PEROT SYSTEMS CORPORATION
12404 Park Central Drive
Dallas, Texas 75251
Notice of Annual Meeting of Stockholders
Wednesday, May 9, 2001
2:00 p.m. - Central Daylight Time
The Westin Park Central Hotel
12720 Merit Drive
Dallas, Texas 75251
April 3, 2001
To our Stockholders
On behalf of the Board of Directors, you are cordially invited to attend the
2001 Perot Systems Corporation Annual Meeting of Stockholders to:
o elect directors;
o adopt the 2001 Long-Term Incentive Plan and approve the reservation of
shares under the plan;
o approve the grant of a stock option to our Chief Executive Officer;
o ratify the appointment of our independent public accountants for 2001; and
o conduct any other business properly brought before the Annual Meeting.
Voting is limited to stockholders of record at the close of business on March
12, 2001.
If you plan to attend the meeting in person, please bring to the Annual Meeting
one of the cut out admission tickets included on the back of the Proxy
Statement.
Sincerely yours,
Ross Perot
Chairman
PEROT SYSTEMS CORPORATION
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
Perot Systems Corporation is furnishing you with this Proxy Statement on behalf
of its Board of Directors to solicit proxies for its Annual Meeting of
Stockholders and any adjournments or postponements of the Annual Meeting. The
Annual Meeting will be held at The Westin Park Central Hotel, 12720 Merit Drive,
Dallas, Texas on Wednesday, May 9, 2001, at 2:00 p.m. local time. We first
mailed these proxy materials to Stockholders on or about April 3, 2001.
PURPOSE OF MEETING
We are holding the Annual Meeting for the Stockholders to consider and act upon
the proposals summarized in the accompanying Notice of Annual Meeting. We have
described each proposal in more detail in this Proxy Statement.
VOTING AND SOLICITATION
Right to Vote and Record Date
Our Class A Common Stock, par value $.01 per share, is the only type of security
entitled to vote at the Annual Meeting. Each share of Class A Common Stock that
you owned on March 12, 2001 entitles you to one vote for six nominees for
director and one vote on each other proposal brought before the Annual Meeting.
On March 12, 2001, there were 96,164,260 shares of Class A Common Stock
outstanding.
Voting at the Annual Meeting
If your shares of Class A Common Stock are registered directly with Mellon
Investor Services, you are a "record holder" and may vote in person at the
Annual Meeting. If you hold your shares through a stockbroker, bank or other
nominee, you are a "beneficial holder" and, in order to vote in person at the
Annual Meeting, you must obtain a proxy from your broker or nominee. Otherwise,
beneficial holders must submit their voting instructions through their broker or
nominee.
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Voting By Proxy
Whether or not you are able to attend the Annual Meeting, we urge you to vote.
You can vote your shares using one of the following methods:
o the Internet website shown on the proxy card,
o by telephone using the toll-free number shown on the proxy card, or
o a completed and returned written proxy card.
We must receive votes submitted through the Internet or by telephone by 11:59
p.m., Eastern Daylight Time, on May 8, 2001. Internet and telephone voting are
available 24 hours a day, and if you use one of those methods, you do not need
to return a proxy card. You can also vote in person at the Annual Meeting as
described above, and submitting your voting instructions by any of the methods
mentioned above will not affect your right to attend the Annual Meeting and
vote.
If you vote by phone or via the Internet, please have your social security
number and proxy or voting instruction card available. The sequence of numbers
appearing on your card and your social security number are necessary to verify
your vote.
How Your Proxy Will Be Voted
The proxy holders will vote as you direct if you properly complete your proxy.
If you submit a proxy but do not provide directions on how to vote, your proxy
will be voted as follows:
o FOR the nominees of the Board of Directors (Proposal 1),
o FOR approval of the Perot Systems Corporation 2001 Long-Term Incentive
Plan and the reservation of shares under the plan (Proposal 2),
o FOR approval of the grant of a stock option to our Chief Executive
Officer (Proposal 3),
o FOR the ratification of the appointment of PricewaterhouseCoopers LLP
as independent public accountants for the fiscal year ending December
31, 2001 (Proposal 4), and
o In the discretion of the proxy holders, for any other matters that may
properly come before the Annual Meeting.
Changing Your Vote
You may revoke or change your proxy at any time before the Annual Meeting. The
procedures for changing your vote differ depending on how you own your shares.
If you are a "record holder" of your Perot Systems shares, you may change your
vote by:
o submitting another proxy with a later date before the beginning of the
Annual Meeting,
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o sending a written notice of revocation to the Secretary of Perot
Systems at 12404 Park Central Drive, Dallas, Texas 75251 that is
received before the beginning of the Annual Meeting, or
o attending the Annual Meeting and voting in person.
If you are a "beneficial holder" of your Perot Systems shares, you may change
your vote by submitting new voting instructions to your broker or nominee.
Vote Required
Board of Directors
The six nominees receiving the highest number of affirmative votes of shares of
the Class A Common Stock will be elected directors of Perot Systems and will
serve until the next Annual Meeting and until their successors have been elected
and qualified. Perot Systems does not have cumulative voting for the election of
directors. Cumulative voting would give each stockholder a number of votes for
director equal to the shares owned by the stockholder times the number of
directors being elected. The stockholder would be able to distribute these votes
among as many (or as few) directors as that stockholder desired.
All Other Matters
Approval of all other matters to be considered at the Annual Meeting require the
affirmative vote of a majority of the shares of Class A Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting.
Broker Non-Votes and Abstentions
We will count abstentions and broker non-votes to determine whether a quorum is
present. (A broker non-vote occurs when a broker votes on some matters but not
on others, because he or she does not have the authority to do so.) Broker
non-votes will not be counted toward a nominee's total and will not be treated
as entitled to vote on other proposals before the Annual Meeting. An abstention
from voting on a proposal will have the same legal effect as a vote cast against
the proposal.
Solicitation of Proxies
Perot Systems will pay all costs of the solicitation. We will furnish copies of
solicitation material to fiduciaries and custodians holding shares in their
names that are beneficially owned by others. We will conduct the original
solicitation by mail or, in cases where the Stockholder has previously consented
to electronic delivery, by electronic means. We may supplement the original
solicitation with a solicitation by telephone, telegram, or other means by our
directors, officers, or employees. We will not pay additional
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compensation to these individuals for their services. We do not plan to solicit
proxies by means other than those described above.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
General
Perot Systems is proposing the reelection of all of its current directors. We
have listed the nominees and their positions and offices with Perot Systems
below. The proxy holders will vote all proxies received in the accompanying form
for the nominees listed below unless you instruct them otherwise. If any nominee
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxy holders will vote the proxies for any nominee designated by the
current Board to fill the vacancy. The Board is not aware of any nominee who is
unable or who will decline to serve as a director.
The Board recommends that the Stockholders vote "FOR" the election of each of
the nominees listed below.
Directors and Their Business Experience
Ross Perot is Chairman of the Board and has served as a director of Perot
Systems since 1997. Mr. Perot is a founder of Perot Systems, served as Perot
Systems' President and Chief Executive Officer from November 1997 through August
2000 and served as a director from 1988 through 1994. Mr. Perot is currently a
private investor. Age 70.
Ross Perot, Jr. is President and Chief Executive Officer of the Company and has
served as a director since 1988. Mr. Perot is a director of Hillwood Development
Corporation, a real estate development company. Mr. Perot is the son of Ross
Perot. Age 42.
Steve Blasnik has served as a director of Perot Systems since 1994. Mr. Blasnik
is a director and President of Perot Investments, Inc., a private investment
firm affiliated with Ross Perot. Mr. Blasnik also serves as a director and
member of the compensation committee of Zonagen, Inc. Age 43.
James Champy is a Vice President of Perot Systems and has served as a director
since 1996. Mr. Champy previously served as Corporate Vice President and
Chairman - Consulting Group of Computer Sciences Corporation and was a founder
and former Chairman and Chief Executive Officer of CSC Index. Age 58.
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William K. Gayden has served as a director of Perot Systems since 1998. Mr.
Gayden is the founder and President of Merit Energy Company. Mr. Gayden
previously served as President of EDS World Corporation and was a former Senior
Vice President and Director of Electronic Data Systems Corporation. Age 59.
Carl Hahn has served as a director of Perot Systems since 1993. Mr. Hahn is
currently a private investor. Mr. Hahn previously served as Chairman of Saurer
Ltd., a manufacturer of textile machines, and Chairman of the Board of
Management of Volkswagen AG. Mr. Hahn also serves as a director of Gerling AG,
Hawesko, A.G. and Sachsenring, AG. Age 74.
Board and Committee Meetings
The Board met seven times in 2000. The Board has established the Executive
Committee and the Audit Committee to assist in the discharge of the Board's
responsibilities. The Board may establish other committees to facilitate the
management of Perot Systems or for other purposes it deems appropriate. Each
director attended at least 86% of the Board meetings during 2000.
Executive Committee
The Executive Committee consists of Ross Perot, Ross Perot, Jr., and Steve
Blasnik. The Executive Committee did not meet in 2000. Generally, the Executive
Committee has the full power and authority of the Board in the management of the
business and affairs of Perot Systems, except with respect to matters that
cannot be delegated under Delaware law.
Audit Committee
The Audit Committee consists of William K. Gayden and Carl Hahn. The Audit
Committee met four times in 2000. Both members of the Audit Committee attended
all meetings of the Audit Committee.
The Audit Committee assists the Board in fulfilling its responsibility for
oversight of the quality and integrity of the accounting, auditing, and
financial reporting practices of Perot Systems. The Audit Committee's activities
are governed by a charter that the Board reassesses annually. A copy of our
Audit Committee charter is attached as Appendix A. The Audit Committee's primary
responsibilities and duties are to review Perot Systems' annual financial
statements and the professional services provided by our independent public
accountants, including the scope of their audit coverage, the auditor's reports
to management and management's responses to such reports, and the independence
of such accountants from Perot Systems' management. The Audit Committee also
reviews the scope of Perot Systems' internal audits, the internal auditors'
reports to management and management's responses to such reports, the
effectiveness of Perot Systems' internal audit staff, stock and stock option
grants to Perot Systems' executive officers, possible
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violations of Perot Systems' Standards and Ethical Principles, and such other
matters with respect to the accounting, auditing and financial reporting
practices and procedures of Perot Systems as it may find appropriate or as have
been brought to its attention.
Director Compensation
Perot Systems compensates its non-employee directors $2,000 for each meeting of
the Board attended in person. Employee directors receive no additional
compensation for attending Board or committee meetings. Our directors are
reimbursed for their reasonable travel-related and other out-of-pocket expenses
associated with attending Board and committee meetings.
Perot Systems' 1996 Non-Employee Director Stock Option/Restricted Stock
Incentive Plan provides for the issuance of nonqualified stock options or
restricted stock to our non-employee directors. The Board administers the
Non-Employee Director Plan and has the authority to interpret it. Directors who
are not employees of Perot Systems are eligible to receive awards under the
Non-Employee Director Plan. Perot Systems makes grants to new directors upon
election to the Board and to existing directors at completion of the original
vesting schedule for existing options or restricted shares. The Non-Employee
Director Plan currently provides for a grant to each eligible director of (i) an
option to purchase 40,000 shares of Class A Common Stock vesting over five years
or (ii) the right to purchase 40,000 restricted shares of Class A Common Stock
vesting over five years. The exercise price of options or the purchase price of
restricted shares of Class A Common Stock must be at least equal to 100% of the
fair value of the Class A Common Stock on the date of the award.
