO SANTANDER - NEW YORK BRANCH By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ 60 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By:______________________________________ Name:____________________________________ Title:___________________________________ CHEMICAL BANK By:______________________________________ Name:____________________________________ Title:___________________________________ CREDIT LYONNAIS CAYMAN ISLAND BRANCH By:______________________________________ Name:____________________________________ Title:___________________________________ MORGAN GUARANTY TRUST COMPANY OF NEW YORK By:______________________________________ Name:____________________________________ Title:___________________________________ NATIONSBANK OF TEXAS, N.A. By:______________________________________ Name:____________________________________ Title:___________________________________ 61 MANAGERS/LENDERS: BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ CIBC INC. By:______________________________________ Name:____________________________________ Title:___________________________________ PNC BANK, NATIONAL ASSOCIATION By:______________________________________ Name:____________________________________ Title:___________________________________ TORONTO DOMINION (TEXAS), INC. By:______________________________________ Name:____________________________________ Title:___________________________________ WACHOVIA BANK OF GEORGIA, N.A. By:______________________________________ Name:____________________________________ Title:___________________________________ 62 LENDERS: THE DAI-ICHI KANGYO BANK, LTD. By:______________________________________ Name:____________________________________ Title:___________________________________ SOCIETE GENERALE, SOUTHWEST AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ THE SANWA BANK, LIMITED, DALLAS AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ THE BANK OF TOKYO LTD., NEW YORK AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ 63 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ THE FUJI BANK, LIMITED - HOUSTON AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ THE SUMITOMO BANK, LIMITED, HOUSTON AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ COMMERZBANK AKTIENGESELLSCHAFT, ATLANTA AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ 64 DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ FIRST FIDELITY BANK, N.A. By:______________________________________ Name:____________________________________ Title:___________________________________ ISTITUTO BANCARIO SAN PAOLO DI TORINO S.P.A. By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ 65 BANCA DI ROMA - HOUSTON AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ BANCA MONTE DEI PASCHI DI SIENA, S.p.A. By:______________________________________ Name:____________________________________ Title:___________________________________ By:______________________________________ Name:____________________________________ Title:___________________________________ COMERICA BANK By:______________________________________ Name:____________________________________ Title:___________________________________ KREDIETBANK N.V. By:______________________________________ Name:____________________________________ Title:___________________________________ 66 NATIONAL WESTMINSTER BANK Plc By:______________________________________ Name:____________________________________ Title:___________________________________ THE ROYAL BANK OF SCOTLAND plc By:______________________________________ Name:____________________________________ Title:___________________________________ THE SAKURA BANK, LIMITED, HOUSTON AGENCY By:______________________________________ Name:____________________________________ Title:___________________________________ SUNBANK, NATIONAL ASSOCIATION By:______________________________________ Name:____________________________________ Title:___________________________________ UNITED STATES NATIONAL BANK OF OREGON By:______________________________________ Name:____________________________________ Title:___________________________________ 67 AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED CAYMAN ISLANDS BRANCH By:______________________________________ Name:____________________________________ Title:___________________________________ BANK OF MONTREAL By:______________________________________ Name:____________________________________ Title:___________________________________ CREDIT SUISSE By:______________________________________ Name:____________________________________ Title:___________________________________ FIRST INTERSTATE BANK OF CALIFORNIA By:______________________________________ Name:____________________________________ Title:___________________________________ THE FIRST NATIONAL BANK OF BOSTON By:______________________________________ Name:____________________________________ Title:___________________________________ 68 THE FIRST NATIONAL BANK OF MARYLAND By:______________________________________ Name:____________________________________ Title:___________________________________ MELLON BANK, N.A. By:______________________________________ Name:____________________________________ Title:___________________________________ STANDARD CHARTERED BANK By:______________________________________ Name:____________________________________ Title:___________________________________ 69 EXHIBIT 10(J) REGISTRATION RIGHTS AGREEMENT By and Between GENERAL MOTORS CORPORATION and UNITED STATES TRUST COMPANY OF NEW YORK as Trustee of THE GENERAL MOTORS HOURLY-RATE EMPLOYEES PENSION PLAN TABLE OF CONTENTS -----------------
PAGE ---- 1. Contribution of Registrable Securities......................... 2 2. Restrictions on Transfer....................................... 4 3. Demand Transfers............................................... 12 4. Piggyback Registration......................................... 17 5. Holdback Period................................................ 20 6. Other Registration Rights...................................... 21 7. Demand, Piggyback and Shelf Registration Procedures............ 25 8. Participation in Underwritten Transfers........................ 27 9. Registration Expenses and Legal Counsel........................ 27 10. Indemnification................................................ 28 11. Definitions.................................................... 31 12. Miscellaneous.................................................. 33 EXHIBITS -------- EXHIBIT A......................................... Form of Transfer Agreement EXHIBIT B......................................... Interest Rate Schedule EXHIBIT C......................................... Form of Succession Agreement
-i- REGISTRATION RIGHTS AGREEMENT This Agreement is entered into on March 12, 1995, by and between General Motors Corporation, a Delaware corporation (sometimes referred to herein as "Issuer"), and United States Trust Company of New York, as trustee (the "Trustee") of a trust established under the General Motors Hourly-Rate Employees Pension Plan (the "Pension Plan"), for the account and on behalf of the Pension Plan (which shall thereby be deemed a party to this Agreement). Capitalized terms used and not otherwise defined herein shall have the respective meanings set forth in Section 11. WHEREAS, Issuer intends, subject to the satisfaction of certain regulatory and other conditions, to contribute approximately 177 million shares of Class E Common Stock to the Pension Plan; and WHEREAS, the Pension Plan is prepared to accept the Class E Common Stock that may be contributed to it as described herein and to hold and dispose of any such Class E Common Stock on the terms and conditions hereinafter stated; and WHEREAS, the Pension Plan is the owner of shares of Class E Common Stock acquired by the Pension Plan pursuant to an Exchange and Registration Agreement, dated as of November 4, 1992 (the "Exchange Agreement"), by and among Issuer, the Pension Plan and the General Motors Retirement Program for Salaried Employees (the "Salaried Plan"); and WHEREAS, General Motors and the Pension Plan have entered into a Transfer Agreement, dated as of the date hereof, substantially in the form of Exhibit A attached hereto (as such agreement may be amended or modified from time to time, the "Transfer Agreement"), pursuant to which the Pension Plan has agreed to hold and dispose of the Class E Common Stock owned by the Pension Plan on the terms and conditions stated therein; and WHEREAS, the Trustee has been appointed by the named fiduciary of the Pension Plan (the "Named Fiduciary") (as determined in accordance with Section 402(a) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), to manage any shares of Class E Common Stock held by the Pension Plan as described herein and to exercise all rights, powers and privileges appurtenant to such shares (subject to the authority of the Named Fiduciary to terminate such appointment and appoint one or more other investment managers for any such shares); and WHEREAS, the Trustee has full power and authority to execute and deliver this Agreement for the account and on behalf of the Pension Plan and to so bind the Pension Plan; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Issuer and the Pension Plan agree as follows: 1. Contribution of Registrable Securities. -------------------------------------- (a) Issuer agrees that any contribution of Registrable Securities made by Issuer to the Pension Plan (each such contribu tion being hereinafter referred to as a "Contribution") shall be made only on such days as the New York Stock Exchange, Inc. ("NYSE") shall be open for trading (a "Business Day"). (b) The Pension Plan represents that it beneficially owns _______ shares of Class E Common Stock as of the date hereof (as determined pursuant to Section 16 of the Exchange Act (or any successor thereto) ("Section 16")) and agrees that, after the date hereof and until the final Contribution is made hereunder, it shall not acquire beneficial ownership of any additional shares of Class E Common Stock (as so determined), except pursuant to a Contribution made hereunder. Issuer agrees that if it makes multiple Contributions, either (i) no Contribution prior to the final Contribution will cause the Pension Plan to become a ten percent beneficial owner (as defined in Rule 16a-2 under the Exchange Act (or any successor thereto)) or (ii) Issuer will not propose to its stockholders any transaction that would result in a "sale" of shares of Class E Common Stock by the Pension Plan for purposes of Section 16 being deemed to occur (unless such sale is exempt under Section 16(b) of the Exchange Act (or any successor thereto) ("Section 16b")) prior to the date that is six months and one day after the final Contribution (or, if Section 16 is amended to change the period within which purchases and sales are matched for purposes of determining whether profits are recoverable by an issuer, the date that is one day after the expiration of a period of such length commencing on the date the final Contribution is made); provided, that is understood that nothing herein shall prohibit Issuer from submitting any such transaction to its stockholders prior to such date so long as any such sale is deemed to occur on or after such date. (c) Issuer agrees that it shall give the Trustee and its valuation adviser on behalf of the Pension Plan notice by teleconf erence after the close of normal trading on the NYSE but no later than 5:00 p.m., New York time, on the Business Day prior to the Business Day on which Issuer contemplates making such Contribution that it contemplates making a Contribution; provided, however, that such notice shall be revocable by Issuer at any time in its sole discretion prior to the conclusion of the teleconference referred to in Section 1(d). In such teleconference, Issuer shall state the date on which Issuer contemplates making the proposed Contribution and a range for the number of Registrable Securities which may be -2- contributed, and the Trustee, together with its valuation adviser, will estimate a value per share, based on the closing price on the day of notice on the NYSE of Class E Common Stock, at various points within such range. (d) As soon as practicable, and in any event prior to 10:30 a.m., New York time, on the day of the proposed Contribution, Issuer will give the Trustee and its valuation adviser on behalf of the Pension Plan notice by teleconference of its continued inter est, if any, in making a Contribution. In such teleconference, Issuer will make one or more estimates of the specific number of Registrable Securities which Issuer may contribute, and the Trustee, together with its valuation adviser, will state the value per share it would assign for the Contribution based on each such estimate. If Issuer so decides, it shall irrevocably commit itself in such teleconference to contribute a number of Registrable Securities equal to one of such estimates, and the Trustee's valua tion adviser shall be irrevocably committed to opine to the applicable value per share previously stated by it in such tele conference. The Contribution, if any, shall be effective at the end of such teleconference, and the value per share for purposes of such Contribution shall be such stated value. Immediately after the teleconference in which a Contribution is made, Issuer shall deliver instructions to its transfer agent to issue the Registrable Securities so contributed (in the form described below) and to register such Registrable Securities in the name of the Pension Plan or its nominee, and Issuer shall confirm such Contribution by delivering copies of such transfer instructions to the Trustee. As soon as practicable after the teleconference, and in any case no later than 5:00 p.m., New York time, on the Business Day on which such Contribution is made, the Trustee's valuation adviser will deliver to the Trustee, with a copy to Issuer, its written valua tion opinion, confirming the valuation given in the teleconference. (e) Delivery of certificates representing the duly authorized, validly issued, fully paid and nonassessable shares of Class E Common Stock contributed in a Contribution shall be made to the Pension Plan at the offices of the Trustee for the Pension Plan (or such other place as may be mutually agreed upon), in such form as shall permit, subject to the provisions of this Agreement, the Transfer of the Registrable Securities through normal means of settlement (subject to the proviso in the next following sentence), not later than 5:00 p.m., New York time, on the fourth full Business Day after such Contribution. Such certificates shall be in due and proper form for delivery under applicable corporate law and shall be accompanied by such other documents and certificates as may be reasonably requested by the Trustee to confirm that the Pension Plan, upon receipt of such certificates, may, subject to the provisions of this Agreement, Transfer record and beneficial ownership of the shares of Class E Common Stock represented by such certificates; provided, however, that, subject to Section 1(f) below, each such certificate representing the Registrable Securi- -3- ties shall conspicuously bear legends in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A REGISTRATION RIGHTS AGREEMENT, DATED __________, 1995, BY AND BETWEEN THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND UNITED STATES TRUST COMPANY OF NEW YORK, AS TRUSTEE OF A TRUST ESTABLISHED UNDER THE GENERAL MOTORS HOURLY-RATE EMPLOYEES PENSION PLAN, THAT CONTAINS, AMONG OTHER THINGS, CERTAIN RESTRICTIONS ON THE TRANSFER OF SUCH SECURITIES. A COPY OF SUCH REGISTRATION RIGHTS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST." The certificates representing shares of Class E Common Stock held by the Pension Plan and acquired other than pursuant to a Contribution shall be promptly surrendered to Issuer in order that Issuer's transfer agent may place such legends upon them. (f) Issuer will instruct its transfer agent that the legends set forth in Section 1(e) shall be removed upon the Pension Plan's Transfer of shares of Class E Common Stock if such Transfer is made in accordance with all applicable provisions of this Agreement; provided, however, that if such Transfer is a Negotiated Transfer (as defined below) that is not registered under the Securities Act, the first legend shall remain on the certificates representing such shares until such time as the restrictions set forth in such legend cease to be applicable. (g) The Pension Plan represents and warrants that the Pension Plan, together with its investment managers, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Registrable Securities. The Pension Plan understands and acknowl edges that the Contributions have not been and will not be regis tered under the Securities Act or any state securities law and that the Registrable Securities may not be the subject of any Transfer except as expressly permitted by this Agreement. 2. Restrictions on Transfer. (a) The Pension Plan shall not make any Transfer of any Registrable Securities other than, in each case, in accordance with the terms and conditions of this Agreement, pursuant to (i) a -4- Public Transfer (as defined below), (ii) a Negotiated Transfer, (iii) as described in subsection (d), (e), (f), (g) or (h) below, (iv) as described in Section 4 or 6 below, (v) from and after such time as the Pension Plan reduces its ownership of the Registrable Securities to less than 50 million shares of Class E Common Stock, pursuant to Rule 144 under the Securities Act or any successor thereto ("Rule 144") (without giving effect to the provisions of paragraph (k) (or any successor thereto) of Rule 144) and (vi) from and after such time as the Pension Plan reduces its ownership of the Registrable Securities to less than 25 million shares of Class E Common Stock, pursuant to Rule 144, (vii) a Transfer to Issuer or a wholly-owned direct or indirect subsidiary of Issuer pursuant to a self-tender offer or otherwise and (viii) a Transfer pursuant to a merger or consolidation in which Issuer or a wholly-owned direct or indirect subsidiary of Issuer is a constituent corporation. Except as provided in Section 6(b), no Transfer described in clause (iii), (iv), (v), (vi), (vii) or (viii) of the preceding sentence shall be considered a Demand Transfer (as defined below). (b) The Pension Plan shall not make any Transfer of Registrable Securities pursuant to a Demand Registration Statement (as defined below), a Shelf Registration Statement (as defined below) or a registration statement pursuant to a Piggyback Registration (as defined below) or a Strategic Partner Demand Registration (as defined below) other than in accordance with the plan of distribution described therein. (c) The Pension Plan shall not make any Transfer of securities convertible into or exercisable or exchangeable for the Registrable Securities or any other securities the value of which is derived from the Registrable Securities without obtaining the prior written consent of Issuer to such Transfer. (d) Notwithstanding the provisions of this Agreement to the contrary, the Pension Plan may at any time deliver to Issuer a written notice that the Pension Plan proposes to make a Transfer of Registrable Securities to or for the benefit of an employee benefit plan maintained or contributed to by Issuer or any of its affiliates in connection with the satisfaction of ordinary course funding obligations or investment objectives with respect to such employee benefit plan. Each notice of a proposed Transfer pursuant to this Section 2(d) shall be delivered a reasonable period of time before such proposed Transfer and, in any event, not less than 30 days before such proposed Transfer. The Pension Plan shall establish, to the reasonable satisfaction of Issuer, that such proposed Transfer is in compliance with ERISA, federal and state securities laws and regulations and other applicable laws and regulations. Notwithstanding the foregoing, the Pension Plan shall not effect any such Transfer if Issuer's legal counsel advises Issuer and the Pension Plan in writing that such Transfer would constitute a "prohibited transaction" (as described in Section 4975 of the Internal Revenue Code of 1986, as amended), unless the -5- Pension Plan establishes to the reasonable satisfaction of Issuer that an exemption from such Section is available. (e) Notwithstanding the provisions of this Agreement to the contrary, the Pension Plan may at any time effect a Transfer by tendering any or all of the Registrable Securities into an exchange offer, a tender offer or a request or invitation for tenders (as such terms are used in Sections 14(d) or 14(e) of the Exchange Act and the rules and regulations of the Commission thereunder) (collectively, a "tender offer")) for Class E Common Stock if (X) such Transfer is effected within the 24-hour period immediately prior to the then scheduled expiration time for such tender offer, and (Y) at the time the Pension Plan proposes to effect such Transfer: (i) Issuer (A) does not have in effect a stockholders rights plan or (B) has in effect a stockholders rights plan but there has been a redemption, revocation or similar invalidation of the preferred stock or other rights issued under such stockholders rights plan (the "Rights"), in either case as a result of (X) action of the Board of Directors of Issuer (or any committee thereof) in connection with such tender offer (including as a result of a finding that such tender offer was a "permitted offer" under the terms of such stockholders rights plan) or (Y) a final and non- appealable order of a court of competent jurisdiction issued in connection with such tender offer in response to a challenge to the validity and/or effects of such stockholders rights plan or Rights; or (ii) Issuer (A) does not have in effect a stockholders rights plan or (B) has in effect a stockholders rights plan but there has been a redemption, revocation or similar invalidation of any Rights issued thereunder, in either case other than as a result of the matters described in clause (i) above and other than as a result of a court order of the type described in clause (i) above that has not become final and non-appealable, and (X) the Board of Directors of Issuer has not recommended rejection of such tender offer pursuant to Rule 14e-2(a) under the Exchange Act or any successor thereto ("Rule 14e-2(a)"), or (Y) at least half of the members of the Board of Directors of Issuer who are not officers or employees of Issuer and who are not representatives, nominees or affiliates of the bidder (as defined in Rule 14d-1(c) under the Exchange Act or any successor thereto) (the "Bidder") making such tender offer (collectively, the "Independent Directors") did not recommend rejection of such tender offer when the Board of Directors of Issuer determined the position of Issuer with respect to such tender offer as contemplated by Rule 14e-2(a) or (Z) there are fewer than two members of the Board of Directors of Issuer that are Independent Directors at -6- the time the Board of Directors of Issuer considers such tender offer; or (iii) Issuer (A) does not have in effect a stockholders rights plan or (B) has in effect a stockholders rights plan but there has been a redemption, revocation or similar invalidation of any Rights issued thereunder, in either case other than as a result of the matters described in clause (i) above and other than as a result of a court order of the type described in clause (i) above that has not become final and non-appealable and other than as a result of a proposal initiated, recommended, endorsed, supported or encouraged, directly or indirectly, publicly or privately, by the Pension Plan (it being understood that, for purposes of this subsection (iii), a vote by the Pension Plan in favor of any such proposal shall constitute support for such proposal), and both (X) the Pension Plan, after consultation with its legal counsel and financial advisors, has concluded in good faith that the Minimum Tender Condition with respect to such tender offer will likely be satisfied without giving effect to any shares of Class E Common Stock tendered or to be tendered into such tender offer by the Pension Plan and (Y) after the date of the commencement of such tender offer and prior to the 24-hour period immediately prior to the then scheduled expiration time of such tender offer, Issuer has not given written notice to the Pension Plan that such Transfer may not be made under this subsection (iii), which notice included the good faith determination of the Board of Directors of Issuer as to the Put Price as contemplated by Section 2(f)(iii) (or, if given, such notice has been withdrawn in writing). If, at any time after the Pension Plan has made a Transfer by tendering Registrable Securities into a tender offer pursuant to this Section 2(e), the Bidder making such tender offer decreases the percentage or number of shares of Class E Common Stock being solicited for purchase, decreases the amount or changes the form of consideration offered to tendering stockholders or otherwise makes a material change or waives a material condition in the terms of such tender offer such that the then scheduled expiration date of such tender offer is extended, then the Pension Plan shall, upon the request of Issuer, withdraw such Registrable Securities from such tender offer as promptly as practicable, subject to the Pension Plan's right to tender Registrable Securities again as contemplated by this Agreement. If the Pension Plan is not permitted to make a Transfer of Registrable Securities pursuant to Section 2(g), promptly (and in any event within one Business Day after any public announcement with respect thereto) after the Board of Directors of Issuer determines the position of Issuer with respect to any tender offer as contemplated by Rule 14e-2(a), Issuer shall give the Pension Plan written notice of such position by the Board of Directors of -7- Issuer and by