Master Separation Agreement

EXECUTION COPY


MASTER SEPARATION AGREEMENT


dated as of


December 22, 1998


among


GENERAL MOTORS CORPORATION,


DELPHI AUTOMOTIVE SYSTEMS CORPORATION,


DELPHI AUTOMOTIVE SYSTEMS LLC,


DELPHI TECHNOLOGIES, INC.


and


DELPHI AUTOMOTIVE SYSTEMS (HOLDING), INC.


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TABLE OF CONTENTS


----------------------------


ARTICLE 1
Definitions


Section 1.01 Defined Terms...............................................2


ARTICLE 2
Contribution and Assumption


Section 2.01 Contribution of Assets......................................6 Section 2.02 Assumption of Liabilities...................................7 Section 2.03 Methods of Transfer and Assumption.........................7 Section 2.04 Nonassignable Contracts.....................................8 Section 2.05 Transition Services.........................................8


ARTICLE 3
Ancillary Agreements


Section 3.01 General....................................................10 Section 3.02 Priority...................................................10 Section 3.03 Extensions of Transition Services..........................10


ARTICLE 4
Covenants


Section 4.01 IPO and Distribution Agreement.............................10 Section 4.02 Registration Rights Agreement..............................10 Section 4.03 Delayed Asset Transfers....................................10


ARTICLE 5
Indemnification


Section 5.01 Indemnification by Delphi..................................11 Section 5.02 Indemnification Procedures.................................11 Section 5.03 Certain Limitations........................................12


ARTICLE 6
Access to Information


Section 6.01 Restrictions on Disclosure of Information..................13 Section 6.02 Legally Required Disclosure of Confidential Information....13 Section 6.03 Access to Information......................................13 Section 6.04 Record Retention...........................................14 Section 6.05 Production of Witnesses....................................16 Section 6.06 Reimbursement..............................................16


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ARTICLE 7
Certain Claims and Litigation


Section 7.01 Product Liability Claims...................................16 Section 7.02 General Litigation.........................................17 Section 7.03 Employment Related Claims..................................18 Section 7.04 Cooperation................................................18


ARTICLE 8
Insurance Matters


Section 8.01 Delphi Insurance Coverage During the Transition Period.....19 Section 8.02 Delphi Insurance Coverage After the Transition Period......20


ARTICLE 9
Miscellaneous


Section 9.01 Entire Agreement...........................................20 Section 9.02 Governing Law..............................................20 Section 9.03 Descriptive Headings.......................................20 Section 9.04 Notices....................................................20 Section 9.05 Parties In Intersest.......................................21 Section 9.06 Counterparts...............................................21 Section 9.07 Binding Effect; Assignment.................................21 Section 9.08 Dispute Resolution.........................................21 Section 9.09 Severability...............................................22 Section 9.10 Failure or Indulgence Not Waiver; Remedies Cumulative......22 Section 9.11 Amendment..................................................22 Section 9.12 Authority..................................................22 Section 9.13 Interpretation.............................................22


Schedule A Ancillary Agreements Schedule B Delphi Financial Statements Schedule C Facilities to be Transferred Schedule D Covenants Not to Compete Schedule E Domestic Ownership Interest Transfers Schedule F International Ownership Interest Transfers Schedule G Extension of Eligibility in the GM Vehicle Purchase Program -
Used Vehicle Program Schedule H Extension of Eligibility in the GM New Vehicle Purchase
Program Schedule I Certain Agreements with Respect to Divested Businesses Schedule J Entities in Liquidation by 12/31/98 to be Retained by GM Schedule K General Litigation Claims to be Transferred to Delphi Schedule L General Litigation Claims to be Defended by GM at Delphi's
Expense Schedule M Delphi Related General Litigation Claims for which GM will
Retain Liability Schedule N Employment Related Claims to be Transferred to Delphi Schedule O Employment Related Claims to be Jointly Defended by GM and
Delphi Schedule P Entities Included in Delphi Financial Statements which are to
be retained by GM after 1/1/99


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MASTER SEPARATION AGREEMENT


This Master Separation Agreement ("Agreement") is entered into on December 22, 1998 among General Motors Corporation, a Delaware corporation ("GM"), Delphi Automotive Systems Corporation, a Delaware corporation ("Delphi"), Delphi Automotive Systems LLC, a Delaware limited liability company and, on the date hereof, a wholly owned subsidiary of GM ("DAS LLC"), Delphi Technologies, Inc., a Delaware corporation and, on the date hereof, a wholly owned subsidiary of GM ("DTI", and together with DAS LLC, the "Delphi U.S. Subsidiaries") and Delphi Automotive Systems (Holding), Inc., a Delaware corporation and, on the date hereof, a wholly owned subsidiary of GM ("Delphi International Subsidiary"). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in Article 1 hereof.