PROPOSAL NO. 2
APPROVAL OF THE
2001 LONG-TERM INCENTIVE PLAN
On March 7, 2001, the Board adopted the Perot Systems Corporation 2001 Long-Term
Incentive Plan (the "Plan"), subject to Stockholder approval. Upon receiving
Stockholder approval, Perot Systems will terminate all of its previously
authorized stock and stock option plans, except the 1996 Non-Employee Director
Stock Option/Restricted Stock Incentive Plan. The terminated plans will include
the 1988 Restricted Stock Plan, 1989 Pioneer Stock Option Plan, 1991 Stock
Option Plan, 1992 Advisor Stock Option/Restricted Stock Incentive Plan, and 1996
Advisor and Consultant Stock Option/Restricted Stock Incentive Plan. The Company
will reserve for issuance under the Plan the number of shares of Class A Common
Stock that have not been awarded under the old plans, plus any shares that
become available when awards under the old plans expire, become unexercisable or
are repurchased. As of March 1, 2001, this number was 14,897,626 shares. As of
today, Perot Systems has not granted any awards under the Plan.
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You are being asked to approve the Plan and the reservation of shares to be
issued under the Plan so that those shares will qualify for special tax
treatment under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
Our Board recommends that you vote "FOR" the approval of the Perot Systems
Corporation 2001 Long-Term Incentive Plan and the reservation of shares to be
issued under the Incentive Plan.
Summary of the Plan
General
Our Plan is designed to encourage our Associates and other contributors to our
success to own stock in Perot Systems and to act in the Stockholders' best
interests. Under the Plan, we may award stock options, stock and cash. The
options we grant under the Plan may be either "incentive stock options," as
defined in Section 422 of the Code, or non-statutory stock options.
Administrator
The Administrator of the Plan will be the Board or a committee that has been
delegated the responsibility of administration by the Board.
Eligibility
Under the Plan, employees and consultants of Perot Systems, its affiliates and
subsidiaries will be eligible to receive non-statutory stock options, stock
awards and cash awards. Only employees of Perot Systems or its subsidiaries will
be eligible to receive incentive stock options. The Administrator will have the
discretion to select the employees and consultants to whom options, stock awards
and cash awards may be granted, the time or times at which awards are granted,
and the number of shares covered by each grant.
Limitations
Section 162(m) of the Code places limits on the deductibility for federal income
tax purposes of compensation paid to certain executive officers of Perot
Systems. In order to preserve Perot Systems' ability to deduct the compensation
income associated with options granted to such persons, the Plan provides that
no employee, director or consultant may be granted, in any fiscal year of Perot
Systems, options to purchase more than 2,000,000 shares of Class A Common Stock.
Terms and Conditions of Options
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An option agreement between Perot Systems and the recipient of the option will
contain the terms and conditions of each grant or award. The Plan requires that
each grant or award be subject to the following terms and conditions:
Exercise Price
The Administrator will determine the exercise price of options at the time the
options are granted. The exercise price of any incentive stock option will not
be less than 100% of the fair market value of the Class A Common Stock on the
date the option is granted. The exercise price of a non-statutory stock option
will not be less than 85% of the fair market value of the Class A Common Stock
on the date such option is granted, although certain replacement options with
lower exercise prices may be granted to employees or consultants of entities
acquired by Perot Systems. The fair market value of the Class A Common Stock is
the last reported sale price on the New York Stock Exchange for the stock on the
date the option is granted (or if no sales were reported that day, the last
preceding day a sale occurred). As of March 12, 2001, the last reported sales
price of Class A Common Stock was $11.99 per share.
Exercise of Option; Form of Consideration
The Administrator determines when options will become exercisable and, in its
discretion, may accelerate the vesting of any outstanding option. Each option
agreement will specify the means of payment for shares issued under that
agreement. The Plan permits payment to be made by cash, check, wire transfer,
other shares of Class A Common Stock of Perot Systems (with some restrictions),
broker-assisted same-day sales, any other form of consideration permitted by
applicable law, or any combination thereof.
Term of Option
The term of an incentive stock option may be no more than ten years from the
date of grant. The term of any other option may be no more than 11 years from
the date of grant. No option may be exercised after the expiration of its term.
Termination of Employment
If an option holder's employment or consulting relationship terminates for any
reason (except death, total disability or retirement due to age), then all
options held by the option holder under the Plan generally terminate 90 days
after the option holder's termination.
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Death, Total Disability or Retirement Due to Age
If an option holder's employment or consulting relationship terminates as a
result of the option holder's death, then all unvested options will immediately
vest and all options may be exercised for the remaining term of the options. If
an option holder's employment or consulting relationship terminates as a result
of the option holder's total disability, then all unvested options will continue
to vest so long as the total disability continues and the option holder may
exercise the option for the remaining term of the option. If an option holder's
employment or consulting relationship terminates as a result of the option
holder's retirement due to age, then all unvested options will generally
terminate immediately and the option holder may exercise any vested options
within one year after the date of such retirement, provided that no option may
be exercised after the expiration of its term.
Nontransferability of Options
Unless otherwise determined by the Administrator, options granted under the Plan
will not be transferable other than by will or the laws of descent and
distribution and may be exercised during the option holder's lifetime only by
the option holder.
Other Provisions
The stock option agreement may contain other terms, provisions and conditions
not inconsistent with the Plan, as determined by the Administrator.
Stock Awards
In the case of stock awards, unless the Administrator determines otherwise, the
restricted stock agreement will provide that any unvested stock is forfeited
back to Perot Systems upon the award recipient's termination of employment for
any reason (except death or total disability). Upon total disability of the
award recipient, the forfeiture provisions of the restricted stock will continue
to lapse as long as the total disability continues to exist. The forfeiture
provisions for the restricted stock will generally lapse at a rate determined by
the Administrator. Upon the death of an award recipient, the forfeiture
provisions will lapse.
Cash Awards
The Administrator may grant cash awards, which entitle the recipient to a cash
payment upon meeting predetermined goals set by the Administrator.
Adjustments Upon Changes in Capitalization, Merger or Sale of Assets
In the event that Perot Systems' stock changes by reason of any stock split,
dividend, combination, reclassification or other similar change in Perot
Systems' capital structure
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effected without the receipt of consideration, appropriate adjustments will be
made in the number and class of shares of stock subject to the Plan, the number
and class of shares of stock subject to any option or stock award outstanding
under the Plan, and the exercise price of any such outstanding option or stock
award.
In the event of a liquidation or dissolution of Perot Systems, any unexercised
options or stock awards will terminate. The Administrator, in its discretion,
may provide that each option holder will have the right to exercise all of the
option holder's options, including those not otherwise exercisable, and be fully
vested in any stock awards until the date ten days prior to the consummation of
the liquidation or dissolution.
In the event of a change of control of Perot Systems, as determined by the
Board, the Board, in its discretion, may provide for the assumption,
substitution or adjustment of each outstanding award, accelerate the vesting of
options and terminate any restrictions on stock awards or cash awards, or cancel
awards for a cash payment to the award recipient.
Amendment and Termination of the Plan
The Board may amend, alter, suspend or terminate the Plan, or any part thereof,
at any time and for any reason. However, Perot Systems will obtain Stockholder
approval for any amendment to the Plan if approval is necessary to comply with
applicable laws. No such action by the Board or Stockholders may alter or impair
any option or award previously granted under the Plan without the written
consent of the award recipient. Unless terminated earlier, the Plan will
terminate ten years from the later of the date the Plan or any amendment to add
shares to the Plan is adopted by the Board of Perot Systems and approved by the
Stockholders.
New Plan Benefits
Because benefits under the Plan will depend on the Administrator's actions and
the fair market value of the Class A Common Stock at future dates, it is not
possible to determine the benefits that will be received by our directors,
executive officers and other employees if the Plan is approved by the
Stockholders.
Federal Income Tax Consequences
Incentive Stock Options
An option holder who is granted an incentive stock option does not recognize
taxable income at the time the option is granted or upon its exercise, although
the exercise is an adjustment item for alternative minimum tax purposes and may
subject the option holder to the alternative minimum tax. Upon a disposition of
the shares more than two years after grant of the option and one year after
exercise of the option, any gain or loss is treated as long-term capital gain or
loss. Net capital gains on shares held more than 12
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months are generally taxed at a maximum federal rate of 20%. Capital losses are
generally allowed in full against capital gains and up to $3,000 against other
income. If the above holding periods are not satisfied, the option holder
recognizes ordinary income at the time of disposition equal to the difference
between the exercise price and the lower of (i) the fair market value of the
shares at the date of the option exercise or (ii) the sale price of the shares.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income is treated as long-term or
short-term capital gain or loss, depending on the holding period. A different
rule for measuring ordinary income upon a premature disposition may apply if the
option holder is also an officer, director or 10% stockholder of Perot Systems.
Unless limited by Section 162(m) of the Code, Perot Systems is entitled to a
deduction in the same amount as and at the time the option holder recognizes
ordinary income.
Non-Statutory Stock Options
An option holder does not recognize any taxable income at the time he or she is
granted a non-statutory stock option. Upon exercise, the option holder
recognizes taxable income generally measured by the excess of the then fair
market value of the shares over the exercise price. Any taxable income
recognized in connection with an option exercise by an employee is subject to
tax withholding by Perot Systems. Unless limited by Section 162(m) of the Code,
Perot Systems is entitled to a deduction in the same amount as and at the time
the option holder recognizes ordinary income. Upon a disposition of such shares
by the option holder, any difference between the sale price and the option
holder's exercise price, to the extent not recognized as taxable income as
provided above, is treated as long-term or short-term capital gain or loss,
depending on the holding period. Net capital gains on shares held more than 12
months may be taxed at a maximum federal rate of 20% (lower rates may apply
depending upon when the stock is acquired and the applicable income tax bracket
of the taxpayer). Capital losses are generally allowed in full against capital
gains and up to $3,000 against other income.
Stock Awards
Stock awards will generally be taxed in the same manner as non-statutory stock
options. However, a stock award is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code to the extent the award will be
forfeited in the event that the employee or consultant ceases to provide
services to Perot Systems. As a result of this substantial risk of forfeiture,
the employee or consultant will not recognize ordinary income at the time of
award. Instead, the employee or consultant will recognize ordinary income on the
dates when the stock is no longer subject to a substantial risk of forfeiture,
or when the stock becomes transferable, if earlier. The employee's or
consultant's ordinary income is measured as the difference between the amount
paid for the stock, if any, and the fair market value of the stock on the date
the stock is no longer subject to forfeiture.