the Independent Directors as described in subsection (ii) above. If there are fewer than two members of the Board of Directors of Issuer that are Independent Directors at the time the Board of Directors of Issuer considers such tender offer, such notice shall so state. If, based on such positions by the Board of Directors of Issuer and the Independent Directors, a Transfer to be made by tendering into such tender offer would be permitted only by subsection (iii) of this Section 2(e) (excluding for purposes of such determination the conditions set forth in clauses (X) and (Y) of such subsection (iii)), Issuer shall promptly commence arranging financing so that it will be able to pay in full all amounts due in connection with any exercise of the Put Right (as defined below) in connection with such tender offer and shall use all commercially reasonable efforts to obtain such financing so as to pay all such amounts as and when due (it being understood that the obligation of Issuer to make payment at the Put Closing (as defined below) shall be absolute and that compliance with this sentence shall not relieve Issuer of its obligations under this Agreement or excuse performance hereunder). (f) (i) If the Pension Plan in good faith desires to effect a Transfer of Registrable Securities by tendering into a tender offer and such Transfer would be permitted only by subsection (iii) of Section 2(e) (assuming that Issuer has not and will not give the notice described in such subsection (iii) that such Transfer may not be made thereunder) then the Pension Plan shall, no later than 96 hours prior to the then scheduled expiration time for such tender offer, deliver to Issuer a written notice (the "Tender Notice") of such proposed tender that specifies the number of shares of Registrable Securities proposed to be so tendered. If, after the delivery of such Tender Notice and prior to the then scheduled expiration time for such tender offer, the Bidder making such tender offer amends the terms thereof or another Bidder commences a tender offer for shares of Class E Common Stock, then the Pension Plan may revoke such Tender Notice by delivering written notice thereof to Issuer at any time prior to the then scheduled expiration time for the tender offer that was the subject of such Tender Notice. No such revocation shall limit the Pension Plan's right to deliver a Tender Notice with respect to any tender offer, including any such amended tender offer or new tender offer. (ii) If (A) the Pension Plan has delivered, and not revoked, a Tender Notice with respect to a tender offer, each in accordance with subsection (i), (B) Issuer has given (and not withdrawn) the notice described in subsection (iii) of Section 2(e) that such Transfer may not be made under such subsection (iii)), (C) the Minimum Tender Condition with respect to such tender offer has been satisfied and shares required to satisfy such Minimum Tender Condition have been accepted for purchase and purchased pursuant to such tender -8- offer and (D) effecting a Transfer of Registrable Securities to Issuer pursuant to an exercise of the Put Right would not violate the Transfer Agreement, then the Pension Plan shall have the right (the "Put Right") to require Issuer to purchase up to the number of shares of Registrable Securities specified in the Tender Notice multiplied by, if applicable, the proration fraction applied to determine the number of shares of Class E Common Stock purchased from each tendering stockholder pursuant to such tender offer (the "Maximum Share Number"). The purchase price per share at which Issuer shall be required to purchase such Registrable Securities shall be equal to the price per share of Class E Common Stock paid in such tender offer (or, to the extent such tender offer price was paid in consideration other than cash, the cash equivalent of the fair market value thereof as of the expiration time of such tender offer determined as described below) (the "Put Price"). The Pension Plan may exercise the Put Right, in whole or in part, by delivering to Issuer a written notice (the "Exercise Notice") of such exercise that specifies the number of Registrable Securities to be purchased pursuant to such exercise (which number shall not exceed the Maximum Share Number). The delivery of the Exercise Notice shall constitute an agreement binding upon the Pension Plan to sell, and upon Issuer to purchase, such Registrable Securities. The term of the Put Right shall commence immediately after the Bidder making such tender offer accepts for purchase and purchases shares of Class E Common Stock tendered pursuant to such tender offer and shall terminate ten days after Issuer gives the Pension Plan notice that such purchase has occurred. (iii) If any portion of the tender offer price for any tender offer is payable in consideration other than cash: (A) any notice given by Issuer to the Pension Plan under subsection (iii) of Section 2(e) that a Transfer may not be made under such subsection (iii) shall include a good faith determination by the Board of Directors of Issuer as to the Put Price; (B) if the Put Right has become exercisable as described in subsection (ii) above in connection with such tender offer, within 24 hours after the expiration time for such tender offer, Issuer shall deliver to the Pension Plan a notice (the "Put Price Notice") confirming the (or, if necessary, setting forth a revised) good faith determination of Issuer's Board of Directors as to the Put Price; and (C) in the Exercise Notice, if any, the Pension Plan shall either agree to the Put Price as set forth in the Put Price Notice or set forth its own good faith determination as to the Put Price. Each such determination shall separately identify the value attributed to each component of the consideration offered in such tender offer. If the Pension Plan does not so agree to the Put Price as set forth in the Put Price Notice and Issuer and the Pension Plan, negotiating in good faith, are unable to reach an agreement on the Put Price within 15 -9- days after delivery of an Exercise Notice, an investment banking firm shall be selected and instructed to determine the Put Price as contemplated herein and submit to Issuer and the Pension Plan promptly (and in any event no later than 30 days after the delivery of the Exercise Notice) a written report setting forth such determination. If Issuer and the Pension Plan are unable to agree on an investment banking firm within 15 days after delivery of an Exercise Notice, a firm shall be selected by lot (until a firm so selected has agreed to accept the engagement to determine the Put Price as contemplated herein) from the top eight New York-based investment banking firms, as determined in each case by dollar volume of equity offerings in which such firms acted as lead underwriters, on the basis of the most recently available information, after Issuer and the Pension Plan have each eliminated one such firm and after the elimination of each such firm that represented the Bidder, Issuer or the Pension Plan in connection with such tender offer or, within the 365-day period prior to the delivery of the Put Notice, otherwise performed substantial services for the Bidder. If, as a result of the selection process set forth in the preceding sentence, no such firm is eligible to be so selected or no such firm accepts the engagement, Issuer and the Pension Plan shall promptly agree on an alternative process to promptly select an investment banking firm to determine the Put Price as contemplated herein. In any case, the fees and expenses of such firm shall be borne by Issuer, and the determination of such firm shall be final and binding upon all parties; provided, that if such determination results in a Put Price greater than the Put Price set forth by the Pension Plan in the Exercise Notice, the Put Price determined by such firm shall be deemed to equal the Put Price set forth in the Exercise Notice for purposes hereof. Issuer and the Pension Plan shall cooperate and provide each other (and any such firm) with the information (in reasonable detail) used in making its determinations with respect to the Put Price. Issuer shall cooperate with any investment banking firm engaged to determine the Put Price hereunder, including providing information as reasonably requested by such firm in connection with such determination. (iv) The closing (the "Put Closing") of the purchase and sale of the Registrable Securities specified in the Exercise Notice shall occur no later than 90 days after the delivery of the Exercise Notice (or, if such day is not a Business Day, the immediately following Business Day) (the "Final Date"), at a time and place mutually agreeable to Issuer and the Pension Plan. If Issuer and the Pension Plan are unable to agree on a time and place for the Put Closing, the Put Closing shall be at 10:00 a.m. (local time) at the principal executive offices of Issuer on the Final Date; provided, that the Issuer may specify that the Put Closing occur on any Business Day prior to the Final Date by giving written notice to the Pension Plan -10- at least two Business Days prior to the date so specified. At the Put Closing, Issuer shall pay to the Pension Plan, by wire transfer of immediately available funds to the account designated in writing by the Pension Plan, an amount (the "Base Purchase Price") equal to (Y) the Put Price, multiplied by (Z) the number of shares of Registrable Securities to be purchased, together with interest on the Base Purchase Price at the interest rate determined as set forth in Exhibit B attached hereto for the period from and including the fifth Business Day after the delivery of the Exercise Notice through but excluding the day the Base Purchase Price (and all accrued interest thereon) is paid in full (calculated on the basis of actual days elapsed and a 365-day year). At the Put Closing, the Pension Plan shall deliver to Issuer certificates representing the Registrable Securities to be sold to Issuer, together with duly executed stock powers endorsed in blank, and shall execute and deliver such other certificates, agreements and instruments as Issuer may reasonably request to effect such sale (which shall include a representation and warranty of the Pension Plan that all Registrable Securities sold to Issuer pursuant to the Put Right are owned of record by the Pension Plan, free and clear of any liens, pledges, security interests, encumbrances, equities, claims, options or limitations of whatever nature (other than those contemplated by this Agreement) but which shall not include any further representations and warranties from the Pension Plan). (g) Notwithstanding any provisions of this Agreement to the contrary, at any time that the Pension Plan owns Registrable Securities that constitute 7.5% or less of the Class E Common Stock on a fully-diluted basis (calculated for such purpose without giving effect to options, warrants or other rights exercisable for the Class E Common Stock issued or issuable pursuant to any employee stock option or other benefit plan maintained by Issuer), the Pension Plan may effect a Transfer by tendering any or all of the Registrable Securities into a tender offer for Class E Common Stock. (h) Nothing in this Agreement shall prohibit Issuer and the Pension Plan from at any time agreeing to effect or effecting a Transfer of Registrable Securities from the Pension Plan to Issuer or any of its consolidated subsidiaries. If Issuer or any of its consolidated subsidiaries intends to purchase Class E Common Stock on the open market for or on behalf of any employee benefit plan maintained or contributed to by Issuer, any of its consolidated subsidiaries or any of their predecessors or succes sors, it shall make reasonable efforts to consult in good faith with the Pension Plan with respect to the possibility of purchasing such shares from the Pension Plan. -11- (i) Prior to making any Transfer of Registrable Securities pursuant to clause (v) or (vi) of the first sentence of Section 2(a), the Pension Plan shall deliver to Issuer an opinion of counsel reasonably satisfactory to Issuer to the effect that such Transfer may be made without registration under the Securities Act in reliance upon Rule 144. (j) No Transfer of Registrable Securities in violation of this Agreement shall be made or recorded on the books of Issuer and any such Transfer shall be void and of no effect. 3. Demand Transfers. (a) The Pension Plan may from time to time deliver to Issuer a written notice that the Pension Plan proposes to make a Transfer of Registrable Securities either (i) pursuant to an under written public offering reasonably designed to achieve a broad public distribution of the securities being offered (a "Public Transfer") or (ii) subject to Section 3(h), pursuant to a negotiat ed transaction or series of related transactions effected on the same date and at the same price per share with one or more transferees (each such transaction or series of related transac tions described in this clause (ii), whether registered or not, being referred to herein collectively as a "Negotiated Transfer"). Public Transfers and Negotiated Transfers, whether made pursuant to a Demand Registration Statement, a Shelf Registration Statement or without a registration statement, are referred to herein collec tively as "Demand Transfers." The number of Public Transfers (including any Transfer considered a Public Transfer under Section 6(b)) and Negotiated Transfers that are registered under the Securities Act that may be effected by the Pension Plan in any 12- month period shall not exceed two in the aggregate; provided, that there shall be no numerical limit hereunder on the number of Negotiated Transfers that may be effected by the Pension Plan without registration under the Securities Act. Notwithstanding anything to the contrary in the immediately preceding sentence, from and after the first time at which an issuer other than General Motors shall become the Issuer pursuant to the succession provisions of Section 12(a), the Pension Plan shall not effect more than two Demand Transfers (including any Transfer considered a Public Transfer under Section 6(b)) in any 12-month period. For purposes of this Agreement, a Demand Transfer is deemed to be effected (x) if the Demand Transfer is to be made pursuant to a Demand Registration Statement, on the effective date of such Demand Registration Statement and (y) if the Demand Transfer is to be made either pursuant to a Shelf Registration Statement, or without a registration statement, on the date of the consummation of such Demand Transfer. A registered transaction pursuant to a Demand Registration Statement shall not be considered a Demand Transfer unless and until the applicable registration statement has become effective pursuant to the Securities Act (unless the failure to become effective is due solely to a breach by the Pension Plan of -12- its obligations hereunder) and in the case of a Shelf Registration Statement, unless and until Registrable Securities are actually Transferred pursuant to the Shelf Registration Statement. The Pension Plan may withdraw any Demand Transfer request prior to the effective date of a Demand Registration Statement, in the case of a Demand Transfer to be made pursuant to a Demand Registration Statement, prior to the commencement of an offering of Registrable Securities, in the case of a Public Transfer to be made pursuant to a Shelf Registration Statement, or prior to the consummation of a Transfer of Registrable Securities, in the case of a Negotiated Transfer to be made either pursuant to a Shelf Registration Statement or without a registration statement, in each of which cases such request shall not be considered a Demand Transfer. (b) At any time after the fourth anniversary of the date of the initial Contribution pursuant to Section 1, so long as the Pension Plan owns not less than 50 million shares of Registrable Securities, the Pension Plan may deliver to Issuer a written request that Issuer prepare and file with the Commission a registration statement on the appropriate form under the Securities Act (together with any amendments or supplements thereto, the "Shelf Registration Statement"), registering under the Securities Act up to the lesser of (i) 40 million shares of Registrable Securities or (ii) the amount of Registrable Securities that, if Transferred, would result in the Pension Plan owning 50 million shares of Registrable Securities, in either case for offering and sale by the Pension Plan in Public Transfers and Negotiated Transfers from time to time pursuant to Rule 415 under the Securities Act or any successor thereto ("Rule 415"). Subject to Sections 3(f) and 12(a), as promptly as reasonably practicable after the receipt of the Pension Plan's request for the filing of a Shelf Registration Statement, Issuer shall file a Shelf Registra tion Statement registering the number of shares of Registrable Securities so requested. Subject to Sections 3(f) and 12(a), at any time after Issuer has filed a Shelf Registration Statement and until such time as the Pension Plan has reduced its ownership of Registrable Securities to less than 50 million shares of Class E Common Stock, if fewer than 20 million shares of Registrable Securities remain subject to the Shelf Registration Statement, Issuer shall, if and to the extent requested by the Pension Plan, prepare and file with the Commission an additional Shelf Registration Statement (utilizing a combined prospectus as provided for by Rule 429 under the Securities Act or any successor thereto ("Rule 429")) as promptly as reasonably practicable after receipt of such request, registering under the Securities Act up to the number of shares of Registrable Securities equal to the lesser of (i) the difference between 40 million and the number of such shares remaining subject to the Shelf Registration Statement then in effect and (ii) the amount of such Registrable Securities that, if Transferred, would -13- result in the Pension Plan owning 50 million shares of Registrable Securities. (c) Notwithstanding any other provision of this Agreement, if within 395 days following the delivery of a written request for a Demand Transfer by the Pension Plan, such Demand Transfer has not been consummated, such request has not been withdrawn or a Liquidity Event has not occurred and (i) in the case of a Public Transfer, either Issuer has not filed the related registration statement or there has not been a period of at least 45 consecutive days following the date on which the Commission has completed its review, if any, of the related Demand Registration Statement (or, if a Shelf Registration Statement is then effective, following the date of such request) without the occurrence of a Blackout Period, (ii) in the case of a Negotiated Transfer that is to be registered under the Securities Act pursuant to this Agreement, either Issuer has not filed the related registration statement or there has not been a period of at least 20 consecutive days following the date on which the Commission has completed its review, if any, of the related Demand Registration Statement (or, if a Shelf Registration Statement is then effective, following the date of such request) without the occurrence of a Blackout Period or (iii) in the case of a Negotiated Transfer that is not to be registered under this Agreement, there has not been a period of at least 20 consecutive days following the date of such request without the occurrence of a Blackout Period, then the Pension Plan may, at the end of such 395-day period, deliver to Issuer a written request for a Demand Transfer, and Issuer shall take all reasonable actions that are necessary to permit the Pension Plan to effect such Demand Transfer, including, if such Demand Transfer is to be registered under the Securities Act pursuant to this Agreement, and a Shelf Registration Statement is not then effective, (i) preparing and filing a registration statement for the Transfer of the Registrable Securities requested to be registered in connection with such Demand Transfer within a period of 30 days following the delivery of such request and (ii) providing the Pension Plan with a period of at least 45 days following the date on which the Commission has completed its review, if any, of such registration statement, or, if such Demand Transfer is not to be registered under the Securities Act pursuant to this Agreement or a Shelf Registration Statement is then effective, the date of the delivery of such request, in either case, to allow for the marketing and Transfer of such Registrable Securities. Without limiting the generality of the foregoing, Issuer shall, within 60 days following the date of delivery of the Pension Plan's request, terminate any proposal or plan or make any public disclosure, that, in either case, would otherwise give rise to Issuer's right of postponement pursuant to Section 3(f). All of the Pensions Plan's rights and all of Issuer's obligations under this Section 3(c) shall terminate from and after the time the Pension Plan has reduced its ownership of Registrable Securities to less than 25 million shares of Class E Common Stock. -14- (d) Each notice of a proposed Demand Transfer shall be delivered a reasonable period of time before the proposed Transfer and, in any event, (i) in connection with a proposed Public Transfer pursuant to a Demand Registration Statement, not less than 30 days before the anticipated filing date of such Demand Registration Statement if Issuer is eligible to use Form S-3 or any successor form ("Form S-3") or 45 days before such date in the event Issuer is not eligible to use such form, (ii) in connection with a proposed Negotiated Transfer pursuant to a Demand Registration Statement, not less than 20 days before the anticipated filing date of such Demand Registration Statement if Issuer is eligible to use Form S-3 or 45 days before such date in the event Issuer is not eligible to use such form, (iii) in connection with a proposed Transfer pursuant to a Shelf Registration Statement, not less than 10 days before the proposed commencement of such proposed Transfer and (iv) in connection with a proposed Negotiated Transfer that is not to be registered under the Securities Act pursuant to this Agreement, not less than five days before the proposed consummation of such Negotiated Transfer. Each notice of a proposed Demand Transfer shall specify whether such Transfer will be a Public Transfer or a Negotiated Transfer, the approximate number of Registrable Securities proposed to be Transferred, the proposed time table for the transaction and the anticipated per share price range for such Transfer. (e) Unless a Shelf Registration Statement is effective with respect to the full amount of shares proposed to be subject to a Demand Transfer, (i) each notice of a proposed Public Transfer shall constitute a request that Issuer register the proposed Transfer of the Registrable Securities under the Securities Act on the appropriate form and (ii) in connection with any notice of a proposed Negotiated Transfer, the Pension Plan may request that Issuer register the proposed Transfer of the Registrable Securities; provided, however, that if the Pension Plan does not request that Issuer register such proposed Transfer of the Registrable Securities, the Pension Plan shall establish, to the reasonable satisfaction of Issuer, that such Negotiated Transfer may be made without registration under applicable securities laws. In the case of each request for registration pursuant to the foregoing sentence (a "Demand Registration"), Issuer shall file the requested registration statement (together with any amendments or supplements thereto, a "Demand Registration Statement") as promptly as reasonably practicable, subject to postponement as provided in Section 3(f); provided, however, that Issuer shall not be required to register a proposed Negotiated Transfer of the Registrable Securities if Issuer's legal counsel advises in writing that (i) such registration would not be permitted under applicable federal and state securities laws and regulations, (ii) if such Transfer is not so registered, the shares Transferred in such Transfer would not constitute "restricted securities" (as defined in Rule 144) in the hands of the transferee in such proposed Transfer or (iii) such registration is not required under applicable federal securities -15- laws and Issuer and the Pension Plan reasonably agree that the shares Transferred in such Transfer would constitute "restricted securities" in the hands of the transferee in such proposed transaction regardless of registration. (f) Subject to Section 3(c), Issuer may postpone the filing or effectiveness of any Demand Registration Statement, the initial filing or effectiveness of any Shelf Registration Statement or the making of any Demand Transfer, whether registered or not, at any time if Issuer determines, in its reasonable judgment, that (i) such action or proposed action would interfere with any proposal or plan by Issuer or any of its affiliates to engage in any material acquisition, merger, consolidation, tender offer, securities offering (including any proposal or plan to register or offer Class E Common Stock existing as of the time of the Pension Plan's notice to Issuer of a proposed Demand Transfer) or other material transaction or (ii) would require Issuer to make a public disclosure of previously non-public material information and Issuer shall promptly notify the Pension Plan of any postponement pursuant to this Section 3(f). Issuer agrees that it will terminate any such postponement as promptly as reasonably practicable and will promptly notify the Pension Plan of such termination. In making any such determination to initiate or terminate a postponement, Issuer shall not be required to consult with or obtain the consent of the Pension Plan or any investment manager therefor (including the Trustee), and any such determination shall