RECITALS


WHEREAS, the Board of Directors of GM has determined that it would be appropriate and desirable to completely separate the Delphi Automotive Systems Business from GM;


WHEREAS, GM has caused Delphi to be incorporated in order to effect such separation, GM currently owns all of the issued and outstanding common stock of Delphi, and Delphi currently conducts no business operations and has no significant assets or liabilities;


WHEREAS, the Boards of Directors of GM and Delphi have each determined that it would be appropriate and desirable for GM to contribute and transfer to Delphi, and for Delphi to receive and assume, directly or indirectly, substantially all of the assets and liabilities currently associated with the Delphi Automotive Systems Business, including those assets and liabilities currently held directly by GM in divisional form and the stock or similar interests currently held by GM in subsidiaries and other entities that conduct such business;


WHEREAS, GM and Delphi intend that the contribution and assumption of assets and liabilities will qualify as a tax-free reorganization under Section 368(a)(1)(D) of the Code;


WHEREAS, GM and Delphi currently contemplate that, following the contribution and assumption of assets and liabilities, Delphi will make an initial public offering of an amount of its common stock that will reduce GM's ownership of Delphi to not less than 80%;


WHEREAS, GM currently contemplates that, several months following such initial public offering, GM will distribute to the holders of its common stock, $1-2/3 par value, by means of an exchange offer and/or a pro rata distribution, all of the shares of Delphi common stock owned by GM (the "Distribution");


WHEREAS, GM and Delphi intend that the Distribution will be tax-free to GM and its stockholders under the Code; and


WHEREAS, the parties intend in this Agreement, including the Exhibits and Schedules hereto, to set forth the principal arrangements between them regarding the separation of the Delphi Automotive Systems Business from GM.


NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows: 5


ARTICLE 1


DEFINITIONS


SECTION 1.01. Defined Terms. The following terms, as used herein, shall have the following meanings:


"AFFILIATE" of any specified Person means any other Person directly or indirectly Controlling, Controlled by, or under common Control with, such specified Person; provided, however, that for purposes of this Agreement, (i) GM and its subsidiaries (other than Delphi and its subsidiaries) shall not be considered Affiliates of Delphi and (ii) Delphi and its subsidiaries shall not be considered Affiliates of GM.


"AMENDED AND RESTATED TAX ALLOCATION AGREEMENT" means the Amended and Restated Agreement for the Allocation of Federal, United States, State and Local Income Tax, between GM and Delphi, a copy of which is attached hereto as Exhibit L-3.


"ANCILLARY AGREEMENTS" means each of the agreements which are listed on Schedule A hereto and which are attached as Exhibits A-1 through M-5 to this Agreement, including any exhibits, schedules, attachments, tables or other appendices thereto, and each agreement and other instrument contemplated therein.


"ASSETS" means, except for cash and cash equivalents, any and all assets, properties and rights, whether tangible or intangible, whether real, personal or mixed, whether fixed, contingent or otherwise, and wherever located, including, without limitation, the following:


(i) real property interests (including leases), land,
plants, buildings and improvements;


(ii) machinery, equipment, vehicles (other than GM
Product Evaluation Program vehicles), furniture and fixtures, leasehold
improvements, supplies, repair parts, tools, plant, laboratory and
office equipment and other tangible personal property, including any
and all leases with respect thereto, together with any rights or claims
arising out of the breach of any express or implied warranty by the
manufacturers or sellers of any of such assets or any component part
thereof;


(iii) inventories, including raw materials,
work-in-process, finished goods, parts and accessories;


(iv) notes, loans and accounts receivable (whether
current or not current), interests as beneficiary under letters of
credit, advances and performance and surety bonds;