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The employee or consultant may accelerate to the date of award his or her
recognition of ordinary income, if any, and begin his or her capital gains
holding period by timely filing (i.e., within thirty days of the award) an
election pursuant to Section 83(b) of the Code. In such event, the ordinary
income recognized, if any, is measured as the difference between the amount paid
for the stock, if any, and the fair market value of the stock on the date of
award, and the capital gain holding period commences on such date. The ordinary
income recognized by an employee will be subject to tax withholding by Perot
Systems. Unless limited by Section 162(m) of the Code, Perot Systems is entitled
to a deduction in the same amount as and at the time the employee or consultant
recognizes ordinary income.
Cash Awards
Upon receipt of cash, the recipient will have taxable ordinary income, in the
year of receipt, equal to the cash received. In the case of a recipient who is
also an employee, any cash received will be subject to tax withholding by Perot
Systems. Unless limited by section 162(m) of the Code, Perot Systems will be
entitled to a tax deduction in the amount and at the time the recipient
recognizes compensation income.
The description above is only a summary of the effect of federal income taxation
upon option holders and Perot Systems with respect to the grant and exercise of
options and awards under the Plan. It is not a complete description of the tax
consequences to option holders. In particular, this description does not address
the tax consequences arising in the context of the employee's or consultant's
death or the income tax laws of any municipality, state or foreign country in
which the employee's or consultant's income or gain may be taxable.
Incorporation by Reference
The description above is only a summary of the Plan and does not describe all of
its features. The full text of the Plan is attached as Appendix B.
PROPOSAL NO. 3
APPROVAL OF THE GRANT OF A STOCK OPTION
TO OUR CHIEF EXECUTIVE OFFICER
Subject to Stockholder approval, the Board has approved a grant to Ross Perot,
Jr. of an option to purchase 1,050,000 shares of Class A Common Stock at an
exercise price per share equal to the fair market value of the Class A Common
Stock on the date the Stockholders approve the option, and vesting in five equal
annual installments beginning on October 23, 2006.
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The Board recommends that you vote "FOR" the grant of a stock option to our CEO.
PROPOSAL NO. 4
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
We have appointed the accounting firm of PricewaterhouseCoopers LLP as our
independent public accountants to examine our financial statements for the year
ending December 31, 2001. A resolution to ratify the appointment will be
presented at the Annual Meeting. A majority of the votes cast must vote in favor
to ratify the appointment. If the Stockholders do not ratify the appointment, we
will reconsider our selection of PricewaterhouseCoopers.
PricewaterhouseCoopers and one of its predecessor firms have audited Perot
Systems' financial statements annually since fiscal 1989. A representative of
PricewaterhouseCoopers will be at the Annual Meeting and will be given the
opportunity to make a statement if they desire to do so, and will be available
to answer questions.
For services rendered during 2000, Perot Systems paid PricewaterhouseCoopers the
amount set forth next to the type of services in the table below:
Type of Services Fees Paid
Audit $375,919
Financial Information Systems
Design and Implementation -0-
All Other $1,220,163
Total $1,596,082
The Board recommends that you vote "FOR" the ratification of the appointment of
PricewaterhouseCoopers LLP.
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT
The following table shows the number of shares of Common Stock beneficially
owned as of March 12, 2001 by:
o each person who we know beneficially owns more than 5% of Perot
Systems' Common Stock;
o each director;
o the Chief Executive Officer and the other executive officers required
to be named in the Summary Compensation Table; and
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o all executive officers and directors as a group.
Class B
Common
Class A Common Stock Stock
---------------------------------- ----------------
Number of Shares Percent Number of Shares
Beneficially Of Beneficially
Owned(1) Ownership(1) Owned
---------------- ------------ ----------------
Executive Officers and Directors
Ross Perot, Jr.(2).............................. 31,710,000 33.0% --
Joseph Boyd(3).................................. 270,401 * --
James Champy(4)................................. 975,286 1.0% --
Don Drobny(5)................................... 1,205,663 1.3% --
Ken Scott(6).................................... 301,225 * --
Steven Blasnik(7)............................... 54,000 * --
William K. Gayden(8)............................ 31,000 * --
Carl Hahn....................................... 285,000 * --
Ross Perot(9)................................... 31,749,100 33.0%
All Executive Officers and Directors as a Group
(12 Persons)(10)............................... 36,840,460 38.2% --
Additional 5% Beneficial Owners
Morton H. Meyerson(11) ......................... 5,143,051 5.3% --
UBS(12)......................................... -- -- 7,334,320
- ----------
* Less than 1%
(1) Percentages are based on the total number of shares of Class A Common
Stock outstanding at March 12, 2001, plus the total number of
outstanding options and warrants held by each person that are
exercisable within 60 days of such date. Shares of Class A Common
Stock issuable upon exercise of outstanding options and warrants are
not deemed outstanding for purposes of computing the percentage
ownership of any other person. Except as indicated in the footnotes to
this table, other than shared property rights created under joint
tenancy or marital property laws between Perot Systems' directors and
executive officers and their respective spouses, each stockholder
named in the table has sole voting and investment power with respect
to the shares of Class A Common Stock set forth opposite such
stockholder's name. The shares of Class A Common Stock listed include
shares held by Perot Systems' Retirement Savings Plan and Trust for
the benefit of the named individuals. Participants in the Plan have
investment and voting power over shares held for their benefit.
(2) Includes 31,705,000 shares owned by HWGA, Ltd. and 5,000 shares owned
by Mr. Perot's spouse. Mr. Perot disclaims beneficial ownership of the
shares held by his spouse. Ross Perot, Jr., our President and Chief
Executive Officer, is a general partner of HWGA and has authority to
manage HWGA if the managing general partner, Ross Perot, ceases to be
managing general partner. Accordingly, shares owned by HWGA are also
shown in this table as being beneficially owned by Ross Perot. The
address for Ross Perot, Jr. is 12404 Park Central Drive, Dallas, Texas
15
75251, and the address of HWGA is 12377 Merit Drive, Suite 1700,
Dallas, Texas 75251.
(3) Includes 60,000 shares of Class A Common Stock that Mr. Boyd has the
right to acquire upon the exercise of vested options and 4,000 shares
of Class A Common Stock held by Mr. Boyd's spouse, with respect to
which Mr. Boyd shares voting and investment power.
(4) Includes 200,000 shares of Class A Common Stock held by the Champy
Family Irrevocable Trust of which Mr. Champy is a trustee. As trustee,
Mr. Champy shares voting and investment power with respect to the
shares of Class A Common Stock held by the Champy Trust and,
therefore, is deemed the beneficial owner of such shares of Class A
Common Stock.
(5) Includes 4,000 shares of Class A Common Stock held by Mr. Drobny's
spouse. Mr. Drobny disclaims beneficial ownership of such shares.
(6) Includes 112,200 shares of Class A Common Stock that Mr. Scott has the
right to acquire upon the exercise of vested options.
(7) Includes 48,000 shares of Class A Common Stock that Mr. Blasnik has
the right to acquire upon the exercise of vested options and 6,000
shares of Class A Common Stock held by Mr. Blasnik's spouse. Mr.
Blasnik disclaims beneficial ownership of the shares held by his
spouse.
(8) Includes 10,000 shares held by partnerships of which Mr. Gayden is a
general partner and 16,000 shares of Class A Common Stock that Mr.
Gayden has the right to acquire upon the exercise of vested options.
(9) Includes 31,705,000 shares owned by HWGA, Ltd. and 100 shares owned by
Mr. Perot's spouse with respect to which Mr. Perot shares voting and
investment power. Ross Perot, our Chairman, is the managing general
partner of HWGA. Mr. Perot has voting and investment power over shares
owned by HWGA. Ross Perot, Jr., President and Chief Executive Officer
of Perot Systems, is a general partner of HWGA and has authority to
manage HWGA if Ross Perot ceases to be managing general partner of
HWGA. Accordingly, shares owned by HWGA are also shown in this table
as being beneficially owned by Ross Perot, Jr. The address for Ross
Perot and HWGA is 12377 Merit Drive, Suite 1700, Dallas, Texas 75251.
(10) Includes 346,200 shares of Class A Common Stock that the Executive
Officers and Directors have the right to acquire upon the exercise of
vested options.
(11) This data is based on information contained in Amendment No. 2 to
Schedule 13G filed by the Meyerson Family Limited Partnership with the
Securities and Exchange Commission on February 11, 2000. Includes
18,353 shares owned by an
16
estate Mr. Meyerson is executor of, and 4,602,000 shares held by the
Meyerson Family Limited Partnership of which Mr. Meyerson is general
partner. The address of Mr. Meyerson is 4514 Cole Ave., Dallas, Texas
75205.
(12) Includes 5,550,000 shares of Class B Common Stock that UBS has the
right to acquire upon the exercise of options. The address for UBS AG
is Bahnhofstrasse, CH 8001, Zurich, Switzerland.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The Summary Compensation Table below shows compensation for the years 2000,
1999, and 1998 for each person who served as the Chief Executive Officer during
2000 and the four other most highly compensated executive officers who were
serving as executive officers at the end of 2000.
Summary Compensation Table
Long Term Compensation
Awards
----------------------------
Securities
Annual Compensation Restricted Under- All Other
------------------------------------- Stock lying Compen-
Name and Principal Position Year Salary($) Bonus($)(1) Other($)(2) Award(s)($)(3) Options sation($)(4)
- --------------------------- ----- ---------- ----------- ----------- -------------- ---------- ------------
Ross Perot, Jr............. 2000 166,667 __ __ __ 950,000 __
President & Chief 1999
Executive Officer (5) 1998
Ross Perot................. 2000 __ __ __ __ __ __
Chairman and Former 1999 __ __ __ __ __ __
President & Chief
Executive Officer(6) 1998 __ __ __ __ __ __
James Champy............... 2000 520,000 __ 12,576 __ __ 23,800
Vice President 1999 513,333 325,000 12,627 __ __ 23,400
1998 500,000 275,000 13,162 __ __ 23,950
Don Drobny................. 2000 393,208 __ 236,748(7) __ __ 6,800
Vice President 1999 320,320 275,000 7,679 __ __ 23,207
1998 312,000 225,000 3,830 __ __ 17,632
Ken Scott.................. 2000 355,883 __ 310,867(8) __ __ 6,800
Vice President 1999 405,611 275,000 171,840(9) __ __ 6,400
1998 324,240 325,000 __ __ __ __
Joseph Boyd................ 2000 325,050 __ __ __ __ 6,800
Vice President 1999 308,367 400,000 __ __ __ 6,400
1998 240,000 350,000 __ __ 200,000 6,400
- ----------
(1) Bonus amounts shown in 1999 were earned in 1999 and paid in 2000.
Bonus amounts shown for 1998 were earned in 1998 and paid in 1999.
17
(2) For Mr. Champy represents the payment of taxes related to the life
insurance premiums referenced in Note 4 to this table. For Mr. Drobny
represents the payment of taxes in 1998 and 1999 related to the life
insurance premiums referenced in Note 4 to this table.
(3) The number of restricted shares of Class A Common Stock held by the
named executive officers and the value of such shares of Class A
Common Stock (less the amount paid therefor) at December 31, 2000 were
as follows: Mr. Champy -- 600,000 shares of Class A Common Stock,
$4,762,500; and Mr. Scott -- 121,800 shares of Class A Common Stock,
$890,663. The holders of these restricted shares are entitled to a pro
rata distribution of any dividends paid by Perot Systems on the Class
A Common Stock.