be Issuer's responsibility alone, and neither the Pension Plan nor any investment manager for the Pension Plan (including the Trustee) shall be responsible or have any liability therefor. (g) The Pension Plan may select the lead underwriter and co-manager or co-managers to administer any Public Transfer of Registrable Securities from a list of eligible lead underwriters and of eligible co-managers, respectively, prepared for each such purpose by Issuer and delivered to the Pension Plan on the date hereof (as such list may be revised by Issuer from time to time). The list of eligible lead underwriters shall contain the names of no fewer than five Persons, each of which shall be among the top six underwriting firms, and the list of eligible co-managers shall contain the names of no fewer than seven Persons, no fewer than six of which shall be among the top ten underwriting firms, as determined in each case by dollar volume of equity offerings in which such firms acted as lead underwriters, on the basis of the most recently available information. The Pension Plan shall have the right to request that Issuer add a Person to the list of eligible lead underwriters and of eligible co-managers, provided that Issuer shall have no obligation to consent to any such request. The Pension Plan may not select any Person to be lead underwriter or co-manager unless such Person shall have agreed to use its reasonable best efforts to effect a broad public distribution of the Registrable Securities to be sold in the Public Transfer and to use its reasonable best efforts not to sell to any one -16- Person (or group of related Persons) (whether such Person (or group of related persons) is buying for its own account or as a fiduciary on behalf of one or more accounts) Registrable Securities constituting more than 2% of the Class E Common Stock then outstanding. The selection of counsel to such lead underwriter and co-manager or co-managers shall be subject to the consent of Issuer, which consent shall not be unreasonably withheld. (h) The Pension Plan shall not make a Negotiated Transfer to (i) any one Person (or group of related Persons) (whether such Person (or group of related Persons) is buying for its own account or as a fiduciary on behalf of one or more accounts) of more than 2% of the Class E Common Stock then outstanding or (ii) any one Person (or group of related Persons) if such Person (or group of related Persons) is then required to file, or has filed, or as a result of such Negotiated Transfer will be required to file (to the knowledge of the Pension Plan after reasonable inquiry) a Schedule 13D under the Exchange Act (or any successor thereto) with respect to the Class E Common Stock. If the Registrable Securities subject to any Negotiated Transfer are not to be registered under the Securities Act, the Pension Plan shall, prior to effecting such Negotiated Transfer, cause each transferee in such Negotiated Transfer to represent and warrant to the Pension Plan and Issuer in writing that (i) such transferee is acquiring such Registrable Securities for its own account, or for one or more accounts, as to each of which such transferee exercises sole investment discretion, for investment purposes only and not with a view to, or for resale in connection with, any distribution (within the meaning of the Securities Act) and (ii) such transferee does not constitute an underwriter (within the meaning of the Securities Act) with respect to the acquisition of such Registrable Securities from the Pension Plan. (i) Issuer shall make available members of the management of Issuer and its affiliates for reasonable assistance in the selling efforts relating to any public offering of the Registrable Securities pursuant to a Public Transfer, to the extent customary for public offerings (including, without limitation, to the extent customary, senior management attendance at due diligence meetings with underwriters and their counsel and road shows), and for such assistance as is reasonably requested by the Pension Plan and its counsel in the selling efforts relating to any Negotiated Transfer. 4. Piggyback Registration. (a) In the event that Issuer proposes to register any shares of Class E Common Stock for its own account or for the account of any holder or holders of Class E Common Stock (other than the Strategic Partner) pursuant to contractual rights of such holder or holders or otherwise, in either case under the Securities Act in an underwritten public offering (other than on a registration statement on Form S-4 or S-8 under the Securities Act -17- or any successors thereto, a registration statement for a delayed or continuous offering pursuant to Rule 415, a registration statement covering securities convertible into or exercisable or exchangeable for Class E Common Stock, an offering of securities solely to Issuer's existing shareholders or otherwise in connection with any offer to exchange securities) (together with any underwritten public offering of Class E Common Stock pursuant to Rule 415 as described in Section 4(b) below, a "Piggyback Registration"), Issuer shall give the Pension Plan written notice of such proposed registration no less than 30 days before the date of filing anticipated by Issuer in connection with such registration. Subject to Sections 4(d), (e) and (f), Issuer shall include in such registration all Registrable Securities held by the Pension Plan with respect to which Issuer has received a written request for inclusion therein within 15 days after Issuer's notice of such proposed registration. (b) In the event that Issuer proposes to offer for its own account or for the account of any holder or holders of Class E Common Stock (other than the Strategic Partner) pursuant to contractual rights of such holder or holders or otherwise, in either case any shares of Class E Common Stock in any underwritten public offering pursuant to Rule 415, Issuer shall give the Pension Plan written notice of such proposed offering no less than 30 days before the date of commencement of distribution anticipated by Issuer in connection with such offering. Subject to Sections 4(d), (e) and (f), Issuer shall include in such offering all such Registrable Securities with respect to which Issuer has received a written request for inclusion therein within 10 days after Issuer's notice of such proposed offering. Without limiting the generality of the foregoing, in order to so include such Registrable Securities, Issuer shall, to the extent necessary, file an amendment to the registration statement then in effect for the Class E Common Stock or an additional registration statement for the Class E Common Stock that uses a combined prospectus pursuant to Rule 429. (c) Issuer may select the lead underwriter and co-manager or co-managers to administer any offering of Registrable Securities pursuant to a Piggyback Registration; provided, however, that if Registrable Securities held by the Pension Plan and expected to be included in any such offering constitute, in Issuer's reasonable judgment, at least 25% of the shares of Class E Common Stock expected to be Transferred in such offering, the Pension Plan shall have the right to appoint one co-manager (reasonably acceptable to Issuer) for such offering, who shall participate in such offering on the same terms as the co-managers appointed by Issuer. In the event that Issuer gives the Pension Plan notice of its intention to effect an offering pursuant to a Piggyback Registration and subsequently declines to proceed with such offering, the Pension Plan shall have no rights in connection with such offering; provided, however, that, subject to Section -18- 3(f), at the request of the Pension Plan, Issuer shall proceed with such offering with respect to the Registrable Securities, which offering shall be deemed to be a Demand Transfer for all purposes hereunder. The Pension Plan shall participate in any offering of Registrable Securities pursuant to a Piggyback Registration in accordance with the same plan of distribution for such Piggyback Registration as Issuer or the holder or holders of Class E Common Stock that proposed such Piggyback Registration, as the case may be. (d) Until the earlier of (i) the date on which the Pension Plan reduces its ownership of Registrable Securities to less than 100 million shares of Class E Common Stock and (ii) the seventh anniversary of the date of the initial Contribution pursuant to Section 1 (the "Piggyback Priority Date"), if there is a Share Limitation in connection with a Piggyback Registration, then Issuer shall include in such offering (i) first, the Class E Common Stock that Issuer proposes to Transfer, (ii) second, the Registrable Securities requested to be included in the offering by the Pension Plan, (iii) third, other shares of Class E Common Stock requested to be included therein pursuant to contractual rights of the holder or holders thereof (including the Strategic Partner, if any, and the holder or holders of Class E Common Stock that proposed such Piggyback Registration, if any) and (iv) fourth, any other shares of Class E Common Stock. (e) From and after the Piggyback Priority Date and until such time as the Pension Plan reduces its ownership of Registrable Securities to less than 25 million shares of Class E Common Stock (the "Priority Termination Date"), if there is a Share Limitation in connection with any Piggyback Registration, then Issuer shall include in such offering (i) first, the Class E Common Stock that Issuer proposes to Transfer, (ii) second, an equal number of Registrable Securities and shares of Class E Common Stock from each of the Pension Plan and the Strategic Partner, if any, respectively, until all of the shares requested to be included therein by either the Pension Plan or the Strategic Partner have been selected, (iii) third, any additional Registrable Securities and shares of Class E Common Stock requested to be included therein by the Pension Plan or the Strategic Partner, as the case may be, (iv) fourth, other shares of Class E Common Stock requested to be included therein pursuant to contractual rights of the holder or holders thereof (including the holder or holders of Class E Common Stock that proposed such Piggyback Registration, if any) and (v) fifth, any other shares of Class E Common Stock; provided, however, that if the Strategic Partner, if any, does not beneficially own at least 25 million shares of Class E Common Stock as of the time of such proposed offering, all shares of Registrable Securities requested by the Pension Plan to be included therein shall be so included before any shares of Class E Common Stock requested by the Strategic Partner to be included therein are so included. -19- (f) From and after the Priority Termination Date, if there is a Share Limitation in connection with a Piggyback Registration, then Issuer shall include in such offering (i) first, the Class E Common Stock Issuer proposes to Transfer, (ii) second, the shares of Class E Common Stock requested by the Strategic Partner, if any, and the holder or holders of Class E Common Stock that proposed such Piggyback Registration, if any, to be included therein pursuant to contractual rights of the Strategic Partner and such holder or holders, as the case may be, (iii) third, the Registrable Securities requested to be included therein by the Pension Plan, (iv) fourth, other shares of Class E Common Stock requested to be included therein pursuant to contractual rights of the holder or holders thereof and (v) fifth, any other shares of Class E Common Stock. 5. Holdback Period. (a) The Pension Plan agrees not to make any Transfer of Registrable Securities during the period commencing with the effective date of a registration statement for any underwritten public offering of the Class E Common Stock (or any securities convertible into or exchangeable or exercisable for the Class E Common Stock) or, in the case of a Rule 415 registration statement, upon Issuer's notice of commencement of distribution in connection with such offering, and terminating on the 90th day after the effectiveness of the registration statement for such offering pursuant to the Securities Act or, in the case of a Rule 415 registration statement, the commencement of such offering, or, in either case, on such earlier date as Issuer gives notice to the Pension Plan that Issuer declines to proceed with such offering, unless the underwriter or underwriters administering such offering otherwise agree. (b) Issuer agrees not to make any Transfer of any Class E Common Stock (or any securities convertible into or exchangeable or exercisable for the Class E Common Stock) during the period commencing with the date of any notice of a proposed Public Transfer and terminating on the 90th day after the effectiveness of the registration statement for such Public Transfer pursuant to the Securities Act or, in the case of a Shelf Registration Statement, the commencement of distribution in connection with such Public Transfer, or, in either case, on such earlier date as the Pension Plan gives notice to Issuer that the Pension Plan declines to proceed with such Public Transfer, except (i) for the issuance of shares of Class E Common Stock upon the conversion, exercise or exchange, by the holder thereof, of options, warrants or other securities convertible into or exercisable or exchangeable for the Class E Common Stock pursuant to the terms of such options, warrants or other securities (which, in the case of any conversion, exercise or exchange which is at Issuer's option, Issuer shall not call for conversion, exercise or exchange during such period (it being understood that nothing herein shall limit the right of -20- Issuer to call for redemption any security convertible, exercisable or exchangeable for Class E Common Stock or to issue shares of Class E Common Stock to the extent a holder of any such security elects to convert, exercise or exchange such security in lieu of accepting any redemption payments)), (ii) pursuant to the terms of any other agreement to issue shares of Class E Common Stock (or any securities convertible into or exchangeable or exercisable for the Class E Common Stock) in effect on the date of the notice of a proposed Transfer, including any such agreement in connection with any previously disclosed acquisition, merger, consolidation or other business combination, and (iii) in connection with Transfers to dividend reinvestment plans or to employee benefit plans in order to enable any such employee benefit plan to fulfill its funding obligations in the ordinary course, unless the underwriter or underwriters administering the offering in connection with such Public Transfer otherwise agree. Notwithstanding the foregoing, the provisions of this Section 5(b) shall be subject to the provisions of Section 3(f), and if Issuer exercises its rights of postponement pursuant to Section 3(f) with respect to any proposed Public Transfer, the provisions of this Section 5(b) shall not apply unless and until such time as Issuer notifies the Pension Plan of the termination of such postponement and the Pension Plan notifies Issuer of its intention to continue with such proposed Public Transfer. 6. Other Registration Rights. (a) Nothing herein shall restrict the authority of Issuer to grant to any Person, including a Strategic Partner, if any, the right to obtain registration under the Securities Act of any equity securities of Issuer, or any securities convertible into or exchangeable or exercisable for such securities; provided, however, that Issuer shall not grant any such right with respect to the Class E Common Stock or securities convertible into or exchangeable or exercisable for the Class E Common Stock that conflicts with the rights of the Pension Plan under Section 3(c), 4 or 6 in a manner that limits or reduces such rights. Without limiting the generality of the foregoing, Issuer shall cause each such Person, including a Strategic Partner, if any, and a holder or holders of Class E Common Stock with the right to propose a registration giving rise to a Piggyback Registration, if any, to agree to the provisions of Sections 3(c), 4 and 6(b) and to agree not to make any Transfer of any such securities during the period referred to in Section 5(b) to the extent such Transfer would be prohibited if made by Issuer. (b) If at any time a Strategic Partner has been designated by Issuer, the relative rights of the Pension Plan and the Strategic Partner shall be as follows: (i) If at any time the Strategic Partner, if any, elects to exercise any rights for a demand registration of -21- shares of Class E Common Stock pursuant to an underwritten public offering (a "Strategic Partner Demand Registration"), Issuer shall give the Pension Plan written notice of such proposed Strategic Partner Demand Registration within five days of receipt of notice thereof from the Strategic Partner. (ii) Until the earlier of (A) the date on which the Pension Plan reduces its ownership of Registrable Securities to less than 100 million shares of Class E Common Stock and (B) the fifth anniversary of the date of the initial Contribution under Section 1 (the "Demand Priority Date"), if the Pension Plan requests (and does not withdraw its request for) a Public Transfer within 10 days of Issuer's notice of a proposed Strategic Partner Demand Registration, Issuer shall (subject to Section 3(f)) effect such Public Transfer as contemplated herein, and the proposed Strategic Partner Demand Registration shall not proceed. In such case, the Pension Plan shall proceed with such Public Transfer in good faith, taking into account market conditions, until such Public Transfer is consummated or abandoned by the Pension Plan. The Pension Plan shall give Issuer prompt written notice if it determines to abandon any such proposed Public Transfer. (iii) The Pension Plan may at any time elect to participate in any Strategic Partner Demand Registration by giving Issuer notice thereof within 10 days of Issuer's notice to the Pension Plan of such Strategic Partner Demand Registration. In such case, subject to Section 6(b)(iv), Issuer shall include in such registration the number of Registrable Securities requested by the Pension Plan to be included therein (which number shall be set forth in the Pension Plan's notice to Issuer of its election to participate therein). Any such registration shall be considered a Public Transfer and shall be deemed made on such date as such Registrable Securities are Transferred pursuant thereto. The Pension Plan shall participate in any offering of Class E Common Stock in connection with such registration in accordance with the same plan of distribution as the Strategic Partner. (iv) Until the Priority Termination Date, if there is a Share Limitation in connection with any Strategic Partner Demand Registration in which the Pension Plan has elected to participate, Issuer shall include in such registration (A) first, an equal number of Registrable Securities and shares of Class E Common Stock from each of the Pension Plan and the Strategic Partner, respectively, until all of the shares requested to be included therein by either the Pension Plan or the Strategic Partner have been selected, (B) second, any additional Registrable Securities and shares of Class E Common Stock requested to be included therein by the Pension Plan or the Strategic Partner, as the case may be, (C) third, other -22- shares of Class E Common Stock requested to be included therein by the holder or holders thereof pursuant to contractual rights of such holder or holders and (D) fourth, any other shares of Class E Common Stock. From and after the Priority Termination Date, if there is a Share Limitation in connection with a Strategic Partner Demand Registration in which the Pension Plan has elected to participate, Issuer shall include in such registration (W) first, the shares of Class E Common Stock proposed to be registered by the Strategic Partner, (X) second, the shares of Registrable Securities requested to be included therein by the Pension Plan, (Y) third, other shares of Class E Common Stock requested to be included therein by the holder or holders thereof pursuant to contractual rights of such holder or holders and (Z) fourth, any other shares of Class E Common Stock. (v) The Strategic Partner, if any, may at any time elect to participate in any Public Transfer requested by the Pension Plan by giving Issuer notice thereof within 15 days of the Pension Plan's notice to Issuer of such Public Transfer. In such case, subject to Section 6(b)(vi), Issuer may include in the registration in connection with such Public Transfer the number of shares of Class E Common Stock requested by the Strategic Partner to be included therein. The Strategic Partner shall participate in any offering of Class E Common Stock in connection with such Public Transfer in accordance with the same plan of distribution for such Public Transfer as the Pension Plan. (vi) Until the Demand Priority Date, if there is a Share Limitation in connection with any Public Transfer requested by the Pension Plan in which the Strategic Partner has elected to participate, Issuer shall include in such registration (A) first, the Registrable Securities requested to be included therein by the Pension Plan, (B) second, shares of Class E Common Stock requested to be included therein by the Strategic Partner, (C) third, other shares of Class E Common Stock requested to be included therein pursuant to contractual rights of the holder or holders thereof and (D) fourth, any other shares of Class E Common Stock. From and after the Demand Priority Date and until the Priority Termination Date, if there is a Share Limitation in connection with a Public Transfer requested by the Pension Plan in which the Strategic Partner has elected to participate, Issuer shall include in the registration in connection with such Public Transfer (A) first, an equal number of Registrable Securities and shares of Class E Common Stock from each of the Pension Plan and the Strategic Partner, respectively, until all of the shares requested to be included therein by either the Pension Plan or the Strategic Partner have been selected, (B) second, any additional Registrable Securities and shares of Class E -23- Common Stock requested to be included therein by the Pension Plan or the Strategic Partner, as the case may be, (C) third, other shares of Class E Common Stock requested to be included therein by the holder or holders thereof pursuant to contractual rights of such holder or holders and (D) fourth, any other shares of Class E Common Stock; provided, however, that if the Strategic Partner does not beneficially own at least 25 million shares of Class E Common Stock as of the time of such registration, all shares of Registrable Securities requested by the Pension Plan to be included therein shall be so included before any shares of Class E Common Stock requested by the Strategic Partner to be included therein are so included. From and after the Priority Termination Date, if there is a Share Limitation in connection with a Public Transfer requested by the Pension Plan in which the Strategic Partner has elected to participate, Issuer shall include in the registration in connection with such Public Transfer (X) first, the Registrable Securities proposed to be registered by the Pension Plan, (Y) second, the shares of Class E Common Stock requested to be included therein by the holder or holders thereof (including the shares of Class E Common Stock requested to be included therein by the Strategic Partner, if any), pursuant to contractual rights of such holder or holders and (Z) third, any other shares of Class E Common Stock. (vii) Nothing herein shall obligate Issuer to grant to any Person, including a Strategic Partner, if any, the right to obtain registration under the Securities Act of any equity securities of Issuer, or any securities convertible into or exercisable or exchangeable for such securities. If and to the extent Issuer grants any such rights to any Person, the terms thereof shall be as set forth in the related agreement between such Person and Issuer and may include restrictions on and obligations of such Person greater than or in addition to those contemplated herein, subject to Section 6(a). (c) The Pension Plan acknowledges and accepts the rights of the Salaried Plan under the Exchange Agreement and that the Salaried Plan has not agreed to the provisions of Sections 3(c), 4 or 6(b) hereof. The Pension Plan and Issuer also acknowledge the arrangements set forth in the Agreement dated as of the date hereof among Issuer, the Salaried Plan and the Hourly Plan with respect to certain registration rights matters. Without limiting the generality of the foregoing and notwithstanding anything to the contrary herein (including Section 3(c)): (i) in the event of a Piggyback Registration requested by the Salaried Plan pursuant to its rights under the Exchange Agreement, if there is a Share Limitation, Issuer shall include in the related offering all shares of Class E Common Stock requested to be included therein by the Salaried Plan before including any shares of Registrable Securities requested to be included therein by the Pension Plan, (ii) the -24- events giving rise to Issuer's right to postpone under Section 3(f) shall include performing its obligations under the Exchange Agreement in connection with the offering and sale of shares of Class E Common Stock by the Salaried Plan, regardless of when the notice requesting the related registration is received by Issuer, and (iii) in no event shall Issuer be deemed to be in breach of this Agreement (including Section 3(c)) as a result of performing its obligations under the Exchange Agreement. 