(v) banker's acceptances, shares of stock, bonds,
debentures, evidences of indebtedness, certificates of interest or
participation in profit-sharing agreements, collateral-trust
certificates, investment contracts, voting trust certificates, puts,
calls, straddles, options, swaps, collars, caps and other securities or
hedging arrangements of any kind;


(vi) financial, accounting and operating data and
records including, without limitation, books, records, electronic data,
notes, sales and sales promotional data, purchasing materials and data,
advertising materials, credit information, cost and pricing
information, customer and supplier lists, reference catalogs, payroll
and personnel records, facility blueprints and plant layouts, minute
books, stock ledgers, stock transfer records and other similar
property, rights and information;


(vii) Intellectual Property;


(viii) Contracts and all rights therein;


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(ix) prepaid expenses, deposits and retentions held by
third parties;


(x) claims, causes of action, choses in action, rights
under insurance policies, rights under express or implied warranties,
rights of recovery, rights of set-off, and rights of subrogation;


(xi) licenses, franchises, permits, authorizations and
approvals; and


(xii) goodwill and going concern value.


"BUSINESS DAY" means a day other than a Saturday, a Sunday or a day on which banking institutions located in the State of New York or Michigan are authorized or obligated by law or executive order to close.


"CODE" means the Internal Revenue Code of 1986, as amended from time to time, together with the rules and regulations promulgated thereunder.


"COMMERCIAL TRAVEL SERVICES SUPPLY AGREEMENT" means the Commercial Travel Services Supply Agreement, effective as of the date Contribution Date, between GM and Delphi (or their respective Affiliates), a copy of which is attached hereto as Exhibit J-2.


"COMMISSION" means the Securities and Exchange Commission.


"CONFIDENTIAL INFORMATION" means with respect to any party hereto, (i) any Information concerning such party, its business or any of its Affiliates that was obtained by another party hereto prior to the Contribution Date, (ii) any Information concerning such party that is obtained by another party under Section 6.03, or (iii) any other Information obtained by, or furnished to, another party hereto prior to the Contribution Date, in each case that (a) was marked "Proprietary" or "Company Private" or words of similar import by the party owning such Information, or any Affiliate of such party, or (b) the party owning such Information notified such other party in writing was confidential or secret by the Contribution Date.


"CONSOLIDATED TAX PERIOD" has the meaning set forth in the Amended and Restated Tax Allocation Agreement.


"CONTRACTS" means any contract, agreement, lease, license, sales order, purchase order, instrument or other commitment that is binding on any Person or any part of its property under applicable law.


"CONTRIBUTION DATE" means January 1, 1999.


"CONTROL" means the possession, direct or indirect, of the power to direct or cause the direction of the management of the policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "CONTROLLING" and "CONTROLLED" have the corollary meanings ascribed thereto.


"DELPHI ASSETS" means all of GM's right, title and interest in and to all Assets that (i) (x) are, except as set forth on Schedule P or as otherwise provided herein or in an Ancillary Agreement, reflected in the Delphi Financial Statements and not disposed of by GM after the date thereof and before the Contribution Date (including assets written off or expensed but still used by Delphi which Delphi can demonstrate to GM's reasonable satisfaction were paid for by the Delphi Automotive Systems Sector of GM) or (y) are to be transferred pursuant to Section 2.01(c) of this Agreement (as and when transferred thereunder) or (ii) are acquired by the Delphi Automotive Systems Business after the date of the Delphi Financial Statements and would be reflected in the financial statements of Delphi as of the Contribution Date if such financial statements were prepared using the same accounting principles under which the Delphi Financial Statements were prepared, or (iii) are expressly provided by this Agreement or any Ancillary Agreement to be transferred to Delphi, or (iv) are listed on Schedule C hereto (which sets forth the facilities to be transferred to Delphi) or (v) except as otherwise provided in an Ancillary Agreement or other express agreement of the parties, are used exclusively by the Delphi Automotive Systems Business as of the Contribution


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Date; provided, unless the parties otherwise expressly agree, that if the accounting principles under which the Delphi Financial Statements were prepared would have required any Asset described in the preceding clause (v) to be reflected in the Delphi Financial Statements as of the date thereof, then such Asset shall be included in the "Delphi Assets" only if so reflected.