(4) In 2000, represents (i) $17,000 in life insurance premiums paid for
the benefit of Mr. Champy; and (ii) $6,800 in Company contributions to
Perot Systems' 401(k) plan for the benefit of each of Messrs. Champy,
Drobny, Scott and Boyd. In 1999, represents (i) $17,000 in life
insurance premiums paid for the benefit of Mr. Champy; (ii) $16,807 in
life insurance premiums paid for the benefit of Mr. Drobny; and (iii)
$6,400 in Company contributions to Perot Systems' 401(k) plan for the
benefit of each of Messrs. Champy, Drobny, Scott and Boyd. In 1998,
represents (i) $17,550 in life insurance premiums paid for the benefit
of Mr. Champy; (ii) $11,232 in life insurance premiums paid for the
benefit of Mr. Drobny; and (iii) $6,400 in Company contributions to
Perot Systems' 401(k) plan for the benefit of each of Messrs. Champy,
Drobny and Boyd.
(5) Mr. Perot has served as President and Chief Executive Officer since
September 1, 2000 and started receiving compensation from Perot
Systems on that date.
(6) Mr. Perot has served as Chairman since February 25, 1998, and served
as President and Chief Executive Officer until September 1, 2000. Mr.
Perot serves Perot Systems without compensation.
(7) In 2000, includes $148,844 in housing expenses and $67,256 in tax
gross ups related to an overseas assignment.
(8) In 2000, includes $90,269 in housing expenses and $207,504 in tax
gross ups related to an overseas assignment.
(9) In 1999, includes $153,849 in housing expenses, $8,060 in automobile
payments, and $9,931 in tax gross ups related to an overseas
assignment.
18
Stock Option Grants
The following table provides information relating to option grants in 2000 to
the named executive officers.
Option Grants in Last Fiscal Year
Individual Grants Potential Realized
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise for Option Term(2)
Options Employees in Price Expiration
Name Granted(1) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- --------------- ---------- ------------- -------- ----------- ---------- ------------
Ross Perot, Jr.. 950,000 3.35% $9.50 10/23/2011 $6,410,813 $16,724,378
Ross Perot...... -- -- -- -- -- --
James Champy.... -- -- -- -- -- --
Don Drobny...... -- -- -- -- -- --
Ken Scott....... -- -- -- -- -- --
Joseph Boyd..... -- -- -- -- -- --
- ----------
(1) Grant vests in five equal annual installments beginning on the first
anniversary of the grant.
(2) These amounts represent assumed rates of appreciation in value from the
date of grant until the end of the option term, at the rates set by the
Securities and Exchange Commission and, therefore, are not intended to
forecast possible future appreciation, if any, in the shares of Class A
Common Stock.
Option Exercises and Holdings
The following table provides information regarding exercises of stock options by
named executive officers during 2000:
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Class A Underlying Unexercised in-the-Money Options at
Shares Options at Fiscal Year-End Fiscal Year-End
Acquired on Value ------------------------------- -------------------------------
Name Exercise(#) Realized($) Exercisable(#) Unexercisable(#) Exercisable($) Unexercisable($)
- ---------------- ------------ ----------- -------------- ---------------- -------------- ----------------
Ross Perot, Jr.. -- -- -- 950,000 -- --
Ross Perot...... -- -- -- -- -- --
James Champy.... -- -- -- -- -- --
Don Drobny...... -- -- -- -- -- --
Ken Scott....... -- -- 112,200 177,800 784,743 1,216,607
Joseph Boyd..... -- -- 36,000 308,000 243,340 2,144,520
Employment Contracts and Change in Control Agreements
James Champy's associate agreement provides for a base salary of $500,000 per
year, which is to be reviewed at least annually, and provides for additional
benefits, including:
19
(i) a bonus to be determined in accordance with the current bonus plan for the
most senior officers of Perot Systems, (ii) payment of life insurance premiums,
and (iii) some travel benefits. Mr. Champy's associate agreement also provides
that if Mr. Champy is terminated by Perot Systems other than for cause or
substantial misconduct (as defined in his associate agreement) or Mr. Champy is
deemed to have been constructively terminated (as defined in his associate
agreement), Mr. Champy will receive a severance payment equal to six months of
his current base salary. If Mr. Champy's employment is terminated by either
party (other than for cause by Perot Systems) within one year of a change in
control of Perot Systems (as defined in his associate agreement), Mr. Champy
would receive severance equal to six months of his current base salary. Mr.
Champy's employment agreement is terminable by Perot Systems upon 30 days'
notice and payment of severance equal to six months' base pay plus benefits.
The 1,000,000 restricted shares of Class A Common Stock acquired by Mr. Champy
pursuant to his restricted stock agreement vest in equal installments over ten
years beginning on the first anniversary of the commencement of his employment.
Vesting is contingent on continued employment, but Mr. Champy's restricted
shares of Class A Common Stock will continue to vest for limited periods
following the termination of his employment if he is terminated by Perot Systems
other than for cause or substantial misconduct (as defined in his associate
agreement) or is deemed to have been constructively terminated (as defined in
his associate agreement). If Mr. Champy's employment is terminated by Perot
Systems other than for cause or substantial misconduct, his restricted shares of
Class A Common Stock will continue to vest as scheduled for two years following
termination. If there is a change in control of Perot Systems (as defined in his
associate agreement) and Mr. Champy's employment is terminated by either party
within one year of such change in control (other than for cause by Perot
Systems), all of his shares of Class A Common Stock scheduled to vest through
the next two vesting dates will vest on schedule. If Mr. Champy's employment is
terminated for any reason by either party, he has the right to require Perot
Systems to purchase his shares for their original cost plus simple interest at
the rate of 8% per annum.
Certain Relationships and Related Transactions
Licenses for Use of Name
Perot Systems licenses the right to use the names "Perot" and "Perot Systems" in
its current and future businesses, products, or services from the Perot Systems
Family Corporation and Ross Perot. The license is a non-exclusive, royalty-free,
non-transferable license without geographic restriction. Perot Systems may also
sublicense its rights to these names to certain of its affiliates. Under the
License Agreement, as amended, either party may, in their sole discretion,
terminate the license at any time, with or without cause and without penalty, by
giving the other party written notice of such termination. Upon termination by
either party, Perot Systems must discontinue all use of the names "Perot" and
"Perot Systems" within one year following notice of termination.
20
Hillwood
Perot Systems provided information technology and energy management services for
Hillwood Development Corporation and Hillwood Ventures, affiliates of Ross
Perot, Jr. Perot Systems was paid $462,199 for such services. In addition, the
Audit Committee has approved the execution of a contract between Perot Systems
and Hillwood Development under which Hillwood Development has engaged Perot
Systems to provide information technology services for the next three years.
Hillwood is expected to pay Perot Systems approximately $4,600,000 during the
term of the contract.
Employment of Law Firms
During 2000, we paid Hughes & Luce, L.L.P. $1,195,739 for legal services. A
partner in that firm is a son-in-law of Ross Perot and brother-in-law of Ross
Perot, Jr.
During 2000, we paid Carrington Coleman Sloman & Blumenthal, L.L.P. $242,375 for
legal services. The spouse of Peter Altabef, Vice President, General Counsel and
Secretary of Perot Systems, is a partner of Carrington Coleman Sloman &
Blumenthal.
21
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
March 7, 2001
Introduction
This report is provided by the Board to assist our Stockholders in understanding
the Board's objectives and procedures in establishing the compensation of Perot
Systems' executive officers.
The Board is responsible for establishing and administering the executive
compensation program. In structuring compensation programs, and in an effort to
adhere to the demands of the competitive market, the Board has been advised by
Perot Systems' compensation organization.
Compensation Philosophy and Objectives
The Board believes that compensation of Perot Systems' key executives should:
o have equity as a key component;
o be cost effective - designed to minimize fixed salary and maximize
variable pay which tracks to business results;
o be compared with industry peers to ensure competitiveness;
o attract and retain high caliber Associates on a long term basis; and
o align with the business strategy of our fast paced, growing company.
Our policy is to position compensation to be competitive with peer information
technology companies with which we compete for talent, with appropriate
variation for individual and corporate performance.
2000 Executive Compensation Components
Perot Systems' 2000 executive compensation program consisted of three elements:
Base Salary, Short-Term Cash Incentives, and Long-Term Incentives. Base Salary
was set within a salary range for positions based on sustained individual
performance. The Short-Term Cash Incentives program was linked to individual
Associate performance and Perot Systems' financial performance and was designed
to provide a significant portion of each executive officer's total cash
compensation.
Base Salary
o Base salary ranges for all Associates - including our executive
officers - were based on comparisons to the competitive marketplace to
assure equitable salary ranges.
22
o Salaries within these salary ranges varied by individuals based on
experience, responsibility level and individual performance toward the
achievement of our goals and objectives.
o Increases to base salary were determined by a comprehensive study of
the competitive market. Final increases made to the base pay of
executive officers were determined by individual and company
performance.
Short-Term Cash Incentives
The Annual Bonus Program bonuses were linked to corporate financial and
strategic results. Corporate financial and strategic results were measured
against goals set at the beginning of the plan year. The financial corporate
goal was a targeted level of corporate pre-tax profits. Individual target awards
varied by position and were based on competitive practices in the information
technology industry. Associates had individual performance assessments and final
payment percentages were based on individual performance. Based on performance
against company financial objectives for the year 2000, our executive officers
did not receive any payment under the Annual Bonus Program this year.
Long-Term Incentive Program
Perot Systems utilizes stock options as its long-term incentive vehicle. Stock
options are granted by Perot Systems to aid in the retention of Associates and
to align the interests of Stockholders.
As with other Associates, executive officers were considered for awards of stock
options based on Perot Systems' need to retain the executive officer for future
years, the individual executive officer's prior awards of options and restricted
stock, and the vesting status of those awards.
Compensation of the Chief Executive Officer
Effective September 1, 2000, Ross Perot, Sr. resigned as President and Chief
Executive Officer. Mr. Perot retained the office of Chairman and continues not
to accept cash or non-cash compensation for his role with Perot Systems.
Ross Perot, Jr. was elected President and Chief Executive Officer effective
September 1, 2000. Mr. Perot's salary is $500,000 per year.
On October 23, 2000, the independent directors of the Board approved a stock
option grant for Ross Perot, Jr. for 950,000 shares at an exercise price of
$9.50 per share, vesting pro-rata over five years, commencing on the first
anniversary of the grant.
23
On March 7, 2001, the independent directors of the Board approved, and the
entire Board ratified, subject to Stockholder approval, a stock option grant for
Ross Perot, Jr. for an additional 1,050,000 shares, at an exercise price equal
to the fair market value on the date the Stockholders approve the grant, vesting
pro-rata over five years commencing on October 23, 2006.
A review of the competitive market indicates that Ross Perot, Jr.'s total
compensation package aligns to median levels of Perot Systems' industry peer
group.