7. Demand, Piggyback and Shelf Registration Procedures. Whenever Registrable Securities are to be registered pursuant to this Agreement, Issuer shall, to the extent applicable for each type of registration statement: (a) subject to Sections 3(f) and 12(a), prepare and file with the Commission a registration statement with respect to such Registrable Securities and use reasonable efforts to cause such registration statement to be declared effective as promptly after the initial filing thereof as reasonably practicable; (b) furnish to any investment manager acting on behalf of the Pension Plan with respect to the Registrable Securities and to one law firm representing each such investment manager, copies of such registration statement, the prospectus contained therein and any amendments or supplements thereto prior to filing such documents with the Commission, but only to the extent such documents contain information regarding such investment manager, with such documentation, and any other documentation provided by this Agreement to be delivered to the investment manager acting on behalf of the Pension Plan and counsel to the Pension Plan, to be delivered as provided in Section 12(d) unless otherwise directed by the Named Fiduciary or its delegate; (c) subject to Sections 3(f) and 12(a), prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than nine months (or such shorter period as may be necessary to effect the Transfer of all shares of Registrable Securities covered by such registration statement as described therein); (d) furnish to the Pension Plan and the underwriters such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as the Pension Plan and its counsel may reasonably request in order to facilitate the disposition of the Registrable Securities; (e) so long as Class E Common Stock is listed on any United States securities exchange or a quotation system, use its -25- best efforts to cause all of the Registrable Securities to be listed on such exchange or a quotation system; (f) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as the Pension Plan reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable the Pension Plan to consummate the disposition in such jurisdictions of the Registrable Securities (provided that Issuer will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subsection, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction); (g) notify the Pension Plan, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, and, at the request of the Pension Plan, Issuer will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; (h) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the Pension Plan or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of the Registrable Securities; and (i) make available (and cause all the officers, directors, employees and independent accountants of Issuer and its subsidiaries to make available), to the extent reasonably requested by the Pension Plan or any underwriter, attorney, accountant or agent retained by the Pension Plan in connection with such registration statement, all financial and other records and pertinent corporate documents and properties of Issuer and its subsidiaries for inspection by the Pension Plan or any underwriter, attorney, accountant or other agent retained by the Pension Plan in connection with such registration. Each of the parties will treat all notices of proposed Transfers and registrations, all notices pursuant to Section 7(g) and all information relating to any Blackout Periods under Section 3(f) received from the other party with the strictest confidence and will not disseminate such information. Subject to Section 3(c), nothing herein shall be construed to require Issuer or any of -26- its affiliates to make any public disclosure of information at any time. In the event Issuer has notified the Pension Plan that (i) the prospectus included in a registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, (ii) the Commission has issued or threatened to issue any stop order suspending the effectiveness of a registration statement or has initiated proceedings for such purpose or (iii) Issuer has received any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, then the Pension Plan shall not deliver such prospectus to any purchaser unless and until a supplement or amendment to such prospectus has been prepared as set forth in Section 7(g) or until Issuer advises the Pension Plan in writing that the use of such prospectus may be resumed. The Pension Plan shall cooperate with Issuer in the preparation and filing of any registration statement under the Securities Act pursuant to this Agreement and provide Issuer with all information necessary to complete such preparation within a reasonable period of time prior to the proposed filing of such registration statement, and in the case of any Demand Registration Statement or Shelf Registration Statement to be filed pursuant to Section 3(c), within such period as is necessary to enable Issuer to file such registration statement within 30 days of the Pension Plan's request therefor. From and after such time as the Pension Plan reduces its ownership of the Registrable Securities to less than 50 million shares of Class E Common Stock, Issuer shall file the reports required to be filed by it under Section 13 of the Exchange Act or any successor thereto (or, if Issuer is not required to file such reports, make publicly available such information upon the request of Pension Plan), and take such further action as the Pension Plan may reasonably request, all to the extent required to enable the Pension Plan to Transfer the Registrable Securities pursuant to Rule 144. 8. Participation in Underwritten Transfers. The Pension Plan may not participate in any underwritten Transfers hereunder unless the Pension Plan (a) agrees to sell the Pension Plan's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, custodian agreements and other documents required under the terms of such underwriting arrangements. 9. Registration Expenses and Legal Counsel. Issuer shall be responsible for all federal and state filing fees (including all blue sky registration or qualification fees), all fees and -27- expenses of its counsel and all independent certified public accountants, underwriters (excluding discounts and commissions and fees and expenses of counsel to the underwriters) and other Persons retained by Issuer and all other costs or expenses incurred by Issuer in the performance of its obligations hereunder and the reasonable fees and expenses of one outside law firm representing the Pension Plan and other out-of-pocket expenses of the Pension Plan in connection with any registration statement under the Securities Act pursuant to this Agreement or any amendment thereto; provided, however, that the selection of the law firm representing the Pension Plan shall be subject to the consent of Issuer, which consent shall not be unreasonably withheld. Issuer shall have the right to select the financial printer to be used in connection with any registration of Registrable Securities under the Securities Act pursuant to this Agreement. 10. Indemnification. (a) Issuer agrees to indemnify and hold harmless each of the Pension Plan, the Trustee and any successor thereto, the investment manager or managers acting on behalf of the Pension Plan with respect to the Registrable Securities and Persons, if any, who control any of them within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each an "Indemnitee"), from and against any and all costs and expenses reasonably incurred and losses, damages and other liabilities sustained by such Indemnitee and arising out of or caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement described herein or any related prospectus relating to the Registrable Securities (as amended or supplemented if Issuer shall have furnished any amendments or supplements thereto), or arising out of or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, except insofar as such costs, expenses, losses, damages or other liabilities arising out of or are caused by any such untrue statement or omission included or omitted in conformity with information furnished to Issuer in writing by such Indemnitee or any Person acting on behalf of such Indemnitee expressly for use therein; provided, however, the foregoing indemnity agreement with respect to any preliminary prospectuses shall not inure to the benefit of such Indemnitee, if the Person asserting any claims, losses, damages or other liabilities against such Indemnitee purchased Registrable Securities and a copy of the prospectus (as then amended or supplemented if Issuer shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Indemnitee to such Person, if required by law so to have been delivered, at or prior to the written confirmation of the sale of the Registrable Securities to such Person, and if the prospectus (as so amended or supplemented) would have cured the defect giving rise to such asserted claim, loss, damage or other -28- liability; provided, further, that the foregoing proviso shall not apply in the case of a Piggyback Registration if the Indemnitee is the Pension Plan or Trustee. (b) The Pension Plan agrees, to the extent permitted under applicable law, and each underwriter selected shall agree, to indemnify and hold harmless each of Issuer, its directors, officers, employees and agents, and each person, if any, who controls Issuer within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from Issuer, but only with respect to costs, expenses, losses, damages or other liabilities arising out of or caused by an untrue statement or omission included or omitted in conformity with information furnished in writing by or on behalf of the Pension Plan or such underwriter, as the case may be, expressly for use in any registration statement described herein or any related prospectus relating to the Registrable Securities (as amended or supplemented if Issuer shall have furnished or any amendments or supplements thereto). No claim against the assets of the Pension Plan shall be created by this Section 10(b), except as and to the extent permitted by applicable law. (c) In case any claim is asserted or any proceeding (including any governmental investigation) shall be instituted where indemnity may be sought by an Indemnitee pursuant to any of the preceding paragraphs of this Section 10, such Indemnitee shall promptly notify in writing the Person against whom such indemnity may be sought (the "Indemnitor"); provided, however, that the omission so to notify the Indemnitor shall not relieve the Indemnitor of any liability which it may have to such Indemnitee except to the extent that the Indemnitor was prejudiced by such failure to notify. The Indemnitor, upon request of the Indemnitee, shall retain counsel reasonably satisfactory to the Indemnitee to represent (subject to the following sentences of this section) the Indemnitee and any others the Indemnitor may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any Indemnitee shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnitee unless (i) the Indemnitor and the Indemnitee shall have mutually agreed to the retention of such counsel, (ii) the Indemnitor fails to take reasonable steps necessary to defend diligently any claim within ten calendar days after receiving written notice from the Indemnitee that the Indemnitee believes the Indemnitor has failed to take such steps, or (iii) the named parties to any such proceeding (including any impleaded parties) include both the Indemnitor and the Indemnitee and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests or legal defenses between them and, in all such cases, the Indemnitor shall only be responsible for the reasonable fees and expenses of such counsel. It is understood that the Indemnitor shall not, in connection with any proceeding or related -29- proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate law firm (in addition to any local counsel) for all such Indemnitees not having actual or potential differing interests or legal defenses among them, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the Pension Plan or any control Person of the Pension Plan, such firm shall be designated in writing by the Named Fiduciary. The Indemnitor shall not be liable for any settlement of any proceeding effected without its written consent. (d) If the indemnification provided for in this Section 10 is unavailable to an Indemnitee in respect of any costs, expenses, losses, damages or other liabilities referred to herein, then the Indemnitor, in lieu of indemnifying such Indemnitee hereunder, shall contribute to the amount paid or payable by such Indemnitee as a result of such costs, expenses, losses, damages or other liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnitor and the Indemnitee and Persons acting on behalf of or controlling the Indemnitee in connection with the statements or omissions or violations which resulted in such costs, expenses, losses, damages or other liabilities, as well as any other relevant equitable considerations. If the indemnification described in Section 10(a) or 10(b) is unavailable to an Indemnitee, the relative fault of Issuer, the Pension Plan and Persons acting on behalf of or controlling the Pension Plan shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by Issuer or by Persons acting on behalf of the Pension Plan and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Indemnitor shall not be required to contribute pursuant to this Section 10(d) if there has been a settlement of any proceeding effected without its written consent. No claim against the assets of the Pension Plan shall be created by this Section 10(d), except as and to the extent permitted by applicable law. (e) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 10 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding section. Notwithstanding the provisions of this Section 10, the aggregate contribution of the Pension Plan under this Section 10 will not exceed the proceeds received by the Pension Plan from the Registrable Securities sold by it and the Pension Plan shall not be required to contribute under this Section 10 in respect of any costs, expenses, losses, damages or other liabilities unless the same arise with reference to any information furnished to Issuer in writing by Persons acting on behalf of the Pension Plan expressly for use in any registration -30- Statement pursuant to this Agreement or the prospectus or any amendment or supplement thereto. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) The indemnification and contribution agreements contained in this Section 10 and the representations and warranties of Issuer contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement and (ii) acceptance of and the payment by the buyer for any Registrable Securities. 11. Definitions. "Blackout Period" means (i) any period of time during which a requested Demand Transfer has been postponed pursuant to Section 3(f), which period shall continue until notice of the termination of such postponement has been delivered to the Pension Plan, and (ii) any holdback period during which Transfers were not permitted by operation of Section 5(a), unless in any offering referred to in Section 5(a), the Pension Plan Transferred or had the opportunity to Transfer shares of Registrable Securities that constituted the lesser of (a) the number of shares of Class E Common Stock that the Pension Plan requested to be included in such offering or (b) 25 million shares. "Class E Common Stock" means Class E Common Stock, par value $0.10 per share, of General Motors and any securities issued or issuable with respect to the Class E Common Stock in connection with any stock dividend, stock split (forward or reverse), combination of shares, recapitalization, merger, consolidation, redemption, exchange of securities or other reorganization or reclassification after the date hereof. In the event of any of the foregoing with respect to the Class E Common Stock or similar transactions affecting the Class E Common Stock, all references herein to the designation "Class E Common Stock" and to any specific number of shares of Class E Common Stock shall be appropriately adjusted to give effect thereto, and shall include reference to all securities of the same class regardless of whether any such securities were issued or issuable with respect to the securities that previously constituted the Class E Common Stock. "Commission" means the United States Securities and Exchange Commission. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. "General Motors" means General Motors Corporation, a Delaware corporation. -31- "Issuer" means, initially, General Motors, and thereafter, each successor issuer as described in Section 12(a). "Liquidity Event" means that either (a) the Pension Plan has Transferred an aggregate of at least 25 million shares of Registrable Securities or (b) the Pension Plan has been given an opportunity to include at least 25 million shares of Registrable Securities in a Piggyback Registration or a Strategic Partner Demand Registration and has declined to do so. "Minimum Tender Condition" means, with respect to any tender offer, that there have been validly tendered and not withdrawn pursuant to such tender offer a number of shares of Class E Common Stock which, when taken together with the number of shares of Class E Common Stock that the Bidder making such tender offer otherwise beneficially owns as of immediately after the acceptance for purchase and purchase of such tendered shares, represent more than 50% of the voting power of all securities of Issuer outstanding as of such expiration date and generally entitled to vote in the election of directors. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint ven ture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. "Registrable Securities" means (i) the Class E Common Stock contributed pursuant to this Agreement from time to time, (ii) the Class E Common Stock held by the Pension Plan as of the date hereof which are subject to the Exchange Agreement and (iii) the securities issued or issuable with respect to the securities referred to in clauses (i) and (ii) in connection with any stock dividend, stock split (forward or reverse), combination of shares, recapitalization, merger, consolidation, redemption, exchange of securities or other reorganization or reclassification after the date hereof. In the event of any of the foregoing with respect to the Registrable Securities or similar transactions affecting the Registrable Securities, all references herein to any designation of securities and to any specific number of shares or Registrable Securities shall be appropriately adjusted to give effect thereto. As to any particular Registrable Securities, such securities will cease to be Registrable Securities when they have been Transferred by the Pension Plan in accordance with all applicable provisions of this Agreement. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations thereunder. "Share Limitation" means that the lead underwriter or co-managers of any offering in connection with a Piggyback Registration, a Demand Registration or a Strategic Partner Demand Registration advise Issuer in writing that in their opinion the -32- number of Registrable Securities requested to be included in such offering exceeds, together with other shares of Class E Common Stock to be included therein, the number of shares of Class E Common Stock which can be sold in such offering without adversely affecting the marketability of the offering. "Strategic Partner" means any Person (or group of Persons acting in concert with respect to an investment in Issuer) who (i) in a single transaction or series of related transactions entered into as part of a single business venture (the "Strategic Partner Transactions") acquires or commits to acquire shares of Class E Common Stock (or securities convertible into or exchangeable or exercisable for the Class E Common Stock) that constitute not less than 10% of the Class E Common Stock then outstanding (determined after giving effect to such commitment (and assuming that all such shares or securities subject to such commitment are acquired) or acquisition and the conversion, exchange or exercise of all such securities subject to such commitment or so acquired) and (ii) is designated as such by the Board of Directors of Issuer. Issuer shall give the Pension Plan prompt notice of any such acquisition, commitment and designation, of the nature and proposed timetable for any acquisitions and of the nature of any rights granted to the Person so designated to register under the Securities Act shares of the Class E Common Stock. If more than one Person is designated the Strategic Partner as described above, all rights of the Strategic Partner herein shall be shared among such Persons as such Persons and Issuer may agree. Issuer may designate only one Person (or group of Persons as described above) as the Strategic Partner hereunder. All references herein to the shares of Class E Common Stock beneficially owned by the Strategic Partner shall include all shares of Class E Common Stock (or securities convertible into or exchangeable or exercisable for the Class E Common Stock) acquired by the Strategic Partner pursuant to the Strategic Partner Transactions and all additional shares of Class E Common Stock (or securities convertible into or exchangeable or exercisable for the Class E Common Stock) that the Strategic Partner has a right, commitment or obligation to acquire pursuant to the Strategic Partner Transactions. "Transfer" means any sale, transfer or other disposition (including any pledge and any disposition upon the foreclosure of any pledge or any agreement to do any of the foregoing). 12. Miscellaneous. (a) Succession. In the event that the Registrable Securities are to be converted or exchanged into (or become the right to receive) securities of any issuer other than the Person who is then Issuer hereunder in connection with any transaction to which such Issuer is a party, such Issuer shall cause the issuer of such securities to agree, effective as of such conversion or exchange, that all rights, obligations and restrictions of Issuer -33- set forth in this Agreement, except for the rights, obligations and restrictions set forth in subsections (a) through (e) of Section 1 (which shall only be obligations of General Motors), shall continue to apply to such securities. As of the time of such conversion or exchange, subject to the exception set forth in the preceding sentence, such issuer shall be bound by this Agreement and shall succeed to all rights, restrictions and obligations of Issuer set forth in this Agreement, all references to Issuer herein shall thereafter be deemed to be references to such issuer, and the predecessor Issuer shall be released from all obligations under this Agreement (except with respect to any obligations under Section 10 with respect to any registration of securities issued by such Issuer). To evidence the foregoing, prior to the time of such conversion or exchange, Issuer may execute, and cause such issuer to execute, a Succession Agreement substantially in the form of Exhibit C attached hereto. Upon request, the Pension Plan shall acknowledge and agree to any such Succession Agreement as set forth therein. To the extent required and permissible under applicable law, as soon as reasonably practicable after such conversion or exchange, such issuer shall file with the Commission an amendment to the Shelf Registration Statement, if any, then in effect to ensure that such Shelf Registration shall continue to apply to such securities. In the event such issuer is not eligible to register such securities on Form S-3, all references to Form S-3 herein shall thereafter be deemed to be references to Form S-1 or any other available form, except that such issuer shall have no obligations hereunder to file a Shelf Registration Statement (and shall have no obligation with respect to any Shelf Registration Statement that is then in effect) unless and until such time as such issuer becomes eligible to register such securities on Form S-3 or any successor short form registration statement. (b) Termination. All rights, restrictions and obligations of Issuer and the Pension Plan, except with respect to any rights and obligations under Section 10, shall terminate and this Agreement shall have no further force and effect at such time as the Pension Plan reduces its ownership of the Registrable Securities to less than 2% of the aggregate number of shares of Class E Common Stock then outstanding. (c) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented except by a writing signed by Issuer and the Pension Plan. (d) Notices. Except where notice by teleconference is specifically called for in this Agreement, all notices and other communications provided for or permitted hereunder shall be in writing and, except as specified herein, shall be made by hand delivery, by registered or certified first-class mail, return receipt requested, overnight courier or facsimile transmission: -34- (i) If to the Pension Plan: United States Trust Company of New York 114 West 47th Street New York, New York 10036 Attention: Senior Vice President and General Counsel Telephone: (212) 852-1302 Facsimile: (212) 852-1310 with copies to: General Motors Investment Management Corporation 767 Fifth Avenue New York, New York 10153 Attention: Vice President, Portfolio Strategy and Manager Relations Telephone: (212) 418-3590 Facsimile: (212) 418-6339 (ii) If to Issuer: General Motors Corporation 767 Fifth Avenue New York, New York 10153 Attention: Treasurer Telephone: (212) 418-3500 Facsimile: (212) 418-3695 with copies to: General Motors Corporation Legal Staff 3031 West Grand Boulevard Detroit, Michigan 48202 Attention: Warren G. Andersen, Esq. Telephone: (313) 974-1528 Facsimile: (313) 974-0685 All notices and communications shall be deemed to have been duly given and received: when received telephonically, if notice by teleconference is specifically called for by this Agreement; when delivered by hand, if hand delivered; the fifth Business Day after being deposited in the