"DELPHI AUTOMOTIVE SYSTEMS BUSINESS" means the business conducted by the Delphi Automotive Systems Sector of GM at any time on or before the Contribution Date, including (i) all business operations whose financial performance is reflected in the Delphi Financial Statements, (ii) all business operations initiated or acquired by the Delphi Automotive Systems Sector of GM after the date of the Delphi Financial Statements and (iii) all business operations that were conducted at any time in the past by the Delphi Automotive Systems Sector of GM or by any predecessor of such Sector (including, without limitation, the GM Automotive Components Group) but were discontinued or disposed of prior to the date of the Delphi Financial Statements other than by transfer or disposition to any other Sector of GM.


"DELPHI COMMON STOCK" means the Common Stock, $0.01 par value per share, of Delphi.


"DELPHI FINANCIAL STATEMENTS" means the financial statements (including the notes thereto) of Delphi for the period ended September 30, 1998 as set forth in the IPO Registration Statement as amended at the date of this Agreement, a copy of which is set forth on Schedule B attached hereto.


"DELPHI LIABILITIES" means all of the Liabilities of GM that (i) (x) are, except as otherwise set forth on Schedule P or as otherwise provided herein or in an Ancillary Agreement, reflected in the Delphi Financial Statements and remain outstanding at the Contribution Date or (y) are to be transferred pursuant to Section 2.01(c) of this Agreement (as and when transferred thereunder), or (ii) arise in connection with the Delphi Automotive Systems Business after the date of the Delphi Financial Statements and would be reflected in financial statements of Delphi as of the Contribution Date if such financial statements were prepared using the same accounting principles under which the Delphi Financial Statements were prepared, or (iii) are expressly provided by this Agreement or any Ancillary Agreement to be transferred to and assumed by Delphi, or (iv) except as otherwise provided in an Ancillary Agreement or other express agreement of the parties, are related to or arise out of or in connection with the Delphi Assets, or (v) except as otherwise provided in an Ancillary Agreement or other express agreement of the parties, are related to or arise out of or in connection with the Delphi Automotive Systems Business (including but not limited to the covenants not to compete entered into by GM prior to the Contribution Date set forth on Schedule D hereto) whether before or after the date of the Delphi Financial Statements; provided, unless the parties otherwise expressly agree, that if the accounting principles under which the Delphi Financial Statements were prepared would have required any liabilities described in the preceding clause (v) to be reflected in the Delphi Financial Statements as of the date thereof, then such liabilities shall be considered to be "Delphi Liabilities" only if so reflected.


"DETERMINATION" has the meaning set forth in the NITA.


"DISTRIBUTION" has the meaning set forth in the preamble to this Agreement.


"DISTRIBUTION DATE" means the date to be determined by GM in its sole and absolute discretion when the Distribution is completed.


"EMPLOYEE MATTERS AGREEMENT" means the Employee Matters Agreement, effective as of the Contribution Date, between GM and Delphi (or their respective Affiliates), a copy of which is attached hereto as Exhibit B-1.


"FINANCIAL SERVICES SUPPLY AGREEMENT" means the Financial Services Supply Agreement, effective as of the Contribution Date, between GM and Delphi (or their respective Affiliates), a copy of which is attached hereto as Exhibit J-4.


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"FINAL DETERMINATION" has the meaning set forth in the Amended and Restated Tax Allocation Agreement.


"INCOME TAX RETURNS" has the meaning set forth in the Amended and Restated Tax Allocation Agreement.


"INFORMATION" means all records, books, contracts, instruments, computer data and other data.


"INTELLECTUAL PROPERTY" means any and all domestic and foreign patents and patent applications, together with any continuations, continuations-in-part or divisional applications thereof, and all patents issuing thereon (including reissues, renewals and re-examinations of the foregoing); invention disclosures; mask works; copyrights, and copyright applications and registrations; trademarks, servicemarks, trade names, and trade dress, in each case together with any applications and registrations therefor and all appurtenant goodwill relating thereto; trade secrets, commercial and technical information, know-how, proprietary or confidential information, including engineering, production and other designs, notebooks, processes, drawings, specifications, formulae, and technology; computer and electronic data processing programs and software (object and source code), data bases and documentation thereof; inventions (whether patented or not); and all other intellectual property under the laws of any country throughout the world.