Conclusion
The above compensation programs and resulting payments directly reflect the
performance of Perot Systems and each individual executive officer. The
compensation package delivered to Ross Perot, Jr. is designed to motivate and
provide an incentive for him to effectively and efficiently execute his duties
as Chief Executive Officer. It is our belief that the compensation strategy
serves both the interests of the Stockholders and Perot Systems.
BOARD OF DIRECTORS
Ross Perot
Ross Perot, Jr.
Steve Blasnik
James Champy
William K. Gayden
Carl Hahn
Compensation Committee Interlocks and Insider Participation
As members of the Board, Ross Perot, Ross Perot, Jr. and James Champy will
participate in future compensation decisions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENT
Our directors, executive officers and holders of more than 10% of our Class A
Common Stock must file reports with the Securities and Exchange Commission
indicating the number of shares of Perot Systems' Common Stock they beneficially
own and any changes in their beneficial ownership. Copies of these reports must
be provided to us. Based on our review of these reports and written
representations from the persons required to file them, we believe each of our
directors and executive officers timely filed all the required reports during
2000.
24
PERFORMANCE GRAPH
The performance of Perot Systems' securities since February 2, 1999, the
inception of public trading, has been compared to the performance of publicly
traded securities in the graph set forth below. The starting point for the graph
was $43.50 per share, the closing price on Perot Systems' first day of trading
following its initial public offering. Therefore, the graph does not reflect the
172% increase from Perot Systems' $16.00 per share initial public offering price
that occurred on the first day of trading.
COMPARE CUMULATIVE TOTAL RETURN
AMONG PEROT SYSTEMS CORPORATION
NYSE MARKET INDEX AND MG GROUP INDEX
[GRAPH]
2/02/99 3/31/99 6/30/99 9/30/99 12/31/99 3/31/00 6/30/00 9/30/00 12/31/00
------- ------- ------- ------- -------- ------- ------- ------- --------
SYSTEMS 100.00 58.91 67.82 42.96 43.39 45.98 25.29 24.71 21.12
GROUP IN 100.00 84.02 98.16 92.72 117.66 102.12 70.49 67.21 68.06
MARKET I 100.00 100.73 108.25 98.96 109.05 110.03 108.40 112.61 111.13
- ----------
(1) The Media General (MG) Group Index reflects the performance of a peer
group of companies selected by Perot Systems. We have included in the
peer group companies we believe maintain operations and lines of
business similar to those of Perot Systems.
25
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
March 7, 2001
The Audit Committee reviewed the audited financial statements of Perot Systems
as of and for the fiscal year ended December 31, 2000, with management and
PricewaterhouseCoopers. The Audit Committee has discussed and reviewed with
PricewaterhouseCoopers all communications required by generally accepted
auditing standards, including those described in Statement on Auditing Standards
No. 61, as amended, "Communication with Audit Committees" and, with and without
management present, discussed and reviewed the results of the independent
auditors' examination of the financial statements.
PricewaterhouseCoopers has provided the Audit Committee with a formal written
statement describing all relationships between the auditors and Perot Systems
that might bear on the auditors' independence (as required by the Independence
Standards Board Standard No. 1). The Audit Committee has discussed with
PricewaterhouseCoopers any relationships that may impact their objectivity and
independence, including fees paid to PricewaterhouseCoopers by Perot Systems for
services not related to the audit of our year end financial statements and the
review of our quarterly financial statements. The Audit Committee has satisfied
itself as to PricewaterhouseCoopers' independence.
The Audit Committee also discussed with management, the internal auditors and
the independent auditors the quality and adequacy of Perot Systems' internal
controls and the internal audit function's organization, responsibilities,
budget, and staffing. The Audit Committee reviewed with both the independent and
the internal auditors their audit plans, audit scope, and identification of
audit risks.
Based on the review and discussions with management and PricewaterhouseCoopers,
the Audit Committee has recommended to the Board that Perot Systems' audited
financial statements be included in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2000, for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
William K. Gayden
Carl Hahn
26
STOCKHOLDER PROPOSALS FOR THE ANNUAL MEETING
AND FOR 2002 ANNUAL MEETING
Under Article II, Section 4 of our current Bylaws, proposals by Stockholders
intended to be presented at the Annual Meeting, must be received by Perot
Systems' Secretary at our executive offices no later than the close of business
on April 13, 2001.
If you want to include a stockholder proposal in the proxy statement for the
2002 annual meeting, it must be delivered to Perot Systems' Secretary at our
executive offices before December 3, 2001.
OTHER MATTERS
At the date of mailing of this Proxy Statement, we are not aware of any business
to be presented at the Annual Meeting other than the proposals discussed above.
If other proposals are properly brought before the Annual Meeting, any proxies
returned to us will be voted as the proxy holders see fit.
BY ORDER OF THE BOARD OF DIRECTORS
Peter Altabef
Secretary
27
Appendix A
PEROT SYSTEMS CORPORATION
AUDIT COMMITTEE CHARTER
Mission Statement
The Audit Committee will assist the Board of Directors in fulfilling its
oversight responsibilities by reviewing the financial reporting process, the
system of internal control, the audit process, and the company's process for
monitoring compliance with laws and regulations and with the Standards & Ethical
Principles of the company. In so doing, it is the responsibility of the Audit
Committee to maintain free and open means of communication between the
directors, management and the internal and external auditors.
Organization
The committee membership will meet the requirements of the audit committee
policy of the New York Stock Exchange. Accordingly, the Audit Committee shall be
composed of directors who are independent of the management of Perot Systems
Corporation and are free of any relationship that, in the opinion of the Board
of Directors, would interfere with the exercise of their independence from
management and the corporation.
Meetings will occur four times annually and will include Audit Committee
members, the Internal Audit Director, the Chief Financial Officer, the General
Council or their designates.
Roles & Responsibility
The Audit Committee undertakes, on behalf of the Board of Directors,
responsibility for oversight of effective internal control, reliable financial
reporting, compliance with regulatory matters and compliance with corporate
standards and ethical principals. Accordingly, the Audit Committee will adopt
best practices in carrying out the following responsibilities:
Internal Control
o Evaluate whether management is providing appropriate guidance by
communicating the importance of internal control and ensuring that
associates possess an understanding of their roles and
responsibilities.
o Gain an understanding of whether internal control recommendations made
by internal and external auditors have been implemented by management.
28
Financial Reporting
o Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements, and understand their
impact on the financial statements.
o Review the annual financial statements and determine whether they are
complete and consistent with the information known to committee
members, and assess whether the financial statements reflect
appropriate accounting principles.
o Discuss with the external auditors the quality, not just the
acceptability, of the company's accounting principles as applied in
its financial reporting including the clarity of the financial
disclosures.
o Meet with management and the external auditors to review the financial
statements and the results of the audit.
o Review the annual report before it is released and consider whether
the information is adequate and consistent with the members' knowledge
about the company and its operations.
Compliance with Laws and Regulations
o Review the effectiveness of the system for monitoring compliance with
laws and regulations and the results of management's investigation and
follow-up on any fraudulent acts or accounting irregularities.
o Be satisfied that all regulatory compliance matters have been
considered in the preparation of the financial statements.
o Review the findings of any examinations by regulatory agencies.
Compliance with the Standards & Ethical Principles
o Ensure that the Standards & Ethical Principles are formalized in
writing and that associates are aware of them.
o Evaluate whether management is providing appropriate guidance to
associates by communicating the importance of the Standards & Ethical
Principles.
Internal Audit
o Review the activities and organizational structure of the internal
audit function. Review the independence and authority of the Internal
Audit functions reporting obligations, the proposed audit plans for
the coming year and the coordination of such plans with the external
auditors.
o Review the qualifications of the internal audit function and concur in
the appointment, replacement, reassignment or dismissal of the
director of internal audit.
o Review a progress report on the internal audit plan, with explanations
of any deviations from the original plan.
29
o Review the effectiveness of the internal audit function.
External Audit
o Review the performance of the external auditors and recommend to the
Board of Directors the appointment or discharge of the external
auditors. The external auditor is ultimately accountable to the Board
of Directors and the Audit Committee.
o Meet with the external auditors and financial management of the
corporation to review the scope of the proposed audit for the current
year and the audit procedures to be utilized, and at the conclusion
review any comments or recommendations of the independent auditors.
o Review and confirm the independence of the external auditors by
reviewing the non-audit services provided and the auditors' assertion
of their independence in accordance with professional standards.
Other Responsibilities
o Ensure that significant findings and recommendations made by the
internal and external auditors are received and discussed on a timely
basis.
o Monitor the status of open internal and external audit findings and
recommendations to ensure items are being addressed in a timely
manner.
o Discuss with management and the internal and external auditors
significant risks and exposures and the plans to minimize such risks.
o Review, with the General Counsel, any legal matters that could have a
significant impact on the company's financial statements.
o Annually review and reassess the charter's adequacy and receive
approval of significant changes from the Board of Directors.
o Investigate any matter brought to its attention within the scope of
its duties, with the power to retain outside experts for this purpose
if, in its judgment, that is appropriate.
Reporting Responsibilities
o Regularly update the Board of Directors about committee activities and
make appropriate recommendations.
30
Appendix B
PEROT SYSTEMS CORPORATION
2001 LONG-TERM INCENTIVE PLAN
1. Purposes of the Plan.
The purposes of this Plan are to provide an incentive to eligible
employees, officers, independent consultants, directors who are also
employees or consultants, and advisors of the Company whose present
and potential contributions are important to the continued success of
the Company; to encourage ownership in the Company by key personnel
whose long-term employment is considered essential to the Company's
continued progress; and to enable the Company to continue to enlist
and retain the best available personnel to contribute to the success
of the Company's business and, thereby, to encourage Participants to
act in the stockholders' interest and share in the Company's success.
2. Definitions.
As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees administering
the Plan in accordance with Section 4 of the Plan.
(b) "Affiliate" means any entity that is directly or indirectly controlled
by the Company or any entity in which the Company has a significant
ownership interest as determined by the Administrator, including but
not limited to any entity (i) in which the Company, directly or
indirectly, owns a 40% or greater voting, equity or other economic
interest and (ii) the financial statements of which are consolidated
with the financial statements of the Company.
(c) "Applicable Laws" means the legal requirements relating to the
administration of stock plans under U.S. federal, state and local
corporate, securities and tax laws and regulations, the New York Stock
Exchange or any other stock exchange or quotation system on which the
Common Stock is listed or quoted and the analogous applicable laws of
any country or jurisdiction where Awards are granted under the Plan.
(d) "Award" means a Cash Award, Stock Award, Stock Appreciation Right or
Option granted to a Participant in accordance with the terms of the
Plan.
31
(e) "Award Agreement" means an instrument or agreement, in written or
electronic form, between the Company and an Awardee evidencing the
terms and conditions of an individual Award which instrument or
agreement may, but need not, be executed or acknowledged by the
Awardee. The Award Agreement is subject to the terms and conditions of
the Plan.
(f) "Awardee" means the holder of an outstanding Award.
(g) "Board" means the Board of Directors of the Company.
(h) "Cash Awards" means cash awards granted pursuant to Section 13 of the
Plan.
(i) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(j) "Committee" means a committee of Directors appointed by the Board in
accordance with Section 4 of the Plan.