mail, registered or certified, return receipt requested, first class postage prepaid, or earlier Business Day actually received, if mailed; the first Business Day after being deposited with an overnight courier, postage prepaid, if by overnight courier; upon oral confirmation of receipt, if by facsimile transmission. Each party agrees promptly to confirm receipt of all notices. -35- Whenever notices are required to be given by Issuer, such notices may only be given by the Treasurer of Issuer or another officer or employee of Issuer designated by the Treasurer in advance in writing to the recipient of such notice. Whenever notices are required to be given by any investment manager (includ ing the Trustee) with respect to the Registrable Securities, such notices may only be given by an officer or employee of such invest ment manager designated in advance in writing to the recipient of such notice. (e) No Third Party Beneficiaries. This Agreement shall be for the sole and exclusive benefit of Issuer, the Pension Plan, the Trustee and any other investment manager or managers acting on behalf of the Pension Plan with respect to the Registrable Securities, and their respective successors, and directors, trustees, officers, employees, agents and controlling Persons indemnified hereunder. Nothing in this Agreement shall be con strued to give any other Person any legal or equitable right, remedy or claim under this Agreement. (f) Descriptive Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not constitute a part hereof. (g) Cooperation. Each party hereto shall take such further action, and execute such additional documents, as may be reasonably requested by any other party hereto in order to carry out the purposes of this Agreement. (h) Binding Effect; Assignment. This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by each of the parties and their successors and the directors, trustees (including, without limitation, any successor trustee for the Pension Plan), officers, employees, agents and controlling Persons of the parties. Except for an assignment to a successor trustee or to an investment manager as stated herein, and except as contemplated in Section 12(a), none of the rights or obligations under this Agreement shall be assigned by the Pension Plan without the consent of Issuer or by Issuer without the consent of the Pension Plan. (i) Counterparts. This Agreement may be executed in counterparts, and shall be deemed to have been duly executed and delivered by all parties when each party has executed a counterpart hereof and delivered an original or facsimile copy thereof to the other party. Each such counterpart hereof shall be deemed to be an original, and all of such counterparts together shall constitute one and the same instrument. (j) Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal laws (and not the laws of conflict) of -36- the State of Delaware, except to the extent that the laws of the state or jurisdiction of incorporation or organization of the issuer of the Registrable Securities from time to time specifically apply to questions concerning the relative rights of the issuer of the Registrable Securities and the stockholders of such issuer in their capacities as such. (k) Acknowledgments. The Pension Plan agrees that it will obtain written acknowledgments, and provide a copy of such acknowledgments to Issuer, from each of its investment managers with respect to the Registrable Securities (other than the Trustee) and from the Trustee's valuation adviser, confirming that such entity has received and reviewed this Agreement and will comply with the terms of this Agreement applicable to it. Issuer and the Pension Plan acknowledge and agree that, as of the date hereof and pursuant to this Section 12(k), the Exchange Agreement is terminated with respect to the Pension Plan and is of no further force and effect with respect to the Class E Common Stock acquired by the Pension Plan pursuant thereto, and the Pension Plan shall have no further rights, and Issuer shall have no further obligations to the Pension Plan, thereunder or with respect to the Class E Common Stock acquired by the Pension Plan pursuant thereto, and the Pension Plan hereby waives any rights it may have had thereunder. * * * * -37- IN WITNESS WHEREOF, the parties hereto, being duly authorized, have executed and delivered this Registration Agreement on the date first above written. GENERAL MOTORS CORPORATION By: Name: Title: GENERAL MOTORS HOURLY-RATE EMPLOYEES PENSION PLAN By: UNITED STATES TRUST COMPANY OF NEW YORK, As Trustee By: Name: Title: -38- EXHIBIT A --------- TRANSFER AGREEMENT This Agreement is entered into on _______________, 1995, by and between General Motors Corporation, a Delaware corporation ("General Motors"), and United States Trust Company of New York (the "Trustee") as trustee of a trust established under the General Motors Hourly-Rate Employees Pension Plan (the "Pension Plan"), for the account and on behalf of the Pension Plan (which shall thereby be deemed a party to this Agreement). Capitalized terms used and not otherwise defined herein shall have the respective meanings set forth in Section 5. WHEREAS, General Motors intends, subject to the satisfaction of certain regulatory and other conditions, to contribute approximately 177,000,000 shares of Class E Common Stock to the Pension Plan, pursuant to the terms of a Registration Rights Agreement, dated as of the date hereof (the "Registration Rights Agreement"), by and between General Motors and the Pension Plan; and WHEREAS, the Pension Plan is the owner of other shares of Class E Common Stock that are subject to the Registration Rights Agreement; and WHEREAS, General Motors wishes to preserve its ability to consummate at a later date a tax-free reorganization (or series of reorganizations) under the Internal Revenue Code of 1986, as amended, and the rules, regulations and rulings thereunder (the "Code"), including, without limitation, a split-off pursuant to which the outstanding shares of Class E Common Stock and, in the discretion of General Motors, Series C Preference Stock will be converted into or exchanged for, among other things, shares of capital stock of Electronic Data Systems Corporation, a Texas corporation ("Texas EDS") (or a subsidiary of Texas EDS or any other subsidiary of General Motors owning an interest in Texas EDS) (Texas EDS and any such subsidiary being collectively referred to herein as "EDS") such that EDS is no longer controlled by General Motors (any such transaction or series of transactions being referred to herein as a "Split- Off"), and to preserve the tax-free status of a Split-Off in the event that EDS enters into a business combination with one or more other corporations or other business entities (a "Merger") within two years of such time as a Split-Off is effected, which objective makes it desirable that certain restrictions be imposed on the Pension Plan's ability to Transfer the Transferable Securities; and WHEREAS, the Pension Plan is prepared to accept the shares of Class E Common Stock that may be contributed to it as described in the Registration Rights Agreement and to hold and Transfer any such shares and other shares of Class E Common Stock owned by it on the terms and conditions stated herein; and WHEREAS, the Trustee has been appointed by the named fiduciary of the Pension Plan (the "Named Fiduciary") (as determined in accordance with Section 402(a) of the Employee Retirement Income Security Act of 1974, as amended), to manage any shares of Class E Common Stock held by the Pension Plan as described in the Registration Rights Agreement and this Agreement and to exercise all rights, powers and privileges appurtenant to such shares (subject to the authority of the Named Fiduciary to terminate such appointment and appoint one or more other investment managers for any such shares); and WHEREAS, the Trustee has full power and authority to execute and deliver this Agreement for the account and on behalf of the Pension Plan and to so bind the Pension Plan; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, General Motors and the Pension Plan hereby agree as follows: 1. Restrictions on Transfer. (a) (i) From and after such date as the first shares of Class E Common Stock are contributed to the Pension Plan pursuant to the Registration Rights Agreement (the "Initial Contribution Date"), the Pension Plan shall not make any Transfer of the Transferable Securities to any Person if, to the knowledge of the Pension Plan after reasonable inquiry, such Person is a Foreign Person and, as a result of such Transfer, such Person would own (directly or through the attribution rules contained in the regulations under Section 367(e) of the Code) shares of Class E Common Stock that would constitute more than 5% of the total value of the Class E Common Stock then outstanding. The foregoing restriction shall terminate at such time as a Split-Off is effected (the "Split-Off Date"). (ii) From and after the Initial Contribution Date, the Pension Plan shall not make any Transfer of the -2- Transferable Securities to (A) any Person (or group of related Persons acting pursuant to a plan or arrangement) (whether such Person (or group of related Persons acting pursuant to a plan or arrangement) is buying for its own account or as a fiduciary on behalf of one or more accounts), if such Transferable Securities constitute more than 2% of the Class E Common Stock then outstanding or (B) any Person (or group of related Persons acting pursuant to a plan or arrangement) if such Person (or group of related Persons acting pursuant to a plan or arrangement) is then, or as a result of such Transfer will become, to the knowledge of the Pension Plan after reasonable inquiry, a 5% Person. The foregoing restrictions shall terminate on the first anniversary of the Split-Off Date. (b) From and after the Initial Contribution Date, the Pension Plan shall not make any Transfer of the Transferable Securities to any Person (or group of related Persons acting pursuant to a plan or arrangement) if, as a result of such Transfer and related transactions, to the knowledge of the Pension Plan after reasonable inquiry, such Person (or group of related Persons acting pursuant to a plan or arrangement) would have acquired shares of Class E Common Stock that (when aggregated with all other shares of Class E Common Stock so acquired at any time by such Person (or group of related Persons acting pursuant to a plan or arrangement)) would constitute 40% or more of the total number of shares of Class E Common Stock then outstanding (computed for this purpose as if any option, warrant or other security that permits such Person (or group of related Persons acting pursuant to a plan or arrangement) to acquire additional shares of Class E Common Stock (or any securities convertible into or exchangeable or exercisable for the Class E Common Stock) had been fully exercised, converted or exchanged). The foregoing restriction shall terminate 185 days after the Split-Off Date. (c) From and after any such time as the Pension Plan receives notice from General Motors or otherwise becomes aware by public announcement that General Motors intends to effect a Split-Off (the "Split-Off Notice Date"), the Pension Plan shall not make any Transfer of the Transferable Securities if, after giving effect to such Transfer, the number of shares of Transferable Securities that would be owned directly by the Pension Plan (which shall include all shares in which the Pension Plan has a beneficial interest (whether or not registered in the name of the Pension Plan) and which shall not include shares owned by any Affiliate of the Pension Plan) would constitute less than 50% of the number of Transferable Securities owned directly by the Pension Plan as of the Split-Off Notice Date; provided that if there has been at any time from and after the Split-Off Notice Date, to the knowledge of -3- the Pension Plan after reasonable inquiry, any 5% Person, then the Pension Plan may Transfer shares of Transferable Securities only if and to the extent that the number of Transferable Securities that would be owned directly by the Pension Plan immediately after such proposed Transfer would exceed 50% of the sum of (i) the number of shares of Class E Common Stock owned directly by the Pension Plan as of the Split-Off Notice Date and (ii) the maximum number of shares of Class E Common Stock directly or indirectly beneficially owned (as defined in Rule 13d-3 of the Exchange Act or any successor thereto ("Rule 13d-3")) at any time since the Split-Off Notice Date, to the knowledge of the Pension Plan after reasonable inquiry, by such 5% Person and by each other 5% Person (reduced so as not to double count any shares Transferred by one 5% Person to any other 5% Person). The restrictions set forth in this Section 1(c) shall terminate (i) in the event any such Split-Off is abandoned, on such date as the Pension Plan receives notice from General Motors or otherwise becomes aware of such abandonment (subject to such restrictions again becoming applicable as described in the first sentence of this Section 1(c)) or (ii) in the event any such Split-Off is effected, on the second anniversary of the Split-Off Date, provided that, if any agreement or letter of intent or other announcement of an intention to effect a Merger is entered into or made prior to the second anniversary of the Split-Off Date (a "Merger Event"), such restrictions shall terminate (A) except as provided in clause (B) below, on the second anniversary of such time as such Merger is consummated (such time being referred to as the "Merger Date"), (B) in the event such Merger constitutes a fully taxable exchange under Section 1001 of the Code, in which such Section applies to consideration received pursuant to such Merger by all shareholders of the Person who is then the issuer of the Transferable Securities and so long as the Pension Plan (and the Trustee) complied fully with the provisions of Section 1(h) with respect to such Merger, on the Merger Date, or (C) in the event such Merger is abandoned, on the later of (Y) the second anniversary of the Split-Off Date (subject to the occurrence of another Merger Event after such abandonment and prior to such second anniversary) and (Z) such date as the Pension Plan receives notice from General Motors or otherwise becomes aware of such abandonment. (d) Sections 1(a), 1(b) and 1(f) shall not apply to any Transfer of Transferable Securities by the Pension Plan if such Transfer is pursuant to an underwritten public offering reasonably designed to achieve a broad public distribution of the securities being offered; provided, that the Pension Plan shall have caused the lead underwriter and any co-manager of such offering to have agreed (and the Pension Plan shall have delivered evidence of such agreement to General Motors prior to the proposed commencement of such offering) to use its reasonable best efforts (i) to effect a -4- broad public distribution of such securities and (ii) not to make any Transfer to any one Person (or group of related Persons acting pursuant to a plan or arrangement) (whether such Person (or group of related Persons acting pursuant to a plan or arrangement) is buying for its own account or as a fiduciary on behalf of one or more accounts) if (A) such Transfer is of Transferable Securities constituting more than 2% of the Class E Common Stock then outstanding or (B) such Person (or group of related Persons acting pursuant to a plan or arrangement) is a 5% Person, or, at any time prior to the time of such Transfer, has been designated in a written list provided by General Motors to the Pension Plan as, to the reasonable belief of General Motors, beneficially owning (as defined in Rule 13d-3) 2% or more of the total voting power or total value of the Class E Common Stock then outstanding. (e) Nothing in this Agreement shall prohibit the Pension Plan from making any Transfer of Transferable Securities if and to the extent such Transfer is made pursuant to a Split-Off or a Merger; provided that this Agreement shall continue to apply to any Transferable Securities received by the Pension Plan pursuant to such Split-Off or Merger, as the case may be, as provided in this Agreement. (f) From and after the Initial Contribution Date, the Pension Plan shall not make any Transfer of the Transferable Securities to any Person (or group of related Persons acting pursuant to a plan or arrangement) if, to the knowledge of the Pension Plan after reasonable inquiry, as a result of such Transfer, such Person (or group of related Persons acting pursuant to a plan or arrangement) would constitute a 5% Person, unless the Pension Plan shall cause such Person (and all related Persons acting pursuant to a plan or arrangement) to agree to be bound by the provisions of this Agreement and to execute a transferee agreement reasonably satisfactory to General Motors and the Pension Plan to effectuate the purposes hereof. An executed copy of such agreement shall be delivered to General Motors prior to the consummation of any such proposed Transfer of the Transferable Securities. The foregoing restriction shall terminate on the second anniversary of the Split-Off Date; provided that if a Merger Event occurs prior to the second anniversary of the Split-Off Date, such restriction shall terminate on the second anniversary of the Merger Date or, in the event such Merger is abandoned, on the later of (i) the second anniversary of the Split-Off Date (subject to the occurrence of another Merger Event after such abandonment and prior to such second anniversary) and (ii) such date as the Pension Plan receives notice from General Motors or otherwise becomes aware of such abandonment. -5- (g) Until all restrictions set forth in Sections 1(a) through 1(f) have terminated pursuant to the terms set forth therein, the Pension Plan shall not make any Transfer of securities convertible into or exercisable or exchangeable for the Transferable Securities or any other securities the value of which is derived from the Transferable Securities unless prior to the consummation of such Transfer General Motors has received a Modification Ruling (as defined below) confirming, in form and substance reasonably satisfactory to General Motors, that no income, gain or loss will be recognized by General Motors, EDS or General Motors's or EDS's stockholders or Affiliates on account of such Transfer. (h) The Trustee has determined that a Split-Off would substantially increase the value of the Transferable Securities and is therefore in the interests of the Pension Plan and the participants and beneficiaries of the Pension Plan. General Motors has represented to the Trustee that it will not consider a Split-Off unless it can be adequately assured of the tax-free status of such Split-Off. The Trustee recognizes that such tax-free status may be jeopardized by a taxable Merger that occurred within two years of a Split-Off. Accordingly, until all restrictions set forth in Sections 1(a) through 1(f) have terminated pursuant to the terms set forth therein, the Pension Plan (or the Trustee on behalf of the Pension Plan) will vote against any proposed Merger if (i) the Trustee determines, on the advice of tax counsel, that such Merger would not constitute a tax-free reorganization under Section 368 of the Code in which Section 354(a)(1) of the Code would apply to consideration received pursuant to such Merger by all shareholders of the Person who is then the issuer of the Transferable Securities or (ii) General Motors delivers to the Trustee, no later than three Business Days prior to the scheduled date for the stockholders meeting at which such Merger is to be voted on or the expiration date for the consent solicitation with respect thereto, as the case may be, an opinion of tax counsel reasonably satisfactory to the Trustee (which tax counsel may have been and be retained, employed or consulted from time to time by General Motors) that there is a material risk that such Merger would not constitute a tax-free reorganization as described above. The Trustee shall deliver written notice to General Motors of any determination made pursuant to clause (i) of the preceding sentence (or of any decision not to make any such determination) as promptly as practicable, and in any event no later than ten Business Days prior to the scheduled date for the stockholders meeting at which such Merger is to be voted on or the expiration date for the consent solicitation with respect thereto, as the case may be. (i) No Transfer or attempted Transfer of Transferable Securities in violation of this Agreement shall be made or recorded -6- on the books of General Motors (or any other issuer of the Transferable Securities) and any such Transfer shall be void and of no effect. (j) Each certificate representing the shares of Class E Common Stock contributed to the Pension Plan pursuant to the Registration Rights Agreement shall conspicuously bear a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A TRANSFER AGREEMENT, DATED AS OF __________, 1995, BY AND BETWEEN GENERAL MOTORS CORPORATION ("GENERAL MOTORS") AND THE INITIAL HOLDER HEREOF THAT CONTAINS, AMONG OTHER THINGS, CERTAIN RESTRICTIONS ON THE TRANSFER OF SUCH SECURITIES. A COPY OF SUCH TRANSFER AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY GENERAL MOTORS TO THE HOLDER HEREOF UPON WRITTEN REQUEST." The certificates representing shares of Class E Common Stock held by the Pension Plan and acquired other than pursuant to the Registration Rights Agreement shall be promptly surrendered to General Motors in order that General Motors' transfer agent may place such legend upon them. General Motors (or any other issuer of the Transferable Securities) shall instruct its transfer agent that such legend shall be removed from the certificates representing any Transferable Securities upon the earlier of (i) the Pension Plan's Transfer of such shares of Transferable Securities if such Transfer is made in accordance with all applicable provisions of this Agreement and to a Person (or group of related Persons acting pursuant to a plan or arrangement) who is not required to execute a transferee agreement under Section 1(f) and (ii) the termination of all restrictions set forth in Sections 1(a) through 1(f) pursuant to the terms set forth therein. (k) Nothing herein shall be construed as a waiver or modification of any of the restrictions on Transfer of the Registrable Securities (as defined in the Registration Rights Agreement) set forth in the Registration Rights Agreement, in no event shall any Transfer of the Transferable Securities be deemed to be a permitted Transfer of the Registrable Securities under the Registration Rights Agreement solely because such Transfer is permitted under this Agreement and in no event shall any Transfer of the Registrable Securities be deemed to be a permitted Transfer of the Transferable Securities under this Agreement solely because such Transfer is permitted under the Registration Rights Agreement. -7- 2. Representations, Warranties and Covenants. ----------------------------------------- (a) The Pension Plan represents that it owns ______ shares of Class E Common Stock and does not own any shares of Series C Preference Stock, in each case as of the date hereof. (b) The Pension Plan agrees that from and after the date hereof it shall not purchase or acquire, in open market transactions or otherwise, any additional shares of Class E Common Stock or any securities convertible into or exercisable or exchangeable for the Class E Common Stock or any other interest in the Class E Common Stock; provided, that (i) any securities received by the Pension Plan as consideration for any exchange or conversion of Class E Common Stock pursuant to the terms of a Split-Off or a Merger, (ii) any securities acquired by the Pension Plan as a dividend or other distribution on the Class E Common Stock and (iii) any shares of Class E Common Stock contributed to the Pension Plan pursuant to the Registration Rights Agreement, shall not violate this Section 2(b). The foregoing covenant shall terminate following the consummation of a Split-Off at the time described in clause (ii) of the last sentence of Section 1(c). 