"IPO AND DISTRIBUTION AGREEMENT" means the agreement to be entered into between GM and Delphi on or before the IPO Effective Date, the form of which is attached hereto as Exhibit E-1.


"IPO EFFECTIVE DATE" means the date on which the IPO Registration Statement is declared effective by the Commission.


"IPO REGISTRATION STATEMENT" means the registration statement on Form S-1, Registration No. 333-67333 filed by Delphi with the Securities and Exchange Commission in connection with the initial public offering of the Delphi Common Stock, together with all amendments and supplements thereto.


"LIABILITIES" means any and all debts, liabilities, guarantees, assurances, commitments and obligations, whether fixed, contingent or absolute, asserted or unasserted, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, due or to become due, whenever or however arising (including, without limitation, whether arising out of any Contract or tort based on negligence or strict liability) and whether or not the same would be required by generally accepted accounting principles to be reflected in financial statements or disclosed in the notes thereto.


"NITA" means the Agreement for the Indemnification of United States Federal, State and Local Non-Income Taxes, between GM and Delphi, a copy of which is attached hereto as Exhibit L-2.


"NON-INCOME TAXES" has the meaning set forth in the NITA.


"PERSON" means an individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated association, any other entity, or a government or any department or agency or other unit thereof.


"PRIOR RELATIONSHIP" means the ownership relationship between GM and Delphi at any time prior to the Contribution Date.


"REGISTRATION RIGHTS AGREEMENT" means the agreement to be entered into between GM and Delphi on or before the IPO Effective Date, the form of which is attached hereto as Exhibit E-2.


"REPRESENTATIVES" means directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives.


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"SUBSIDIARY" means with respect to any specified Person, any corporation, any limited liability company, any partnership or other legal entity of which such Person or any of its Subsidiaries Controls or owns, directly or indirectly, more than 50% of the stock of other equity interest entitled to vote on the election of the members to the board of directors or similar governing body.


"SUPPLY AGREEMENT" means the Component Supply Agreement, effective as of the Contribution Date, between GM and Delphi, a copy of which is attached hereto as Exhibit K-1.


"THIRD-PARTY CLAIM" means any claim, suit, arbitration, inquiry, proceeding or investigation by or before any court, governmental or other regulatory or administrative agency or commission or any arbitration tribunal asserted by a Person other than any party hereto or their respective Affiliates which gives rise to a right of indemnification hereunder.


ARTICLE 2


CONTRIBUTION AND ASSUMPTION


SECTION 2.01. Contribution of Assets.


(a) Except as provided for in Section 2.01(c), on the Contribution Date, GM (i) hereby transfers (or causes its appropriate Subsidiaries and Representatives to transfer) the Delphi Assets in the following order: (A) all intellectual property to be transferred pursuant to the intellectual property agreements attached hereto as Exhibits G-1 through G-5, to DTI (except that all Delco Electronics Corporation intellectual property shall be transferred to DTI after GM has transferred its stock ownership interest in DTI to Delco Electronics Corporation), (B) its stock ownership interest in DTI to Delco Electronics Corporation, (C) its stock ownership interest in Delco Electronics Corporation to DAS LLC and (D) all other Delphi Assets located in the United States, including the ownership interests listed on Schedule E but excluding those listed on Schedule F, to either Delphi or DAS LLC, and (ii) will have transferred or shall transfer as promptly as reasonably practicable (or cause its appropriate Subsidiaries and Representatives to transfer) the Delphi Assets located outside of the United States and the ownership interests of the United States and foreign entities listed on Schedule F owning such Delphi Assets, to either Delphi, the Delphi International Subsidiary, or such other Subsidiary as Delphi may direct. Each of Delphi, the Delphi U.S. Subsidiaries and Delphi International Subsidiary shall receive and accept such Delphi Assets, subject to the terms and conditions of this Agreement. GM further transfers to Delphi on the Contribution Date but after the transfers described in clause (i) above, its membership interest in DAS LLC and its stock ownership interest in the Delphi International Subsidiary, effective as of the Contribution Date. Each of Delphi, the Delphi U.S. Subsidiaries and Delphi International Subsidiary acknowledges and agrees that the foregoing transfers will be made "AS IS WHERE IS" and that neither GM nor any Subsidiary of GM has made or will make any warranty, express or implied, including without limitation any warranty of ...