(k) "Common Stock" means the Class A common stock of the Company.
(l) "Company" means Perot Systems Corporation, a Delaware corporation, or
any successor entity.
(m) "Consultant" means any person, including an advisor, engaged by the
Company or a Subsidiary to render bona fide services (provided that
such services are not provided in connection with the offer and sale
of securities in capital-raising transactions) to such entity or any
person who is an advisor, director or consultant of an Affiliate.
(n) "Director" means a member of the Board who is also an Employee or
Consultant.
(o) "Employee" means a regular employee of the Company, any Subsidiary or
any Affiliate, including Officers and Directors, who is treated as an
employee in the personnel records of the Company, any Subsidiary or
any Affiliate for the relevant period, but shall exclude individuals
who are classified by the Company, any Subsidiary or any Affiliate as
(A) leased from or otherwise employed by a third party; (B)
independent contractors; or (C) contingent, intermittent or temporary,
even if any such classification is changed retroactively as a result
of an audit, litigation or otherwise. A Participant shall not cease to
be an Employee solely as the result of (i) any leave of absence
approved by the Participant's Employer, subject to the
32
provisions of Section 6(b), or (ii) transfers between locations of the
Participant's Employer or transfers of the Participant's employment
among the Company, any Subsidiary or any Affiliate. Neither service as
a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(p) "Employer" means, with respect to an Awardee on the relevant date, the
Company or any Subsidiary or Affiliate of which Awardee is an Employee
or to which Awardee is a Consultant.
(q) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(r) "Fair Market Value" means, as of any date, the last reported sale
price for one Share on such date (or the most recent prior date for
which the last reported sale price is available) on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading or, if no such reported sale price is available,
the average of the closing bid and asked prices for one Share on such
exchange on such date (or the most recent prior date for which such
prices are available), in either case as reported in The Wall Street
Journal or such other source as the Administrator shall determine.
(s) "Grant Date" means the date selected by the Administrator, from time
to time, upon which an Award is granted to a Participant pursuant to
this Plan.
(t) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(u) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(v) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(w) "Option" means an option of any type permitted by Applicable Laws to
purchase Shares granted pursuant to this Plan.
(x) "Participant" means an Employee, Director or Consultant.
(y) "Plan" means this 2001 Long-Term Incentive Plan, as amended from time
to time.
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(z) "Predecessor Plans" means the Company's (i) 1988 Restricted Stock
Plan, (ii) 1989 Pioneer Option Plan, (iii) 1991 Stock Option Plan,
(iv) 1992 Advisor Stock Plan, and (v) 1996 Advisor / Consultant Stock
Plan.
(aa) "Restricted Stock" means shares of Common Stock acquired pursuant to a
grant of a Stock Award under Section 11 of the Plan.
(bb) "Severance Date" means the date shown in the Company's, its
Subsidiaries' and Affiliates' personnel or other records as the last
day an Awardee was a Participant or, with respect to an Awardee who
has a Total Disability, the day such Total Disability ceases to exist
unless such Awardee becomes an Employee within a reasonable period
determined by the Administer in its sole discretion.
(cc) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 15 of the Plan.
(dd) "Stock Appreciation Right" means a right to receive cash equal to the
difference between the Fair Market Value of Common Stock on the Grant
Date and the Fair Market Value of Common Stock on the date such right
is exercised by the Awardee granted pursuant to Section 12 of the
Plan.
(ee) "Stock Awards" means right to purchase or receive Common Stock
pursuant to Section 11 of the Plan.
(ff) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(gg) "10% Shareholder" means the owner of stock (as determined under Code
Section 424(d)) possessing more than 10% of the total combined voting
power of all classes of stock of the Company (or any parent or
Subsidiary of the Company).
(hh) "Total Disability" means a mental or physical condition that results
in an Employee's continued entitlement to long term disability
benefits under a long term disability plan sponsored by the Employee's
Employer or the U.S. Social Security Act or any equivalent law
governing non-U.S. Employees, provided that such mental or physical
condition is not the result of any condition or circumstance that the
Administrator, in its sole discretion, determines to have resulted
from the Awardee's illegal or reckless use of alcohol, drugs or other
chemical substances, or from actions taken by the Awardee with the
intention of causing self-injury or with reckless disregard for
personal health and safety.
34
3. Stock Subject to the Plan.
(a) Subject to the provisions of Section 15 and Section 6(d) of the Plan,
the maximum aggregate number of Shares that may be issued in
connection with any combination of Awards under the Plan is (i) the
aggregate number of Shares remaining available for grants under the
Predecessor Plans on the date this Plan is approved by the Company's
stockholders, plus (ii) the additional Shares described in paragraph
(b) below. The Shares may be authorized, but unissued, or reacquired
Common Stock.
(b) If an Award or any award or grant under any Predecessor Plan expires
or becomes unexercisable without having been exercised in full, the
unpurchased Shares which were subject thereto, if any, shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares of Restricted Stock that are either forfeited or
repurchased by the Company shall become available for future grant or
sale under the Plan. Shares that are tendered, whether by physical
delivery or by attestation, to the Company by the Participant as full
or partial payment of the exercise price of any Award or in payment of
any applicable withholding for federal, state, city, local or other
taxes incurred in connection with the exercise of any Award shall
become available for future grant or sale under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be administered
by different Committees with respect to different groups of
Participants.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Awards granted
hereunder as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the Plan shall be
administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3 promulgated under the
Exchange Act, the transactions contemplated hereunder shall
be structured to satisfy the requirements for exemption
under Rule 16b-3.
35
(iv) Other Administration. The Board may delegate to the
Executive Committee of the Board or the chief executive
officer of the Company the power to approve Awards to
Participants who are not (A) subject to Section 16 of the
Exchange Act or (B) at the time of such approval, "covered
employees" under Section 162(m) of the Code.
(b) Powers of the Administrator. Subject to the provisions of the Plan,
and in the case of a Committee or the chief executive officer of the
Company, subject to the specific duties delegated by the Board to such
Committee or officer, the Administrator shall have the authority, in
its discretion:
(i) to select the Participants to whom Awards may be granted
hereunder;
(ii) to determine the number of shares of Common Stock to be
covered by each Award granted hereunder;
(iii) to approve forms of agreement for use under the Plan;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Award granted hereunder. Such
terms and conditions include, but are not limited to, the
exercise price, the time or times when an Award may be
exercised (which may or may not be based on performance
criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding
any Award or the Shares relating thereto, based in each case
on such factors as the Administrator, in its sole
discretion, shall determine;
(v) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan;
(vi) to adopt rules and procedures relating to the operation and
administration of the Plan to accommodate the specific
requirements of local laws and procedures. Without limiting
the generality of the foregoing, the Administrator is
specifically authorized (A) to adopt the rules and
procedures regarding the conversion of local currency,
withholding procedures and handling of stock certificates
which vary with local requirements, (B) to adopt sub-plans
and Plan addenda as the Administrator deems desirable, to
accommodate non-US laws, regulations and practice, including
but not limited to non-US tax laws and regulations;
36
(vii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations
relating to sub-plans and Plan addenda;
(viii) to modify or amend each Award, including the discretionary
authority to extend the post-termination exercisability
period of Options longer than is otherwise provided for in
the Plan, provided, however, that any such amendment is
subject to Section 16(c) of the Plan and may not impair any
outstanding Award unless agreed to in writing by the
Participant;
(ix) to allow Participants to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to
be issued upon exercise of an Award that number of Shares
having a Fair Market Value equal to the amount required to
be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of
tax to be withheld is to be determined. All elections by an
Awardee to have Shares withheld for this purpose shall be
made in such form and under such conditions as the
Administrator may deem necessary or advisable;
(x) to authorize conversion or substitution under the Plan of
any or all outstanding stock options or outstanding stock
appreciation rights held by employees, directors, officers,
consultants, advisors or other service providers of an
entity acquired by the Company (the "Conversion Options").
Any conversion or substitution shall be effective as of the
close of the merger or acquisition. The Conversion Options
may be Nonstatutory Stock Options or Incentive Stock
Options, as determined by the Administrator; provided,
however, that with respect to the conversion of stock
appreciation rights in the acquired entity, the Conversion
Options shall be Nonstatutory Stock Options. Unless
otherwise determined by the Administrator at the time of
conversion or substitution, all Conversion Options shall
have the same terms and conditions as Options generally
granted by the Company under the Plan;
(xi) to provide, upon direction by the Board in its sole
discretion in the event there is a change of control of the
Company or any Subsidiary, as determined by the Board, for
the (A) assumption or substitution of, or adjustment to,
each outstanding Award; (B) acceleration of the vesting of
Options and the termination of any restrictions on Cash
Awards or Stock Awards; and/or (C) the cancellation of
Awards for a cash payment to the Awardee.
37
(xii) to delegate to any officer of the Company any of its powers
hereunder, to the extent permitted by Applicable Laws, and
to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Award
previously granted under this Plan;
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan and any Award granted
hereunder.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all
Participants.
5. Eligibility.
One or more Awards may be granted to Participants, provided, however, that
Incentive Stock Options may be granted only to Employees of the Company or
any Subsidiary.
6. Award Limitations.
(a) Each Option shall be designated in the Award Agreement as either an
Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by the Participant during
any calendar year (under all plans of the Company and any Subsidiary)
exceeds $100,000, such Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a), Incentive Stock Options
shall be taken into account in the order in which they were granted.
The Fair Market Value of the Shares shall be determined as of the time
the Option with respect to such Shares is granted.
(b) For purposes of Incentive Stock Options, no leave of absence may
exceed 90 days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of
a leave of absence approved by the applicable Employer is not so
guaranteed, on the 91st day of such leave an Awardee's employment with
the Company shall be deemed terminated for Incentive Stock Option
purposes and any Incentive Stock Option held by the Awardee shall
cease to be treated as an Incentive Stock Option and shall be treated
for tax purposes as a Nonstatutory Stock Option three months
thereafter.
(c) No Participant shall have any claim or right to be granted an Award
and the grant of any Award shall not be construed as giving an Awardee
the right to continue in the employ or hire of the Company, its
Subsidiaries or Affiliates. Further, the Company, its Subsidiaries and
Affiliates expressly
38
reserve the right, at any time, to dismiss a Participant at any time
without liability or any claim under the Plan, except as provided
herein or in any Award Agreement entered into hereunder.
(d) The following limitations shall apply to grants of Awards:
(i) No Participant shall be granted, in any fiscal year of the
Company, Options to purchase more than 2,000,000 Shares.
(ii) If an Option is cancelled, forfeited, or lapses in the same
fiscal year of the Company in which it was granted (other
than in connection with a transaction described in Section
15), the cancelled, forfeited or lapsed Option will be
counted against the limits set forth in subsection (i).
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's
capitalization as described in Section 15.
(e) The following limitations shall apply to grants of Awards to an
Employee who is not exempt from the overtime pay provisions of the
Fair Labor Standards Act of 1938, as amended (a "Non-Exempt
Employee"):
(i) Options or Stock Appreciation Rights (but not Restricted Stock)
may be granted under this Plan to Non-Exempt Employees.