3. Cooperation and Other Covenants. ------------------------------- (a) The Pension Plan shall take (or refrain from taking) all such actions as General Motors may reasonably request as necessary to ensure that General Motors obtains and maintains (i) a private letter ruling from the IRS (the "Split-Off Ruling") confirming, in form and substance reasonably satisfactory to General Motors, that no income, gain or loss will be recognized by General Motors, its stockholders or Affiliates on account of a Split-Off (except to the extent of any additional consideration described in Section 356 of the Code) and (ii) a private letter ruling from the IRS or an opinion of counsel, as determined by General Motors in its sole discretion (the "Merger Ruling"), confirming, in form and substance reasonably satisfactory to General Motors, that no income, gain or loss will be recognized by General Motors, EDS or General Motors's or EDS's stockholders or Affiliates on account of a Merger. Without limiting the generality of the foregoing, the Pension Plan shall agree to be bound by such further restrictions on its ability to Transfer the Transferable Securities as may be reasonably necessary to satisfy the IRS that the Split-Off is not a device for the distribution of profits and earnings of General Motors to General Motors's stockholders and to make such further representations and covenants and execute such additional documents, in each case as General Motors may reasonably request as necessary in connection with obtaining either the Split-Off Ruling or the Merger Ruling. -8- (b) If so requested by the Pension Plan, General Motors shall waive or modify any restriction set forth in Section 1 if and to the extent that General Motors obtains a private letter ruling from the IRS (the "Modification Ruling") confirming, in form and substance reasonably satisfactory to General Motors, that such proposed waiver or modification shall not cause General Motors, EDS or General Motors's or EDS's stockholders or Affiliates to recognize any income, gain or loss on account of either a Split-Off (except to the extent of any additional consideration described in Section 356 of the Code) or a Merger. Without limiting the generality of the foregoing, General Motors shall promptly seek to obtain any such Modification Ruling as the Pension Plan may reasonably request, including a Modification Ruling hereby requested by the Pension Plan, confirming, in form and substance reasonably satisfactory to General Motors, that the IRS will not consider all or part of the number of shares of Class E Common Stock owned by 5% Persons other than the Pension Plan for purposes of determining whether the continuity of interest requirement has been satisfied with respect to a Split-Off or a Merger. General Motors and the Pension Plan shall cooperate with each other (and any such tax counsel) and shall take (or refrain from taking) such actions as either party hereto may reasonably request as necessary to obtain any requested Modification Ruling. (c) General Motors shall promptly notify the Pension Plan of any intention of General Motors to effect or abandon a Split-Off and any intention of EDS of which EDS has notified General Motors with respect to a Merger or the abandonment of a Merger, in all such cases at such time and to the extent determined by General Motors, in its sole discretion, to be reasonably consistent with the purposes of this Agreement. (d) Until all restrictions set forth in Section 1 have terminated, the Pension Plan shall give General Motors written notice of any proposed Transfer of the Transferable Securities within a reasonable period of time prior to such proposed Transfer, and in any event no later than such date as any notice with respect to such proposed Transfer is required to be given by the Pension Plan pursuant to the Registration Rights Agreement (including any notice of election to participate in any Piggyback Registration) or, if no such date is provided for in the Registration Rights Agreement, 10 days prior to the proposed consummation of such Transfer. Each notice hereunder of a proposed Transfer shall set forth the number of shares of Transferable Securities then owned by the Pension Plan and the terms and conditions of such proposed Transfer, including, without limitation, the approximate number of Transferable Securities proposed to be Transferred, the proposed timetable for such Transfer, whether such Transfer is to be made pursuant to an underwritten public offering in accordance with -9- Section 1(f) and, if such Transfer is to be made otherwise, the identity of any proposed transferee and the number of shares of Class E Common Stock otherwise then owned by such proposed transferee, all with sufficient particularity to enable General Motors to determine whether such proposed Transfer would comply with the provisions of this Agreement. If, in connection with any such proposed Transfer, the Pension Plan receives from any proposed underwriter, co-manager or transferee any certificate, representation, undertaking or other documentation intended to establish compliance with the provisions of this Agreement, then the Pension Plan shall deliver to General Motors a copy thereof prior to the consummation of such proposed Transfer. The Pension Plan shall give General Motors written notice of any material change in the terms and conditions of a proposed Transfer from those described in any previous notice thereof to General Motors from the Pension Plan as promptly as practicable, and in no event later than two Business Days prior to such time as such Transfer is then proposed to be consummated, and the Pension Plan shall not make any proposed Transfer other than in accordance with such terms and conditions as so described to General Motors. If at any time prior to the consummation of any proposed Transfer, General Motors determines, based on the advice of its legal counsel, that such proposed Transfer would violate any of the restrictions or be inconsistent with any of the provisions of this Agreement, then General Motors shall give notice to the Pension Plan of such determination and, unless and until tax counsel (which shall not be tax counsel regularly employed by General Motors or the Pension Plan unless otherwise agreed) mutually agreeable to General Motors and the Pension Plan (the fees and expenses of which shall be borne equally by General Motors and the Pension Plan) delivers an opinion to General Motors and the Pension Plan that such proposed Transfer would not so violate or be inconsistent with this Agreement, the Pension Plan shall not make such proposed Transfer. General Motors and the Pension Plan shall cooperate with each other (and any such tax counsel) and shall provide each other with such information as may reasonably be requested in order to enable any party (or such tax counsel) to make any determination with respect to this Agreement. (e) Each of the parties shall treat all notices of and information relating to proposed Transfers, Split-Offs and Mergers, including, without limitation, all notices pursuant to Sections 3(c) and 3(d), that are received from the other party with the strictest confidence and shall not disseminate such information; provided, that nothing herein shall prohibit disclosure of any such notice or information to the then issuer of the Transferable Securities. Nothing herein shall be construed to require General Motors or any of its Affiliates to make any public disclosure of information at any time. -10- 4. Remedies. Each of the parties to this Agreement shall be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including reasonable attorneys fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that the Pension Plan's breach of any term or provision of this Agreement will materially and irreparably harm General Motors, that money damages will accordingly not be an adequate remedy for any breach of the provisions of this Agreement by the Pension Plan and that General Motors, in its sole discretion and in addition to any other remedies it may have at law or in equity, may apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. 5. Definitions and Interpretations. ------------------------------- (a) Definitions. ----------- "Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange Act (or any successor thereto). "Business Day" means such days as the New York Stock Exchange, Inc. shall be open for trading. "Class E Common Stock" means Class E Common Stock, par value $0.10 per share, of General Motors and any securities issued or issuable with respect to the Class E Common Stock in connection with any stock dividend, stock split (forward or reverse), combination of shares, recapitalization, merger, consolidation, redemption, exchange of securities or other reorganization or reclassification after the date hereof, including, without limitation, shares of capital stock of EDS issued or issuable with respect to the Class E Common Stock in connection with a Split-Off and shares of capital stock issued or issuable with respect to such shares of capital stock of EDS in connection with a Merger. In the event of any of the foregoing with respect to the Class E Common Stock or similar transactions affecting the Class E Common Stock, all references herein to the designation "Class E Common Stock" and to any specific number of shares of Class E Common Stock shall be appropriately adjusted to give effect thereto, and shall include reference to all securities of the same class regardless of whether any such securities were issued or issuable with respect to the securities that previously constituted the Class E Common Stock. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. -11- "Exchange Agreement" means the Exchange and Registration Agreement, dated as of November 4, 1992, by and among General Motors, the Pension Plan and the General Motors Corporation Retirement Program for Salaried Employees. "5% Person" means any Person (or group of related Persons acting pursuant to a plan or arrangement) that, directly or indirectly, beneficially owns (as defined in Rule 13d-3) shares of Class E Common Stock that constitute 5% or more of the total voting power or total value of the Class E Common Stock then outstanding; provided that no Person (or group of related Persons acting pursuant to a plan or arrangement) shall be deemed a 5% Person for purposes of Section 1(c) if such Person (or group of related Persons acting pursuant to a plan or arrangement) (i) acquired such shares directly from General Motors or (ii) has executed and delivered to General Motors a transferee agreement pursuant to Section 1(f). "Foreign Person" means any person who is not either (i) a citizen or resident of the United States, (ii) a domestic partnership, (iii) a domestic corporation or (iv) an estate or trust treated as a U.S. person under Section 7701(a)(30)(D) of the Code. "IRS" means the Internal Revenue Service. "Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint ven ture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. "Series C Preference Stock" means Series C Convertible Preference Stock, par value $0.10 per share, of General Motors. "Transfer" means any sale, transfer or other disposition (including any pledge and any disposition upon the foreclosure of any pledge) or any agreement to do any of the foregoing. "Transferable Securities" means (i) the Class E Common Stock contributed to the Pension Plan pursuant to the Registration Rights Agreement from time to time, (ii) the Class E Common Stock held by the Pension Plan as of the date hereof which are subject to the Exchange Agreement and (iii) the securities issued or issuable with respect to the securities referred to in clauses (i) and (ii) in connection with any stock dividend, stock split (forward or reverse), combination of shares, recapitalization, merger, consol idation, redemption, exchange of securities or other reorganization or reclassification after the date hereof, including, without limitation, shares of capital stock of EDS issued or issuable with -12- respect to the Class E Common Stock in connection with a Split-Off and shares of capital stock issued or issuable with respect to the Class E Common Stock in connection with a Merger. In the event of any of the foregoing with respect to the Transferable Securities or similar transactions affecting the Transferable Securities, all references herein to the designation "Transferable Securities" and to any specific number of shares of Transferable Securities shall be appropriately adjusted to give effect thereto. (b) Interpretations. --------------- For purposes of this Agreement, "knowledge of the Pension Plan after reasonable inquiry" shall mean actual knowledge of the Pension Plan after such inquiry, provided that, for purposes of determining compliance of any proposed Transfer of Transferable Securities with the provisions of this Agreement, (i) the Pension Plan shall be deemed to have actual knowledge of the information contained in any Schedule 13D or 13G (or any successor thereto) filed under the Exchange Act or any amendment thereto with respect to the Class E Common Stock more than two Business Days prior to such proposed Transfer and (ii) if such Transfer is made pursuant to an underwritten public offering as described in Section 1(d), the Pension Plan shall be deemed to have made a reasonable inquiry if it shall have conducted a search of the filings of Schedules 13D and 13G (and any successors thereto) under the Exchange Act and any amendments thereto within two Business Days of such proposed Transfer. 6. Miscellaneous. ------------- (a) Successor Issuers. In the event that, at any time after the time at which the Class E Common Stock is converted into, exchanged for or otherwise becomes a security of EDS, EDS enters into any transaction pursuant to which the capital stock of EDS is to be converted into, exchanged for or otherwise become the right to receive securities of any issuer other than EDS, then all references herein to EDS (including this Section 6(a)) shall be deemed as of the time of consummation of such transaction to be references to both EDS and such successor issuer. (b) Amendments and Waivers. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented except by a writing signed by General Motors and the Pension Plan. (c) Notices. All notices and other communications provided for or permitted hereunder shall be in writing and shall be made by hand delivery, by registered or certified first-class -13- mail, return receipt requested, overnight courier or facsimile transmission: (i) If to the Pension Plan: United States Trust Company of New York 114 West 47th Street New York, New York 10036 Attention: Senior Vice President and General Counsel Telephone: (212) 852-1302 Facsimile: (212) 852-1310 with copies to: General Motors Investment Management Corporation 767 Fifth Avenue New York, New York 10153 Attention: Vice President, Portfolio Strategy and Manager Relations Telephone: (212) 418-3590 Facsimile: (212) 418-6339 (ii) If to General Motors: General Motors Corporation 767 Fifth Avenue New York, New York 10153 Attention: Treasurer Telephone: (212) 418-3500 Facsimile: (212) 418-3695 with copies to: General Motors Corporation Legal Staff 3031 West Grand Boulevard Detroit, Michigan 48202 Attention: Warren G. Andersen, Esq. Telephone: (313) 974-1528 Facsimile: (313) 974-0685 All notices and communications shall be deemed to have been duly given and received: when delivered by hand, if hand delivered; the fifth Business Day after being deposited in the mail, registered or certified, return receipt requested, first class postage prepaid, or earlier Business Day actually received, if mailed; the first Business Day after being deposited with an overnight courier, postage prepaid, if by overnight courier; upon -14- oral confirmation of receipt, if by facsimile transmission. Each party agrees promptly to confirm receipt of all notices. Whenever notices are required to be given by General Motors, such notices may only be given by the Treasurer of General Motors or another officer or employee of General Motors designated by the Treasurer in advance in writing to the recipient of such notice. Whenever notices are required to be given by any investment manager (including the Trustee) with respect to the Transferable Securities, such notices may only be given by an officer or employee of such investment manager designated in advance in writing to the recipient of such notice. (d) No Third Party Beneficiaries. This Agreement shall be for the sole and exclusive benefit of General Motors, the Pension Plan, the Trustee and any other investment manager or managers acting on behalf of the Pension Plan with respect to the Transferable Securities, and their respective successors, and directors, trustees, officers, employees, agents and controlling Persons indemnified hereunder. Nothing in this Agreement shall be construed to give any other Person any legal or equitable right, remedy or claim under this Agreement. (e) Descriptive Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not constitute a part hereof. (f) Cooperation. Each party hereto shall take such further action, and execute such additional documents, as may be reasonably requested by any other party hereto in order to carry out the purposes of this Agreement. (g) Binding Effect; Assignment. This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by each of the parties and their successors. Except for an assignment to a successor trustee or to an investment manager as stated herein and except as provided in Section 1(f), none of the rights or obligations under this Agreement shall be assigned by the Pension Plan without the consent of General Motors or by General Motors without the consent of the Pension Plan. (h) Counterparts. This Agreement may be executed in counterparts, and shall be deemed to have been duly executed and delivered by all parties when each party has executed a counterpart hereof and delivered an original or facsimile copy thereof to the other party. Each such counterpart hereof shall be deemed to be an original, and all of such counterparts together shall constitute one and the same instrument. -15- (i) Governing Law. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal laws (and not the laws of conflict) of the State of Delaware, except to the extent that the laws of the state or jurisdiction of incorporation or organization of the issuer of the Transferable Securities from time to time specifically govern questions concerning the relative rights of the issuer of the Transferable Securities and the stockholders of such issuer in their capacities as such. (j) Acknowledgements. The Pension Plan agrees that it will (i) obtain written acknowledgements, and provide a copy of such acknowledgments to General Motors from each of its investment managers with respect to the Transferable Securities (other than the Trustee), confirming that such entity has received and reviewed this Agreement and will comply with the terms of this Agreement applicable to it and (ii) inform each of the investment managers working with or for the Pension Plan in any capacity of the existence and terms of the covenant made by the Pension Plan in Section 2(b) and instruct each such investment manager to comply with such covenant at all times until such covenant terminates as provided in Section 2(b). * * * * * -16- IN WITNESS WHEREOF, the parties hereto, being duly authorized, have executed and delivered this Transfer Agreement on the date first above written. GENERAL MOTORS CORPORATION By: Name: Title: GENERAL MOTORS HOURLY-RATE EMPLOYEES PENSION PLAN By: UNITED STATES TRUST COMPANY OF NEW YORK, As Trustee By: Name: Title: -17- EXHIBIT B --------- INTEREST RATE SCHEDULE The interest rate referred to in Section 2(f)(iv) shall be a per annum rate equal to the sum of (i) the rate quoted on the date of delivery of the Exercise Notice for United States Treasury bills with a maturity of 90 days and (ii) the amount set forth below under the column "Spread" corresponding to the rating (the "Rating") assigned by Standard & Poor's Ratings Group ("S&P") to the short term unsecured debt obligations of Issuer on the date of delivery of the Exercise Notice (it being understood that, for purposes of the foregoing, (i) the rating assigned to such debt obligations by any other rating agency shall be disregarded, (ii) any plus attached to a rating assigned by S&P shall be disregarded, (iii) any minus attached to a rating assigned by S&P shall be considered a downgrade to the next lowest rating and (iv) if S&P changes its rating system after the date hereof, the Ratings as set forth below shall be adjusted to the comparable ratings under such new rating system).
Rating Spread (in basis points) ------ ------ A or better 50 BBB 100 BB 250 B or below or No Rating 400
EXHIBIT C SUCCESSION AGREEMENT This Agreement is entered into as of ___________, ____, by and between ________________________, a __________ corporation ("Predecessor"), and ___________________, a __________ corporation ("Successor"). Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Registration Rights Agreement, dated as of ___________, 1995 (the "Registration Agreement") by and between General Motors Corporation, a Delaware corporation ("General Motors"), and United States Trust Company of New York, as trustee (the "Trustee") of a trust established under the General Motors Hourly-Rate Employees Pension Plan (the "Pension Plan"), for the account of and on behalf of the Pension Plan. WHEREAS, Predecessor is currently the issuer of the securities referred to as the "Registrable Securities" and "Class E Common Stock" in the Registration Agreement and generally has the rights and the obligations of Issuer under the Registration Agreement; and WHEREAS, pursuant to ________________ (the "Transaction"), shares of Class E Common Stock shall be [converted into] [exchanged for] securities of Successor (the "Successor Securities"), effective as of ____________ (the "[Conversion] [Exchange] Date"); and WHEREAS, the Registration Agreement contemplates that in the event of a transaction such as the Transaction, Successor shall generally succeed to the rights and obligations of Issuer under the Registration Agreement; and NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Predecessor and Successor hereby agree as follows: 1. Succession. (a) Effective as of the [Conversion] [Exchange] Date, all rights, obligations and restrictions with respect to shares of Class E Common Stock (including Registrable Securities) set forth in the Registration Agreement shall apply to the Successor Securities. (b) Effective as of the [Conversion] [Exchange] Date, Successor shall be bound by the Registration Agreement and shall succeed to all rights, restrictions and obligations of Issuer set forth in the Registration Agreement, all references to Issuer therein shall thereafter be deemed to be references to Successor, and Predecessor shall be released from all obligations under the Registration Agreement. (c) Notwithstanding subsections (a) and (b) above, (i) all rights and obligations in Sections 1(a) through 1(e) of the Registration Agreement shall remain rights and obligations of General Motors and (ii) Predecessor shall not be released from any obligations under Section 10 of the Registration Agreement with respect to any registration of securities issued by Predecessor. 2. Cooperation. Predecessor and Successor shall take such further action, and execute such additional documents, as may be reasonably requested by either party in order to carry out the purposes of this Agreement. 3. Counterparts. This Agreement may be executed in counterparts, and shall be deemed to have been duly executed and delivered by all parties when each party has executed a counterpart hereof and delivered an original or facsimile copy thereof to the other party. Each such counterpart hereof shall be deemed to be an original, and all of such counterparts together shall constitute one and the same instrument. * * * -2- IN WITNESS WHEREOF, the parties hereto, being duly authorized, have executed and delivered this Succession Agreement on the date first above written. PREDECESSOR: _________________________________ By:______________________________ Its:_____________________________ SUCCESSOR: By:______________________________ Its:_____________________________ This Succession Agreement (including, without limitation, the release of the Predecessor from obligations under the Registration Agreement as set forth herein (except as provided in Section 1(c) above)) is acknowledged and agreed to as of this _____ day of _____________, ____. GENERAL MOTORS HOURLY-RATE EMPLOYEES PENSION PLAN By: UNITED STATES TRUST COMPANY OF NEW YORK, As Trustee By: _____________________________ Its: ____________________________ -3- EXHIBIT 10(K) SUCCESSION AGREEMENT This Agreement is entered into as of ____________, 1996 by and between _______________________ General Motors Corporation, a Delaware corporation ("GM"), and Electronic Data Systems Corporation, a Delaware corporation ("EDS"). Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Registration Rights Agreement, dated as of March 12, 1995 (the "Registration Agreement") by and between GM and United States Trust Company of New York, as trustee (the "Trustee") of a trust established under the General Motors Hourly-Rate Employees Pension Plan (the "Pension Plan"), for the account of and on behalf of the Pension Plan. WHEREAS, GM is currently the issuer of the securities referred to as the "Registrable Securities" and "Class E Common Stock" in the Registration Agreement and generally has the rights and the obligations of Issuer under the Registration Agreement; WHEREAS, in connection with the Split-Off of GM from EDS (the "Split- Off"), each outstanding share of Class E Common Stock shall be converted into one share of common stock, $.01 par value per share, of EDS (the "EDS Common Stock"); and WHEREAS, the Registration Agreement contemplates that in the event of a transaction such as the Split-Off, EDS shall generally succeed to the rights and obligations of Issuer under the Registration Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, GM and EDS hereby agree as follows: 1. Succession. ---------- (a) Effective as of the consummation of the Split-Off, , all rights, obligations and restrictions with respect to shares of Class E Common Stock (including Registrable Securities) set forth in the Registration Agreement shall apply to the EDS Common Stock. (b) Effective as of the consummation of the Split-Off, EDS shall be bound by the Registration Agreement and shall succeed to all rights, restrictions and obligations of Issuer set forth in the Registration Agreement, all references to Issuer therein shall thereafter be deemed to be references to EDS, and GM shall be released from all obligations under the Registration Agreement. (c) Notwithstanding subsections (a) and (b) above, (i) all rights and obligations in Sections 1(a) through 1(e) of the Registration Agreement shall remain rights and obligations of GM and (ii) GM shall not be released from any obligations under Section 10 of the Registration Agreement with respect to any registration of securities issued by GM. 2. Cooperation. GM and EDS shall take such further action, and execute such additional documents, as may be reasonably requested by either party in order to carry out the purposes of this Agreement. 