(ii) Options or Stock Appreciation Rights granted to Non-Exempt
Employees must comply with the exercise price and exercise
period restrictions set forth below, and other provisions of
the "Worker Economic Opportunity Act" of 2000, P.L. 106-202,
or other provisions of law, sufficiently to insure that such
Options, and any profits, gains or income resulting from
such Options, are excluded from such Non-Exempt Employee's
overtime pay calculations.
(iii) No Option granted to a Non-Exempt Employee may be
exercisable less than six months after the effective date of
the grant of such Option, except in the case of death, Total
Disability, retirement or change in control.
7. Term of Plan.
Subject to Section 21 of the Plan, the Plan shall become effective upon its
adoption by the Board and its approval by Company's shareholders. It shall
continue in effect for a term of 10 years from the later of the date the
Plan or any
39
amendment to add shares to the Plan is adopted by the Board and approved by
the stockholders unless terminated earlier under Section 16 of the Plan.
8. Term of Award.
The term of each Award shall be determined by the Administrator and stated
in the Award Agreement. In the case of an Incentive Stock Option, the term
shall be 10 years (five years if the Awardee is a 10% Shareholder) from the
Grant Date or such shorter period as may be provided in the Award
Agreement. In the case of an Option other than an Incentive Stock Option,
the term shall be 10 years from the Grant Date or such shorter term as may
be provided in the Award Agreement; provided that the term may be up to 11
years in other circumstances deemed appropriate in the discretion of the
Administrator.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option the per Share
exercise price shall be no less than 100% of the Fair Market
Value on the Grant Date; provided that if any Participant to
whom an Incentive Stock Option is granted is a 10%
Shareholder, then the per Share exercise price shall be no
less than 110% of the Fair Market Value on the Grant Date.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be no less than 85% of the Fair Market
Value on the Grant Date. In the case of a Nonstatutory Stock
Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the
Code, the per Share exercise price shall be no less than
100% of the Fair Market Value on the Grant Date.
(iii) The exercise price per share for a Nonstatutory Stock Option
granted to a Non-Exempt Employee must be not less than 85%
of the Fair Market Value of a share of Stock on the
effective date of grant of the Option.
(iv) Notwithstanding the foregoing, at the Administrator's
discretion, Conversion Options (as defined in Section
4(b)(x)) may be granted with a per Share exercise price of
less than 100% of the Fair Market Value on the Grant Date
and shall not be subject to the provisions of Section
6(d)(iv) above.
40
(b) Vesting Period and Exercise Dates. At the time an Option is granted,
the Administrator shall fix the period within which the Option may
vest and be exercised and shall determine any conditions that must be
satisfied before the Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including
the method of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at
the Grant Date. Acceptable forms of consideration may, but except for
cash, check and wire transfers are not required to, include:
(i) cash;
(ii) check or wire transfer (denominated in U.S. Dollars or other
currency the Administrator determines is acceptable);
(iii) other Shares which (A) in the case of Shares acquired upon
exercise of an Option, have been owned by the Participant
for more than six months on the date of surrender, and (B)
have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(iv) consideration received by the Company under a cashless
exercise program implemented by the Company in connection
with the Plan;
(v) any combination of the foregoing methods of payment; or
(vi) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable
Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder.
(i) Any Option granted hereunder shall be exercisable according
to the terms of the Plan and at such times and under such
conditions as determined by the Administrator and set forth
in the respective Award Agreement.
(ii) An Option granted hereunder shall continue to vest during
any authorized leave of absence and such Option may be
exercised to the extent vested during such leave of absence.
41
(iii) No Option may be exercised for a fraction of a Share.
(iv) An Option shall be deemed exercised when the Company
receives:
(A) written or electronic notice of exercise (in accordance with
the Award Agreement or the procedures established by the
Administrator from time to time) from a person entitled to
exercise the Option;
(B) full payment for the Shares with respect to which the
related Option is exercised; and
(C) full payment of all applicable taxes required to be withheld
by the Company or the Awardee's employer in connection with
such exercise.
Shares issued upon exercise of an Option shall be issued in the name
of the Awardee or, if requested by the Awardee, in the name of the
Awardee and his or her spouse, or in the name of any permitted
transferee. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to the
Shares subject to an Option, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such Shares
promptly after the Option is exercised. No adjustment will be made for
a dividend or other right for which the record date is prior to the
date the Shares are issued, except as provided in Section 15 of the
Plan. Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option
is exercised.
(b) Termination of Employment. Unless otherwise provided in the Award
Agreement, if an Awardee ceases to be an Employee, other than as a
result of circumstances described in Sections 10(c), (d), (e) and (f)
below, the Awardee's Options shall (i) cease to vest immediately upon
the Awardee's Severance Date and (ii) terminate on the earlier of 90
days after the Awardee's Severance Date or the expiration of the term
of such Option. If the Awardee does not exercise any Shares covered by
the vested portion of his or her Option, the unexercised Shares
covered by the vested portion of such Option shall revert to the Plan
on the earlier of 90 days after the Awardee's Severance Date or the
expiration of the term of such Option.
(c) Total Disability. Unless otherwise provided in the Award Agreement, if
an Awardee ceases to be an Employee as a result of the Awardee's Total
42
Disability, the Awardee's Options shall (i) continue to vest while the
Total Disability continues to exist and (ii) terminate on the earlier
of 90 days after the Awardee's Severance Date unless prior to such
date the Awardee becomes an Employee or the expiration of the term of
such Option. On the Awardee's Severance Date, the Shares covered by
the unvested portion of his or her Option shall revert to the Plan. If
the Awardee does not exercise any Shares covered by the vested portion
of his or her Option, the unexercised Shares covered by the vested
portion of such Option shall revert to the Plan on the earlier of 90
days after the Awardee's Severance Date or the expiration of the term
of such Option. The Option may be exercised by the guardian of
Awardee's property if one has been appointed.
(d) Retirement. Unless otherwise provided in the Award Agreement, if an
Awardee ceases to be an Employee as a result of the Awardee's
retirement on or after attaining the age of 65 years, or otherwise in
accordance with his or her Employer's retirement policy, the Awardee's
Options shall (i) cease to vest immediately upon the Awardee's
Severance Date and (ii) terminate on the earlier of one year after the
Awardee's Severance Date or the expiration of the term of such Option.
On the Awardee's Severance Date, the Shares covered by the unvested
portion of his or her Option shall revert to the Plan. If the Awardee
does not exercise any Shares covered by the vested portion of his or
her Option, the unexercised Shares covered by the vested portion of
such Option shall revert to the Plan on the date such Option
terminates.
(e) Death. Unless otherwise provided in the Award Agreement, if an Awardee
ceases to be an Employee as a result of his or her death, or dies
while the Awardee has a Total Disability to which Section 2(c)
applies, the Awardee's Option shall (i) immediately vest with respect
to all Shares covered by such Option, and (ii) terminate on the
expiration date of such option. The Option may be exercised by the
beneficiary designated by the Awardee (as provided in Section 17), the
executor or administrator of the Awardee's estate or, if none, by the
person(s) entitled to exercise the Option under the Awardee's will or
the laws of descent or distribution. If such Option is not exercised
with respect to any Shares covered by such Option, the unexercised
Shares shall revert to the Plan on the expiration of the term of such
Option.
(f) Buyout Provisions. At any time, the Administrator may, but shall not
be required to, offer to buy out for a payment in cash or Shares an
Option previously granted based on such terms and conditions as the
Administrator shall establish and communicate to the Awardee at the
time that such offer is made.
43
11. Stock Awards.
(a) General. Stock Awards may be issued either alone, in addition to, or
in tandem with other Awards granted under the Plan, except to
Non-Exempt Employees. After the Administrator determines that it will
offer a Stock Award under the Plan, it shall advise the Participant in
writing or electronically, by means of an Award Agreement, of the
terms, conditions and restrictions related to the offer, including the
number of Shares that the Participant shall be entitled to receive or
purchase, the price to be paid, if any, and, if applicable, the time
within which the Participant must accept such offer. The offer shall
be accepted by execution of an Award Agreement in the form determined
by the Administrator. The Administrator will require that all Shares
subject to a right of repurchase or forfeiture be held in escrow until
such repurchase right or risk of forfeiture lapses.
(b) Termination of Employment. Unless the Administrator determines
otherwise, the Award Agreement shall provide for the forfeiture of the
unvested Restricted Stock upon the Awardee ceasing to be an Employee
except as provided below in Sections 11(c), (d) and (e). To the extent
that the Awardee purchased the Restricted Stock, the Company shall
have a right to repurchase the unvested Restricted Stock at the lesser
of (i) the Fair Market Value or (ii) the original price paid by the
Awardee, on or after the Awardee's Severance Date, except as provided
below in Sections 11(c), (d) and (e).
(c) Total Disability. Unless otherwise provided for by the Administrator
in the Award Agreement, if an Awardee ceases to be an Employee as a
result of the Awardee's Total Disability, (i) the Awardee's Stock
Award shall continue to vest while the Awardee Total Disability
continues to exist, and (ii) to the extent that the Awardee purchased
the Restricted Stock, the Company shall have a right to repurchase the
unvested Restricted Stock at the lesser of (A) the Fair Market Value
or (B) the original price paid by the Awardee, on or after the
Awardee's Severance Date.
(d) Retirement of Awardee. Unless otherwise provided for by the
Administrator in the Award Agreement, if an Awardee ceases to be an
Employee as a result of the Awardee's retirement on or after attaining
the age of 65 years, or otherwise in accordance with his or her
Employer's retirement policy, the Awardee's Stock Award shall (i)
cease to vest immediately upon the Awardee's Severance Date, and (ii)
to the extent that the Awardee purchased the Restricted Stock, the
Company shall have a right to repurchase the unvested Restricted Stock
at the lesser of (A) the Fair Market Value, or (B) the original price
paid by the Awardee, on or after the Awardee's Severance Date.
44
(e) Death of Awardee. Unless otherwise provided for by the Administrator
in the Award Agreement, if an Awardee ceases to be an Employee as a
result of his or her death, or dies while the Awardee has a Total
Disability to which Section 11(c) applies, the Awardee's Stock Award
shall immediately vest with respect to all Shares covered by such
Stock Award. The vested portion of the Stock Award shall be delivered
to the beneficiary designated by the Participant (as provided in
Section 17), the executor or administrator of the Participant's estate
or, if none, by the person(s) entitled to receive the vested Stock
Award under the Participant's will or the laws of descent or
distribution.
(f) Rights as a Stockholder. Unless otherwise provided for by the
Administrator in the Award Agreement, once the Stock Award is
accepted, the Awardee shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her acceptance of
the Stock Award is entered upon the records of the duly authorized
transfer agent of the Company.
12. Stock Appreciation Rights.
(a) General. The Committee, in its discretion, may grant Stock
Appreciation Rights to Participants. The following provisions apply to
such Stock Appreciation Rights.
(b) Grant of Stock Appreciation Right. The Stock Appreciation Right shall
entitle the holder upon exercise to an amount for each Share to which
such exercise relates equal to the excess of (i) the Fair Market Value
on the date of exercise over (i) the base or exercise price per Share
set forth in the applicable Award Agreement. Notwithstanding the
foregoing, the Committee may place limits on the amount that may be
paid upon exercise of a Stock Appreciation Right.
(c) Forfeiture of Option. If a Stock Appreciation Right is granted in
tandem with an Option, upon exercise of such Stock Appreciation Right,
the related Option shall no longer be exercisable and shall be deemed
canceled to the extent of such exercise.
(d) Form of Payment. The Company's obligation arising upon the exercise of
a Stock Appreciation Right may be paid currently or on a deferred
basis with such interest or earnings equivalent as may be determined
by the Committee, and may be paid in Common Stock or in cash, or in
any combination of Common Stock and cash, as the Committee, in its
sole discretion, may determine.
45
(e) Other Provisions. The Award Agreement evidencing a Stock Appreciation
Right shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Committee in
its sole discretion. The provisions of such Awards need not be the
same with respect to each recipient.
13. Cash Awards.
Cash Awards may be granted either alone, in addition to, or in tandem with
other Awards granted under the Plan. After the Administrator determines
that it will offer a Cash Award, it shall advise the Participant in writing
or electronically, by means of an Award Agreement, of the terms, conditions
and restrictions related to the Cash Award.
14. Non-Transferability of Awards.
Unless determined otherwise by the Administrator with respect to any Award
other than an Incentive Stock Option, an Award may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other
than by beneficiary designation, will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Awardee, only
by the Awardee. If the Administrator makes an Award transferable, the Award
Agreement for such Award shall contain such additional terms and conditions
as the Administrator deems appropriate.
15. Adjustments Upon Changes in Capitalization or Dissolution or Liquidation.
(a) Changes In Capitalization. Subject to any required action by the
stockholders of the Company, the number and kind of shares of Common
Stock covered by each outstanding Award, and the number and kind of
shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Awards have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Award,
as well as the price per share of Common Stock covered by each such
outstanding Award, shall be proportionately adjusted for any increase
or decrease in the number or kind of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of
shares of
46
stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Common Stock
subject to an Award.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each
Awardee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide
for an Option to be fully vested and exercisable until 10 days prior
to such transaction. In addition, the Administrator may provide that
any restrictions on any Award shall lapse prior to the transaction,
provided the proposed dissolution or liquidation takes place at the
time and in the manner contemplated. To the extent it has not been
previously exercised, an Award will terminate immediately prior to the
consummation of such proposed transaction.
(c) Merger or Asset Sale. In the event there is a change of control of the
Company or any Subsidiary, as determined by the Board, the Board may,
in its discretion, (A) provide for the assumption or substitution of,
or adjustment to, each outstanding Award; (B) accelerate the vesting
of Options and terminate any restrictions on Cash Awards or Stock
Awards; and (C) provide for the cancellation of Awards for a cash
payment to the Awardee.
16. Amendment and Termination of The Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the Plan and the Administrator may at any time,
subject to the authority set forth in Section 4, adopt subordinate
arrangements, policies and programs in each case, in such manner as
may be necessary to enable the Plan to achieve its stated purposes in
any jurisdiction outside the United States in a tax-efficient manner
and in compliance with local rules and regulations by adopting
schedules of provisions to be applicable to awards granted in such
jurisdiction.
(b) Stockholder Approval. The Company shall obtain stockholder approval of
any Plan amendment to the extent necessary or desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Award, unless mutually agreed otherwise between the Awardee and the
Administrator, which agreement must be in writing and signed by the
Awardee and the Company. Termination of the Plan shall not affect the
47
Administrator's ability to exercise the powers granted to it hereunder
with respect to Awards granted under the Plan prior to the date of
such termination.
17. Designation of Beneficiary.
(a) An Awardee may file a written designation of a beneficiary who is to
receive the Awardee's rights pursuant to his or her Award or the
Awardee may include his or her Awards in an omnibus beneficiary
designation for all benefits under the Plan. To the extent that an
Awardee has completed a designation of beneficiary while employed with
the Company or its Subsidiaries or Affiliates, such beneficiary
designation shall remain in effect with respect to any Award hereunder
until changed by the Awardee.
(b) Such designation of beneficiary may be changed by the Awardee at any
time by written notice. In the event of the death of an Awardee and in
the absence of a beneficiary validly designated under the Plan who is
living at the time of such Awardee's death, the Company shall allow
the executor or administrator of the estate of the Awardee to exercise
the Award, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may
allow the spouse or one or more dependents or relatives of the Awardee
to exercise the Award.
18. Legal Compliance.
Shares shall not be issued pursuant to the exercise of an Option or
Stock Award unless the exercise of such Option or Stock Award and the
issuance and delivery of such Shares shall comply with Applicable Laws
and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
19. Inability To Obtain Authority.
To the extent the Company is unable, or the Administrator deems it
infeasible or commercially impracticable, to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
Shares hereunder, the Company shall be relieved of any liability with
respect to the failure to issue or sell such Shares as to which such
requisite authority shall not have been obtained.
20. Reservation of Shares.
48
The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
21. Stockholder Approval.
The Plan shall be subject to approval by the stockholders of the Company
within 12 months of the date the Plan is adopted. Such stockholder approval
shall be obtained in the manner and to the degree required under Applicable
Laws.
22. Notice.
Any written notice to the Company required by any provisions of this Plan
shall be addressed to the Secretary of the Company and shall be effective
when received.
23. Governing Law.
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the substantive laws, but not the choice of law rules,
of the state of Delaware.
24. Unfunded Plan.
Insofar as it provides for Awards, the Plan shall be unfunded. Although
bookkeeping accounts may be established with respect to Participants who
are granted Awards of Shares under this Plan, any such accounts will be
used merely as a bookkeeping convenience. Except for the holding of
Restricted Stock in escrow pursuant to Section 11, the Company shall not be
required to segregate any assets which may at any time be represented by
Awards, nor shall this Plan be construed as providing for such segregation,
nor shall the Company nor the Administrator be deemed to be a trustee of
stock or cash to be awarded under the Plan. Any liability of the Company to
any Participant with respect to an Award shall be based solely upon any
contractual obligations which may be created by the Plan; no such
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 Administrator shall be required to give any security or bond for the
performance of any obligation which may be created by this Plan.
49
Directions to The Westin Park Central Hotel
From DFW International Airport:
Take International Parkway (the one main road running north-south through the
Airport) North to State Highway 121 North.
Merge onto I-635 (Lyndon B. Johnson Freeway) East.
Take exit #20 (Hillcrest). Stay on the service road.
Continue heading East on the service road past the light at Hillcrest and the
stop sign at Park Central Drive.
Continue East on the service road. Turn Right at the fountain entrance between
the Sheraton Hotel and the MCI building.
The entrance to The Westin will be on your Left. Valet parking is available at
this main entrance. To enter the parking garage, take the next Left past the
main entrance to The Westin.
From Downtown Dallas:
Proceed North on North Central Expressway.
Take the Coit Road exit (exit #8B) which will veer to the Right. Proceed North
on Coit Road.
Turn Left onto Banner Drive.
Turn Right onto Merit Drive.
The parking garage entrance is the first Right turn. If you wish to valet park,
proceed to the next Right turn to the main entrance of The Westin.
- --------------------------------------------------------------------------------
Annual Meeting of Stockholders Annual Meeting of Stockholders
The Westin Park Central Hotel The Westin Park Central Hotel
12720 Merit Drive 12720 Merit Drive
Dallas, Texas 75251 Dallas, Texas 75251
May 9, 2001 May 9, 2001
2:00 p.m. 2:00 p.m.
ADMIT ONE ADMIT ONE
50
[LOGO]
C/O PROXY SERVICES
P.O. BOX 9112
FARMINGDALE, NY 11735
VOTE BY PHONE -- 1-800-690-6903
Use any touchtone telephone to transmit your voting instructions until 11:59
p.m. EDT on May 8, 2001. Have your proxy card or e-mail notification available
when you call. You will be prompted to enter your 12-digit Control Number which
is located below and then follow the simple instructions the Vote Voice provides
you.
VOTE BY INTERNET -- www.proxyvote.com
Use the Internet to transmit your voting instructions until 11:59 p.m. EDT on
May 8, 2001. Have your proxy card or e-mail notification available when you
access the web site. You will be prompted to enter your 12-digit Control Number
which is located below to obtain your records and create an electronic voting
instruction form.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return to Perot Systems Corporation, Attention: Legal
Department, 12404 Park Central Drive, Dallas, Texas 75251.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
PEROT1 KEEP THIS PORTION FOR YOUR RECORDS
- --------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
PEROT SYSTEMS CORPORATION
The Board of Directors recommends a vote FOR the following actions or proposals
(as described in the accompanying Proxy Statement). If you sign and return this
card without marking, this proxy card will be treated as voting FOR each
proposal.
For
For Withhold All
All All Except
1. Election of Directors [_] [_] [_]
01) Ross Perot, 02) James Champy,
03) Carl Hahn, 04) Steve Blasnik,
05) William K. Gayden, 06) Ross Perot, Jr.
To withhold authority to vote, mark "For All Except"
and write the nominee's on the line below.
____________________________________________________
Vote On Proposals For Against Abstain
2. Proposal to approve the Perot Systems [_] [_] [_]
Corporation 2001 Long-Term Incentive Plan and
the reservation of shares to be issued under
the plan.
3. Proposal to approve the grant of a stock [_] [_] [_]
option to our Chief Executive Officer.
4. Proposal to ratify the appointment of [_] [_] [_]
PricewaterhouseCoopers LLP as independent
public accountants.
In their discretion, the proxies are authorized to vote on such other business
as may properly come before the meeting.
The undersigned hereby acknowledges receipt of the Proxy Statement and hereby
expressly revokes any and all proxies heretofore given or executed by him with
respect to the shares represented by the proxy.
Please sign exactly as your name appears on stock certificates. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
For address changes, please check the
box and indicate changes to the right. [_]
________________________________________ ____________________________________
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
- --------------------------------------------------------------------------------
PEROT SYSTEMS CORPORATION
Proxy For Annual Meeting of Stockholders
May 9, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Peter A. Altabef and Rex C. Mills, or either of them,
proxies, each with full power of substitution, and hereby authorizes them to
represent and to vote, as designated on the reverse side, all of the shares of
Class A Common Stock of Perot Systems Corporation held of record by the
undersigned on March 12, 2001, at the Annual Meeting of Stockholders to be held
at The Westin Park Central Hotel, 12720 Merit Drive, Dallas, Texas, at 2:00 p.m.
CDT on May 9, 2001 or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN ACCORDANCE WITH YOUR
INSTRUCTIONS AND IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF ALL NOMINEES LISTED ON THE OPPOSITE SIDE OF THIS CARD, FOR THE
PROPOSAL TO ADOPT THE 2001 LONG-TERM INCENTIVE PLAN AND THE RESERVATION OF
SHARES TO BE ISSUED UNDER THE PLAN, FOR THE PROPOSAL TO APPROVE THE GRANT OF A
STOCK OPTION TO OUR CHIEF EXECUTIVE OFFICER, AND FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT PUBLIC ACCOUNTANTS.
YOU MAY REVOKE THIS PROXY AT ANY TIME PRIOR TO THE VOTING THEREOF.