3. Counterparts. This Agreement may be executed in counterparts, and shall be deemed to have been duly executed and delivered by all parties when each party has executed a counterpart hereof and delivered an original or facsimile copy thereof to the other party. Each such counterpart hereof shall be deemed to be an original, and all of such counterparts together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto, being duly authorized, have executed and delivered this Succession Agreement on the date first above written. GENERAL MOTORS CORPORATION By:_____________________________ Name: Title: ELECTRONIC DATA SYSTEMS CORPORATION By:_____________________________ Name: Title: This Succession Agreement (including, without limitation, the release of GM from obligations under the Registration Agreement as set forth herein (except as provided in Section 1(c) above)) is acknowledged and agreed to as of this __ day of ___________ , 1996 GENERAL MOTORS HOURLY-RATE EMPLOYEES PENSION PLAN By: UNITED STATES TRUST COMPANY OF NEW YORK, As Trustee By: _________________________________ Its: _________________________________ EXHIBIT 10(L) 1984 ELECTRONIC DATA SYSTEMS CORPORATION STOCK INCENTIVE PLAN 1. PURPOSE OF PLAN. The purpose of the Plan is to provide corporate officers and key employees of Electronic Data Systems Corporation ("EDS") and its subsidiaries (EDS and such subsidiaries being referred to hereinafter collectively as the "Company") with a strong incentive for individual creativity and contribution to ensure the future growth of the Company. The Plan is not designed to benefit persons who may be satisfied solely with past accomplishments but, rather, is designed to reward those who are deeply committed to a career with the Company and whose ability and diligence permit such persons to make important contributions to the success of the Company by enabling such persons to acquire shares of Class E Common Stock, $0.10 par value ("Class E Stock"), of General Motors Corporation ("GM"), in the manner contemplated by the Plan. This Plan covers the sale of shares subject to restrictions ("Restricted Stock"), the grant of rights, subject to restrictions ("Restricted Stock Units"), to acquire shares which may or may not be subject to restrictions ("Unit Stock"), the award of bonus shares which may or may not be subject to restrictions ("Bonus Stock") and the grant of options (including options intended to qualify as incentive stock options ("Incentive Options") under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")), to acquire shares which may or may not be subject to restrictions ("Option Stock"). 2. ADMINISTRATION OF PLAN. This Plan shall be administered and interpreted by the EDS Executive Compensation Committee (the "Committee"). The Committee shall be appointed by the Executive Compensation Committee (the "Executive Compensation Committee") of the Board of Directors of GM (the "Board of Directors") and shall consist of not less than three persons (at least two of whom shall be members of the board of directors of EDS). No member of the Committee shall be eligible, and shall not have been eligible at any time within one year prior to his appointment to the Committee, for selection as a person to whom stock may be sold or awarded or to whom either rights to acquire shares or stock options may be granted pursuant to the Plan. Subject to Section 3, the Committee shall have full authority, in its discretion, to determine those corporate officers and key employees who shall participate in the Plan and the number of shares to be sold or awarded to each participant and the number of shares to be covered by either rights to acquire shares or options granted to each participant (it being understood that more than one sale, award or grant or any combination thereof may relate to the same participant). Recommendations for individual awards shall be made to the Committee by the President of EDS. The Committee may adopt such rules and regulations for the administration of the Plan as it deems advisable and shall have full authority, in its discretion, to amend such rules and regulations. The Committee may act by a meeting in person or take action by unanimous written consent or by means of a meeting held by conference telephone call or similar communications equipment pursuant to which all persons participating in the meeting can hear each other. The Committee may request advice or assistance or employ such persons as it deems necessary for proper administration of the Plan. Any determination made by the Committee shall be conclusive except that, to the extent required by law or by the Certificate of Incorporation or By-Laws of GM, the terms of any sale or award of shares or any grant of either rights to acquire shares or options under the Plan and the sufficiency of the consideration therefor shall be subject to ratification by the Board of Directors or its Executive Compensation Committee prior to such sale, award or grant. 3. ELIGIBLE PARTICIPANTS. Key employees, including officers and directors, of the Company shall be eligible to participate under the Plan. However: (i) no member of the board of directors shall be eligible to participate under the Plan unless he is also a full time employee of the Company; (ii) no member of the Committee shall be eligible to participate under the Plan; (iii) no person shall be eligible to participate under the Plan if he owns, directly or indirectly, more than 5% of the total combined voting power of all classes of stock of GM; and (iv) not more than 32,000,000 shares may be sold, awarded or covered by rights or options granted under this Plan with respect to any one participant. 4. SHARES SUBJECT TO PLAN. An aggregate of 160,000,000 shares of Class E Stock shall be subject to this Plan. In the discretion of the Board of Directors or its delegate, such shares may be: (i) treasury shares, including shares acquired by GM or EDS in open market transactions; or (ii) authorized but unissued shares. In the event that such shares are reacquired or newly issued by GM, and except as otherwise authorized by the Board of Directors or the Committee, GM shall have the right to require the Company to reimburse GM for such shares in an amount determined by GM, which amount shall include any brokerage fees and commissions paid by GM for such shares, less any amounts directly paid to GM by the employees to whom such shares are issued. If any change is made in the number, class or rights of shares subject to the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, split-up, combination of shares, exchange of shares, issuance of rights to subscribe or other change in capital structure), appropriate adjustments shall be made as to the maximum number of shares subject to the Plan and the number of shares and price per share subject to any outstanding award or grant as shall be equitable, as determined by the Committee, to prevent dilution or enlargement of such rights; provided, however, that the issuance by GM of up to 480,000,000 shares of the Class E Stock, either pursuant to or outside the ambit of the Plan, shall not require an adjustment pursuant to this Section. The Committee in its sole discretion may provide in any agreement with a participant relating to the sale, award or grant of Restricted Stock ("Restricted Stock Agreement"), Restricted Stock Units ("Unit Stock Agreement"), Bonus Stock ("Bonus Stock Agreement"), or Option Stock ("Option Stock Agreement") or otherwise for adjustments to be made with respect to shares sold or awarded hereunder. If prior to the termination of the Plan, shares of Restricted Stock, Unit Stock, Bonus Stock or Option Stock issued pursuant hereto shall have been repurchased by or redelivered to GM or EDS (as designated by the Committee) in connection with the restrictions imposed on such shares pursuant to this Plan, such repurchased or redelivered shares shall again become 2 available for sale, award or grant under the Plan. To the extent any Restricted Stock Units terminate in connection with the restrictions imposed on such Units (other than pursuant to the delivery of shares in respect thereof) or any options granted hereunder terminate or expire unexercised in whole or in part, the shares then so covered shall again become available for sale, award or grant under the Plan. 5. PRICE. Subject to the provisions of Sections 2, 6, 7, 8 and 9 of the Plan and to the requirements of applicable law, the Committee shall determine the price at which shares of Restricted Stock and Unit Stock shall be sold to participants hereunder and the price at which any options granted to purchase shares of Option Stock hereunder shall become exercisable. All shares purchased upon exercise of any option shall be paid for in full at the time of exercise and such payment may be made in whole or in part by delivery of shares of Class E Stock already owned by the participant with such shares being valued for these purposes at 100% of the Fair Market Value (as defined in Section 21) thereof on the date of the exercise. 6. RESTRICTED STOCK. Shares of Restricted Stock may be sold pursuant to this Plan at a nominal price which is consistent with the requirements of applicable state law and which does not exceed 10% of the Fair Market Value of the shares at the time of grant. All shares of Restricted Stock sold pursuant to this Plan (including any shares received by the holders thereof as a result of any adjustment pursuant to Section 4) shall be subject to the following restrictions: A. Shares of Unvested Stock (as defined in Section 21) may not be sold, assigned, transferred or otherwise alienated or hypothecated. B. Except as otherwise provided in the related Restricted Stock Agreement, in the event of termination of employment with the Company by a participant within such period or periods after shares are sold to him hereunder as is established by the Committee in the related Restricted Stock Agreement, if such termination is for any reason other than death, transfer of an employee from employment with EDS or a subsidiary corporation to employment with GM or a subsidiary of GM or EDS, Total Disability (as defined in Section 21), Normal Retirement (as defined in Section 21) or Early Retirement (as defined in Section 21), GM or EDS (as designated by the Committee) shall have the option to buy for cash all or any part of the shares of Unvested Stock sold to such participant at the cash price per share paid by him. Such option shall extend for 60 days following written tender by the participant of the Unvested Stock to the Secretary of GM or the Secretary of EDS as required in the related Restricted Stock Agreement and such purchase shall be as of the date of such termination of employment (which shall be the date on which the participant is deemed to have ceased to own the shares). A participant's failure to make the above tender shall not limit in any manner the rights of GM or EDS to repurchase shares of Unvested Stock hereunder and in such event the Secretary of 3 GM or the Secretary of EDS may give notice to such participant that his tender shall be deemed to have been made on the date of termination of employment. In the event of any conflict between the rights of GM and EDS under this paragraph, the rights of GM shall take precedence. C. Except as otherwise provided in the related Restricted Stock Agreement, in the event a participant who has purchased shares hereunder ceases to be employed by the Company as the result of death, Total Disability, Normal Retirement or Early Retirement, then: (i) GM or EDS (as designated by the Committee) may repurchase that portion of the shares of Unvested Stock sold to such participant, at such price and on such terms and conditions, as the Committee shall determine at such time in its sole discretion; and (ii) the other restrictions imposed and still existing upon any or all of the shares of Unvested Stock sold to such participant shall lapse or shall be removed in accordance with a specified formula, all as shall be determined at such time in the sole discretion of the Committee. D. In the event of the failure of any condition to the vesting of shares of Restricted Stock, all such shares of Unvested Stock shall be repurchased by GM or EDS (as designated by the Committee) within 60 days after the occurrence of the failure of such condition as shall be established by the Committee in the Restricted Stock Agreement at the cash price per share paid by such participant. E. The Committee may provide in the related Restricted Stock Agreement for: (i) any other restrictions on any shares of Restricted Stock sold pursuant to this Plan as it may deem advisable, including, without limitation, restrictions based on market appreciation of Class E Stock, increases in the revenues, sales, net worth or net earnings of EDS or any subsidiary, division or other component thereof, or the attainment of any other business or financial goal of the Company, except that the restrictions contained in Section 10 shall be imposed on all shares of Restricted Stock; and (ii) such further restrictions as may be advisable to comply with law, including the requirements of the Securities Act of 1933, as amended (the "Securities Act"), any stock exchange upon which such share or shares of the same class are then listed and under any state securities or other laws applicable to such shares. F. The Committee shall determine the exercise period within which a right to acquire shares of Restricted Stock pursuant to this Plan must be exercised; provided, however, that such exercise period shall in no event exceed 60 days after the date of the grant of such right and the participant may not sell, assign, transfer or otherwise alienate or hypothecate such right during such 60-day period other than, subject to the other provisions of this Plan, by will or the laws of descent and distribution and such right shall be exercisable during the participant's lifetime only by him or his guardian or legal representative. 4 7. RESTRICTED STOCK UNITS. Subject to the requirements of applicable law, the Committee in its sole discretion may grant Restricted Stock Units without cash consideration. Restricted Stock Units and the shares covered by such Units (including any shares credited thereto as a result of any adjustment pursuant to Section 4) shall be subject to the following conditions: A. Restricted Stock Units and any Unvested Stock received in respect of such Units may not be sold, assigned, transferred or otherwise alienated or hypothecated. B. As specified in the applicable Restricted Stock Unit Agreement, Restricted Stock Units shall be subject to restrictions similar to those imposed on Restricted Stock, subject to adjustment, if applicable, to reflect the lack of cash consideration paid for such Units. C. Each Restricted Stock Unit shall entitle the holder thereof to receive the shares covered by such Unit (including any shares credited thereto as a result of any adjustment pursuant to Section 4) at such time, in such amounts and subject to such conditions as specified in the applicable Restricted Stock Unit Agreement. Such conditions may, in the sole discretion of the Committee, include the payment of cash consideration in an amount not to exceed the nominal purchase price applicable to Restricted Stock determined at the time of grant of such Units. Upon the issuance of certificates representing such shares, a corresponding portion of the Restricted Stock Unit shall be cancelled. D. All shares of Unit Stock received in respect of Restricted Stock Units (including all shares credited thereto as a result of any adjustment pursuant to Section 4) shall be free of any restrictions (other than those advisable to comply with applicable law) or shall be subject to restrictions similar to those referred to in Section 6 (including specifically Section 6E) with respect to shares of Restricted Stock as the Committee shall establish in the related Restricted Stock Unit Agreement, except that the restrictions contained in Section 10 shall be imposed on all shares received in respect of any Restricted Stock Unit. E. Upon each Class E Stock dividend payment date, each holder of a Restricted Stock Unit shall be entitled to receive from GM in respect of the shares then covered by such Unit, which also were so covered on the record date for such dividend (including any such shares credited thereto as a result of any adjustment pursuant to Section 4), an amount in cash equal to the amount of any cash dividend which otherwise would have been paid to such holder in respect of such shares if such shares had been registered in the holder's name on the corresponding record date. 5 F. No holder of a Restricted Stock Unit shall be deemed to be a holder of any shares covered by such Unit until the issuance of certificates representing such shares. Except as provided in Sections 4 and 7E, no adjustment shall be made for any dividends or distributions or other rights for which the record date is prior to the date of issuance of such stock certificates. 8. BONUS STOCK. Subject to the requirements of applicable law, the Committee in its sole discretion may award shares of Bonus Stock to participants hereunder without cash consideration and may determine in the related Bonus Stock Agreement whether shares of Bonus Stock awarded pursuant to the Plan (including any shares received by the holders hereof as a result of any adjustment pursuant to Section 4) shall be free of any restrictions (other than those advisable to comply with law) or shall be subject to restrictions similar to those referred to in Section 6 (including specifically Section 6E) with respect to shares of Restricted Stock. In the event that any restrictions (other than those contained in Section 10 which shall be imposed on all shares of Bonus Stock) are imposed on shares of Bonus Stock awarded pursuant to the Plan, then such shares shall be subject to at least the following restrictions: A. Shares of Unvested Stock may not be sold, assigned, transferred or otherwise alienated or hypothecated. B. In the event of the failure of any condition to the vesting of shares of Bonus Stock, all such shares of Unvested Stock shall be delivered to GM or EDS (as designated by the Committee) within 60 days after the occurrence of the failure of such condition as is established by the Committee without any payment from GM or EDS. 9. STOCK OPTIONS. Subject to the provisions of Sections 2 and 3 of the Plan, all options granted pursuant to the Plan shall have such terms and conditions as the Committee in its sole discretion shall determine, including the period during which they may be exercised in whole or in part and the conditions under which they may be terminated and such other provisions as may be advisable to comply with law or the rules of any stock exchange, but the exercise price shall not be less than 100% of the Fair Market Value of the underlying shares of stock on the date the option is granted. Each option shall have the following additional conditions: A. The options shall not be transferable other than by will or the laws of descent and distribution and shall be exercisable during the participant's lifetime only by him and, except as otherwise determined by the Committee, shall only be exercisable prior to termination of employment with the Company. B. Participants shall have no right to receive any fractional shares upon the exercise of options granted under the Plan. 6 C. No optionee shall be deemed to be a holder of any shares of Class E Stock until the issuance of certificates after the exercise of an option. No adjustment shall be made for any dividends or distributions or other rights for which the record date is prior to the date such stock certificates are so issued except as provided in Section 9D below. D. The number of shares subject to an option and the price per share shall be appropriately adjusted pursuant to Section 4. E. All shares of Option Stock (and all shares received thereon as the result of any adjustment pursuant to Section 4) shall be free of any restrictions (other than those advisable to comply with applicable law) or shall be subject to restrictions similar to those referred to in Section 6 (including specifically Section 6E) with respect to shares of Restricted Stock as the Committee shall establish in the related Option Stock Agreement, except that the restriction contained in Section 10 shall be imposed on all shares of Option Stock. F. An Incentive Option shall lapse and the participant's rights with respect to such Incentive Option shall terminate not later than ten years from the date such Incentive Option is granted. 10. COMPETITION BY PARTICIPANT. In the event a participant, within such period of time and such geographic limitation as shall be specified in the related Restricted Stock Agreement, Restricted Stock Unit Agreement, Bonus Stock Agreement or Option Stock Agreement, directly or indirectly, individually or as an employee, partner, officer, director or stockholder or in any other capacity whatsoever of any person, firm, partnership or corporation: (i) participates in any activity as or for a competitor of the Company, which is the same or similar to the activities in which Employee was involved at the Company at the time of Employee's termination from the Company during the prior 12-month period; (ii) hires, attempts to hire or assists any other person or entity in hiring or attempting to hire any employee of the Company, or any person who was an employee of the Company within the prior 6-month period; (iii) solicits, in competition with the Company, the business of any customer of the Company or any person or entity whose business the Company solicited during the 6-month period prior to termination; or (iv) participates in any activity for any customer of the Company or any person or entity that the Company solicited to become a customer during the 6-month period prior to Employee's termination, which is the same as or similar to those activities in which Employee was involved at the time of termination; the following provisions shall apply with respect to any shares of Restricted Stock, Unit Stock, Bonus Stock and Option Stock received and Restricted Stock Units and options granted under this Plan as of the date of the first occurrence prohibited under this provision: 7 A. Such participant: (i) shall immediately sell and deliver to GM or EDS (as designated by the Committee), upon demand, all shares of Restricted Stock, Unit Stock, Bonus Stock or Option Stock sold or awarded to the participant under the Plan as to which the participant is still the direct or indirect beneficial owner at the cash price per share, if any, paid by the participant; and (ii) shall pay to GM or EDS (as designated by the Committee) an amount in cash with respect to each share of Restricted Stock, Unit Stock, Bonus Stock and Option Stock not still so held equal to the Fair Market Value (as defined in Section 21) of each such share on the first date on which such share is no longer held less the price paid by him for such share. B. Any option outstanding under the Plan shall automatically terminate and shall no longer be exercisable and all Restricted Stock Units then held shall automatically terminate. C. The provisions of this Section shall not limit or restrict in any manner any rights or remedies which EDS, the Company or GM and its subsidiaries may have under any separate employment agreement with a participant or otherwise with respect to competition by a participant. If any provision of this Section 10 or any similar provision contained in a Restricted Stock Agreement, Restricted Stock Unit Agreement, Bonus Stock Agreement or Option Stock Agreement should be found by any court of competent jurisdiction to be unreasonable by reason of its being too broad as to the period of time, territory, aspects of business or customers covered or otherwise, then, and in that event, such provision shall nevertheless remain valid and fully effective, but shall be considered to be amended so that the period of time, territory, aspects of business or customers covered or otherwise set forth shall be changed to be the maximum period of time, the largest territory, the most aspects of business and customers covered and/or the broadest other limitations, as the case may be, which would be found reasonable and enforceable by such court and similarly, if any remedy is so found to be unenforceable in whole or in part, or to any extent, such provision shall remain in effect only to the extent the remedies would be enforceable by such court. 11. RELATED AGREEMENTS. In order to enforce the restrictions imposed upon shares issued and rights and options granted hereunder and to comply with Federal and state securities laws and the Code, EDS shall enter into a Restricted Stock Agreement, Restricted Stock Unit Agreement, Bonus Stock Agreement or Option Stock Agreement with each participant containing such terms and conditions, including additional restrictions of the type described in Section 6E above, as the Committee shall determine, and the Committee may require that the certificates representing shares of Unvested Stock shall remain in the physical custody of EDS or GM (as designated by the Committee) or an escrow holder. The Committee shall have full authority upon the consent of a participant to amend the terms and provisions of any such agreement relating to the participant or the terms of any rights or options relating to the participant which are outstanding under the Plan. 8 12. NO EFFECT ON EMPLOYMENT. Nothing herein contained, including the sale or award of any shares and the grant of any rights or options, shall affect the rights of the Company to terminate any participant's employment at any time for any reason. 13. EXEMPTION FROM PENSION COMPUTATION. By acceptance of shares sold or awarded or rights or options granted under this Plan, each participant shall be deemed to agree that it is special incentive compensation and that it will not be taken into account as "wages" or "salary" in pension, retirement or other employee benefit plans or arrangements of the Company, except as otherwise determined by the Company. In addition, each beneficiary of a deceased participant shall be deemed to agree that such sale, award or grant will not affect the amount of any life insurance coverage available to such beneficiary under any life insurance plan covering employees of the Company. 14. LEGEND. In order to enforce the restrictions imposed upon shares sold or awarded hereunder (other than those contained in Section 10), the Committee may cause a legend or legends to be placed on any certificates representing shares sold or awarded pursuant to this Plan, which legend or legends shall make appropriate reference to the restrictions imposed hereunder. 15. AMENDMENTS. The Plan may be amended at any time by the Board of Directors or the Committee, provided that, without the approval of the stockholders of GM entitled to vote thereon, no such amendment shall become effective if it would: (i) increase the number of shares of Class E Stock which may be sold or awarded under the Plan; or (ii) modify the requirements as to eligibility for participation in the Plan. 16. TERMINATION. Unless earlier terminated by the Board of Directors or the Committee, the Plan shall terminate on October 17, 2004. No shares shall be sold or issued (except to the extent issued in connection with rights or options previously granted hereunder) or rights or options granted hereunder after such date. The termination of the Plan, however, shall not affect any restrictions previously imposed on shares issued pursuant to the Plan or alter the rights of participants with respect to rights or options granted or shares issued (including Unvested Stock) pursuant to the Plan. 17. RIGHTS OF PARTICIPANTS AS STOCKHOLDERS. Each participant acquiring shares of Restricted Stock, Unit Stock, Bonus Stock or Option Stock hereunder shall, upon the issuance of certificates with respect to such shares, be the owner of such shares as provided herein and in the related Restricted Stock Agreement, Restricted Stock Unit Agreement, Bonus Stock Agreement or Option Stock Agreement and, except as otherwise provided herein or in any such related Agreement, shall be entitled to full voting, dividend and distribution rights like any other holder of Class E Stock as long as such participant remains the owner thereof as provided. 9 18. GOVERNING LAW. The Plan shall be governed by and construed and enforced in accordance with the laws of the State of Texas. 19. VALIDITY AND LEGALITY. If any provision of the Plan should be found by any court of competent jurisdiction to be invalid, illegal or unenforceable, in whole or in part, such declaration shall not affect the validity, legality or enforceability of any remaining provision or portion thereof, which remaining provision or portion shall remain in full force and effect as if the Plan had been adopted with the invalid, illegal or unenforceable provision or portion thereof eliminated. 20. EFFECTIVE DATE. The Plan shall be deemed effective upon its approval by the Board of Directors; provided, however, that no stock, rights or options may be sold, awarded or granted under the Plan until a Registration Statement under the Securities Act covering the shares to be issued under the Plan has become effective. 21. DEFINITIONS. For purpose of the Plan, the following additional definitions shall be applicable: "Early Retirement" and "Normal Retirement" shall mean the discontinuance of employment of a participant in accordance with the early and normal retirement provisions, respectively, of the Electronic Data Systems Corporation Retirement Plan, as amended. In the event that at any time EDS does not have a proposed or effective retirement plan, such terms shall be defined by regulation of the Committee. "Fair Market Value" of a share of Class E Stock shall be the mean between the high and low sale prices for Class E Stock as reported in The Wall Street Journal on the date of the occurrence of the event requiring the determination of the Fair Market Value of such share of Class E Stock or on the date immediately prior thereto on which such prices for Class E Stock are so reported or, if not so reported, as reported in another newspaper of national circulation selected by the Committee or, in case no such sales take place on such date, the mean of the closing bid and asked prices (regular way) on the New York Stock Exchange Composite Tape on such date or, if the Class E Stock is not then listed or admitted to trading on the New York Stock Exchange, the mean between the high and low sale prices on such date or, in case no sales take place on such date, the mean of the closing bid and asked prices (regular way) on the largest principal national securities exchange on which such stock is then listed or admitted to trading, or if not listed or admitted to trading on any principal national securities exchange, then the last reported sale price for such shares in the over-the-counter market, as reported on the National Association of Securities Dealers Automated Quotation System, or, if such sale price shall not be reported thereon, the mean of the closing bid and asked prices as reported thereon, or if such prices shall not be reported thereon, as the same shall be reported by the National Quotation Bureau Incorporated, or, in all other cases, the mean of two appraisals of fair market value, each of 10 which shall be furnished by a New York Stock Exchange member firm selected by the Committee for that purpose. "Total Disability" shall mean that a participant is determined to be, in the sole discretion of the Committee, disabled, due to sickness or injury from a cause other than an excluded cause specified below, and such disability is likely to be continuous and permanent, such that the participant is, in the opinion of the Committee, completely unable to perform any and every duty pertaining to his occupation with the Company and unable to engage in any reasonable occupation with the Company or any other employer, where "reasonable occupation" shall mean any occupation which other individuals who have an educational and employment background similar to that of the participant, and are in good health, are actually engaged in as their principal means of financial support. Any opinion of the Committee rendered in accordance herewith shall be final and conclusive and shall not be subject to review by anyone. A participant will not be considered to have suffered a Total Disability if, in the opinion of the Committee considering all of the circumstances, the disability is a result of: (i) excessive and habitual use by the participant of drugs, intoxicants or narcotics; (ii) injury or disease sustained by the participant which was diagnosed or discovered subsequent to the date his employment was terminated; or (iii) injury or sickness sustained by the participant as a result of reckless or wanton disregard of his own health or safety, or self-inflicted injuries. The Committee may require proof in such form as it may decide, including, in all cases where practicable, the certificate of a duly licensed physician, satisfactory to the Committee, that the participant has become disabled as provided herein. "Unvested Stock" shall mean all the shares of Restricted Stock, Unit Stock, Bonus Stock and Option Stock other than Vested Stock. "Vested Stock" shall mean all shares of Restricted Stock, Unit Stock, Bonus Stock and Option Stock which at the time in question have vested in accordance with the vesting provisions contained in the Plan and any related Restricted Stock, Restricted Stock Unit, Bonus Stock or Option Stock Agreement. 11 EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE ATTRIBUTABLE TO CLASS E COMMON STOCK (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ------------------------------ 1995 1994 1993 -------- -------- -------- Net income attributable to Class E Common Stock. $795.5 $444.4 $367.2 Dividends on Class E Common Stock............... 205.4 124.8 97.2 -------- -------- -------- Undistributed earnings.......................... 590.1 319.6 270.0 Adjustments Change in earnings related to the assumed share transactions........................... 0.1 -- 10.6 Dividends on assumed Class E Common Stock transactions................................. -- -- (2.8) -------- -------- -------- Adjusted earnings attributable to common stock.. $ 590.2 $ 319.6 $ 277.8 ======== ======== ======== Weighted average Class E Common shares outstanding.................................... 404.6 260.3 243.0 Adjustments for shares issued on assumed conversion of preference stock................. -- -- 7.0 -------- -------- -------- Adjusted weighted average Class E Common shares outstanding.................................... 404.6 260.3 250.0 ======== ======== ======== Per share data Earnings per share attributable to undistributed earnings on Class E Common Stock............... $ 1.46 $ 1.23 $ 1.11 Dividends....................................... 0.52 0.48 0.40 Adjustment...................................... (0.02)(1) -- -- -------- -------- -------- Earnings per share attributable to Class E Common Stock................................... $ 1.96 $ 1.71 $ 1.51 ======== ======== ========
Note: The difference between fully diluted and primary earnings per share is immaterial. - -------- (1) The per-share reported earnings attributable to Class E Common Stock of $1.96 equals the sum of the separate computations of each of the four quarters, consistent with the requirements for calculating earnings per share based on EDS earnings and the Class E denominator. The calendar year calculation shown above (based on 1995 weighted average outstanding Class E shares for the year) requires an adjustment of $0.02 due to the significant differences in the weighted average number of shares outstanding in each quarter resulting from the Class E stock contribution to the GM U.S. Hourly Pension Plan. EXHIBIT 21 SUBSIDIARIES OF EDS A. T. Kearney A/S, a Denmark corporation A. T. Kearney AB, a Sweden corporation A. T. Kearney AG, a Switzerland corporation A. T. Kearney AS, a Norway corporation A. T. Kearney Bermuda Ltd., a Bermuda corporation A. T. Kearney de Venezuela, C.A., a Venezuela corporation A. T. Kearney GmbH, a Germany corporation A. T. Kearney HE, a Norway corporation A. T. Kearney International, AS, a Norway corporation A. T. Kearney International, Inc., a Delaware corporation A. T. Kearney Ltda., a Brazil corporation A. T. Kearney, Inc., a Delaware corporation A. T. Kearney, Limited, an England corporation A. T. Kearney, Ltd., an Ontario corporation A. T. Kearney, Oy., a Finland corporation A. T. Kearney, S.A., a Spain corporation A. T. Kearney, SpA, an Italy corporation American Network Leasing Corporation, a Nevada corporation (does business under assumed/fictitious names of American Network Leasing Corporation of Nevada, ANLC Corporation, Legacy Recovery Group and Premier Collection Services) Appex, Inc., a Delaware corporation CGT Compania General de Telecomunicaciones S.A., a Spain corporation China Management Systems Corporation, a Republic of Taiwan (China) corporation Database Tecnologie S.p.A., an Italy corporation Deep Star, Inc., a California corporation Desarrollo y Servicios de Informatica y Communiciones, S.A. de C.V. (DESIC), a Mexico corporation E.D.S. de Mexico, Sociedad Anonima de Capital Variable, a Mexico corporation E.D.S. International Corporation, a Texas corporation E.D.S. International Limited, an England corporation E.D.S. of Canada, Ltd., an Ontario corporation E.D.S. Service, Ltd., a Japan corporation E.D.S. World Corporation (Far East), a Nevada corporation E.D.S. World Corporation (Netherlands), a Texas corporation Edley S.A., a Uruguay corporation EDS (Australia) Pty Limited, an Australia corporation EDS (Electronic Data Systems) Limited, an England corporation EDS (Europe) S.A., a Switzerland corporation EDS (New Zealand) Holdings Limited, a New Zealand corporation EDS (New Zealand) Limited Staff Superannuation Fund, a New Zealand corporation EDS (Schweiz) AG, a Switzerland corporation EDS Acquisition Corporation #4, a Delaware corporation EDS Antares, Inc., a Nevada corporation EDS Beteiligungsverwaltungsgesellschaft Duisburg mbH, a Germany corporation EDS Defence Limited, an England corporation EDS Defence N.V./S.A., a Belgium corporation EDS Electronic Data System Luxembourg S.A., a Luxembourg corporation EDS Electronic Data Systems (City) Limited, an England corporation EDS Electronic Data Systems (Deutschland) GmbH, a Germany corporation 1 EDS Electronic Data Systems (Hong Kong) Limited, a Hong Kong corporation EDS Electronic Data Systems (Philippines), Inc., a Philippines corporation EDS Electronic Data Systems del Peru S.A., a Peru corporation EDS Electronic Data Systems Italia S.p.A., an Italy corporation EDS Electronic Data Systems Italia Software S.p.A., an Italy corporation EDS Electronic Financial Services, Inc., a Delaware corporation EDS Elektronikus Adatrendszer Kft, a Hungary corporation EDS Europe, an England corporation EDS Eurosept S.A.S., a France corporation EDS Export Corporation, a St. Croix corporation EDS Finance plc, an England corporation EDS Financial Services Company (Ireland) Limited, an Ireland corporation EDS Fleet Services, Inc., a Texas corporation EDS Forsvars Services AB, a Sweden corporation EDS Holding GmbH, a Germany corporation EDS Industrie A.G., a Switzerland corporation EDS Industrie Software GmbH, a Germany corporation EDS Information Management AG, a Switzerland corporation EDS Informationstechnologie & Service GmbH, a Germany corporation EDS Informatique S.A., a Switzerland corporation EDS International (France) S.A.S., a France corporation EDS International (Singapore) Pte. Limited, a Singapore corporation EDS Kaufmannische Dienste und Informatik GmbH, a Germany corporation EDS New Zealand Limited, a New Zealand corporation EDS Personal Communications Corporation, a Delaware corporation EDS Technical Products Corporation, a Delaware corporation EDS Vermogensverwaltungs-GmbH, a Germany corporation EDS VLT Holdings, Inc., a Nevada corporation EDS-Electronic Data Systems de Portugal Lda, a Portugal corporation EDS-Electronic Data Systems do Brasil Ltda, a Brazil corporation EDS-Padcom Clinical Research Beteiligungs GmbH, a Germany corporation EDS-Scicon N.V., a Belgium corporation EDS-Scicon, US Software Products Group Incorporated, a Delaware corporation (does business under assumed/fictitious name of Ssytems Designers Software Inc.) EDSCICON (Malaysia) Sdn. Bhd., a Malaysia corporation Electronic Data Systems (EDS) A/S, a Norway corporation Electronic Data Systems (EDS) de Argentina S.A., an Argentina corporation Electronic Data Systems (EDS) Gesellschaft mbH, an Austria corporation Electronic Data Systems (EDS) International B.V., a Netherlands corporation Electronic Data Systems (EDS) Israel, Ltd., an Israel corporation Electronic Data Systems (EDS) Sweden AB, a Sweden corporation Electronic Data Systems (Ireland) Limited, an Ireland corporation Electronic Data Systems Belgium N.V., a Belgium corporation Electronic Data Systems Chile, S.A., a Chile corporation Electronic Data Systems Colombia, S.A., a Colombia corporation Electronic Data Systems Danmark A/S, a Denmark corporation Electronic Data Systems de Venezuela "EDS" C.A., a Venezuela corporation Electronic Data Systems Espana S.A., a Spain corporation Electronic Data Systems IT Services (M) Sdn. Bhd., a Malaysia corporation Electronic Data Systems Limited, an England corporation Electronic Data Systems Madrid, a Spain corporation Electronic Data Systems, Ltd., a Japan corporation 2 Eurexcel Associes S.A., a France corporation Federal Computer Services Corporation, a Delaware corporation GCS Limited, a New Zealand corporation ICR Internationale Consulting und Rechenzentrum GmbH, a Germany corporation IGR Ingeneria y Gestion de Redes S.A., a Spain corporation Industrie Daten IDee GmbH, a Germany corporation Informatica Centrum Infrastructuur en Milieu B.V.(ICIM), a Netherlands corporation Information Interchange Limited, a New Zealand corporation Informatique Proget S.A., a Belgium corporation Istiservice, an Italy corporation Japan Systems Company Limited, a Japan corporation K.K. C-2 World, a Japan corporation K.K. Theta Tech, a Japan corporation K.K. Tokai Atene Computer, a Japan corporation Keisai Asociados, C.A., a Venezuela corporation Keisai Panama, S.A., a Panama corporation Lenguajes y Servicios Informaticos, S.A. (LEINSA), a Spain corporation LG-EDS Systems, Inc., a Korea corporation LINC Computer, Inc., a Japan corporation M&DR Consultans Marketing and Data Research S.r.l., an Italy corporation M&SD Network Services, Inc., a Delaware corporation Management Computer Equipment S.A., a Belgium corporation National Heritage Insurance Company, a Texas corporation Nova Domus S.r.l., an Italy corporation OAN Services, Inc., a Texas corporation (does business under assumed/fictitious name of EDS OAN Services, Inc.) Padcom Clinical Research GmbH, a Germany corporation Pecos Holdings Corporation, a Delaware corporation Power Investment Corporation, a Nevada corporation (does business under assumed/fictitious name of Power Cogeneration of Nevada) PremiTech Corporation, a Texas corporation Proget France S.A., a France corporation Progical S.A., a France corporation SD-Scicon Ltd, an England corporation SD-Scicon Pte Limited, a Singapore corporation Servicios Mexicanos E.D.S., S.A. de C.V., a Mexico corporation Sociedad Anonima de Teleinformatica para Cajas de Ahorros (SATEICA), a Spain corporation Subarban Limited-Liability Company, a Nevada corporation Telecommunications International, Inc., a California corporation (does business under assumed/fictitious name of TIC) Trade Management Services, Inc., a Nevada corporation UMW-EDS Technologies Sdn. Bhd., a Malaysia corporation Varitel, Inc., a California corporation Ward FSC, Ltd, a Bermuda corporation Electronic Data Systems Corporation transacts business in various jurisdictions under the following assumed/fictitious names for specific purposes: BEI Golembe, Encore Auto Financing, Inc., Energy Management Associates, Maryland Health Information Network and Premier Results. 3 EXHIBIT 23(A) CONSENT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS GENERAL MOTORS CORPORATION: We consent to the incorporation by reference in this Solicitation Statement/Prospectus of General Motors Corporation and Registration Statement on Form S-4 of Electronic Data Systems Holding Corporation of our reports dated January 29, 1996, appearing in the Annual Report on Form 10-K of General Motors Corporation for the year ended December 31, 1995, as Amended, and to the reference to us under the heading "Experts" in the Solicitation Statement/Prospectus, which is part of this Registration Statement. /s/ Deloitte & Touche LLP - ---------------------- Deloitte & Touche LLP Detroit, Michigan April 16, 1996 EXHIBIT 23(B) CONSENT OF INDEPENDENT AUDITORS THE BOARDS OF DIRECTORS ELECTRONIC DATA SYSTEMS HOLDING CORPORATION GENERAL MOTORS CORPORATION: We consent to the use of our reports included and incorporated by reference herein and to the reference to our firm under the heading "Experts" in the Solicitation Statement/Prospectus, which is part of this Registration Statement. /s/ KPMG Peat Marwick LLP Dallas, Texas April 15, 1996 EXHIBIT 23(E) CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED We hereby consent to the use of our opinion letter dated March 31, 1996 to the Board of Directors of General Motors Corporation included as Appendix B-1 to the Solicitation Statement/Prospectus which forms a part of the Registration Statement on Form S-4 relating to the proposed split-off of Electronic Data Systems Holding Corporation from General Motors Corporation and to the references to such opinion in such Solicitation Statement/Prospectus under the captions "Summary--The Transactions--Fairness Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated," "Summary--The Transactions--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions," "Special Factors--Background of the Split-Off," "Special Factors--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions" and "Special Factors--Fairness Opinions-- Merrill Lynch Fairness Opinion." In giving such consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder, nor do we thereby admit that we are experts with respect to any part of such Registration Statement within the meaning of the term "experts" as used in the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. /s/ Merrill Lynch, Pierce, Fenner & Smith Incorporated April 16, 1996 EXHIBIT 23(F) CONSENT OF LEHMAN BROTHERS INC. We hereby consent to the use of our opinion letter dated March 31, 1996 to the Board of Directors of General Motors Corporation included as Appendix B-2 to the Solicitation Statement/Prospectus which forms a part of the Registration Statement on Form S-4 relating to the proposed split-off of Electronic Data Systems Holding Corporation from General Motors Corporation and to the references to such opinion in such Solicitation Statement/Prospectus under the captions "Summary--The Transactions--Fairness Opinions of Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated," "Summary--The Transactions--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions," "Special Factors--Background of the Split-Off," "Special Factors--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions" and "Special Factors--Fairness Opinions--EDS Team Financial Advisors Fairness Opinions." In giving such consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder, nor do we thereby admit that we are experts with respect to any part of such Registration Statement within the meaning of the term "experts" as used in the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. /s/ Lehman Brothers Inc. April 15, 1996 EXHIBIT 23(G) CONSENT OF MORGAN STANLEY & CO. INCORPORATED We hereby consent to the use of our opinion letter dated March 31, 1996 to the Board of Directors of General Motors Corporation included as Appendix B-3 to the Solicitation Statement/Prospectus which forms a part of the Registration Statement on Form S-4 relating to the proposed split-off of Electronic Data Systems Holding Corporation from General Motors Corporation and to the references to such opinion in such Solicitation Statement/Prospectus under the captions "Summary--The Transactions--Fairness Opinions of Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated," "Summary--The Transactions--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions," "Special Factors--Background of the Split-Off," "Special Factors--Recommendations of the Capital Stock Committee and the GM Board; Fairness of the Transactions" and "Special Factors--Fairness Opinions--EDS Team Financial Advisors Fairness Opinions." In giving such consent, we do not admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder, nor do we thereby admit that we are experts with respect to any part of such Registration Statement within the meaning of the term "experts" as used in the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. /s/ Morgan Stanley & Co. Incorporated April 15, 1996 EXHIBIT 99 CONSENT OF PROSPECTIVE DIRECTOR The undersigned hereby consents to the naming of the undersigned as a person expected to become a director of Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"), in the registration statement on Form S-4 to be filed by EDS in connection with the proposed split-off of EDS from General Motors Corporation. Date: March 6, 1996 /S/ Ray L. Hunt --------------- Ray L. Hunt CONSENT OF PROSPECTIVE DIRECTOR The undersigned hereby consents to the naming of the undersigned as a person expected to become a director of Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"), in the registration statement on Form S-4 to be filed by EDS in connection with the proposed split-off of EDS from General Motors Corporation. Date: March 6, 1996 /S/ James A. Baker III ---------------------- James A. Baker III CONSENT OF PROSPECTIVE DIRECTOR The undersigned hereby consents to the naming of the undersigned as a person expected to become a director of Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"), in the registration statement on Form S-4 to be filed by EDS in connection with the proposed split-off of EDS from General Motors Corporation. Date: March 15, 1996 /S/ Richard B. Cheney ---------------------- Richard B. Cheney CONSENT OF PROSPECTIVE DIRECTOR The undersigned hereby consents to the naming of the undersigned as a person expected to become a director of Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"), in the registration statement on Form S-4 to be filed by EDS in connection with the proposed split-off of EDS from General Motors Corporation. Date: March 7, 1996 /S/ Ray J. Groves ----------------- Ray J. Groves CONSENT OF PROSPECTIVE DIRECTOR The undersigned hereby consents to the naming of the undersigned as a person expected to become a director of Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"), in the registration statement on Form S-4 to be filed by EDS in connection with the proposed split-off of EDS from General Motors Corporation. Date: March 6, 1996 /S/ Dr. Judith Rodin -------------------- Dr. Judith Rodin CONSENT OF PROSPECTIVE DIRECTOR The undersigned hereby consents to the naming of the undersigned as a person expected to become a director of Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"), in the registration statement on Form S-4 to be filed by EDS in connection with the proposed split-off of EDS from General Motors Corporation. Date: March 11, 1996 /S/ Enrique J. Sosa ------------------- Enrique J. Sosa CONSENT OF PROSPECTIVE DIRECTOR The undersigned hereby consents to the naming of the undersigned as a person expected to become a director of Electronic Data Systems Holding Corporation, a Delaware corporation ("EDS"), in the registration statement on Form S-4 to be filed by EDS in connection with the proposed split-off of EDS from General Motors Corporation. Date: March 11, 1996 /S/ Robert Kidder ----------------- Robert Kidder -----END PRIVACY-ENHANCED MESSAGE-----