IPO & Distribution Agreement

INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT,


DATED AS OF _________ __, 1999,


BY AND BETWEEN


GENERAL MOTORS CORPORATION


AND


DELPHI AUTOMOTIVE SYSTEMS CORPORATION


2


TABLE OF CONTENTS


Page


1. Definitions..............................................................................................2


2. The Initial Public Offering and the Distribution.........................................................9
2.1 The Initial Public Offering.....................................................................9
2.2 The Distribution................................................................................9
2.3 Certain Stockholder Matters.....................................................................9
2.4 Prior Relationship.............................................................................10
2.5 Further Assurances Regarding the Distribution..................................................10
2.6 Abandonment of the Distribution................................................................10


3. Expenses................................................................................................11
3.1 General........................................................................................11
3.2 Certain Expenses Relating to the Initial Public Offering.......................................11
3.3 Certain Expenses Relating to the Distribution..................................................11


4. Covenants To Preserve Tax-Free Status of the Distribution and the Qualification of the
Contribution as a D Reorganization......................................................................11
4.1 Representations and Warranties.................................................................11
4.2 Restrictions on Delphi.........................................................................12
4.3 Cooperation and Other Covenants................................................................15
4.4 Indemnification for Tax Liabilities............................................................17
4.5 Procedure for Indemnification for Tax Liabilities..............................................17
4.6 Arbitration....................................................................................18
4.7 Exclusive Remedies.............................................................................19


5. Certain Other Covenants.................................................................................19
5.1 Financial and Other Information................................................................19
5.2 Other Covenants................................................................................25
5.3 Covenants Regarding the Incurrence of Indebtedness.............................................26


6. Indemnification.........................................................................................28
6.1 Indemnification by Delphi......................................................................28
6.2 Indemnification by GM..........................................................................28
6.3 Other Liabilities..............................................................................29
6.4 Tax Effects of Indemnification.................................................................29
6.5 Effect of Insurance Upon Indemnification.......................................................30
6.6 Procedure for Indemnification Involving Third-Party Claims.....................................30
6.7 Procedure for Indemnification Not Involving Third-Party Claims.................................32
6.8 Exclusive Remedies.............................................................................32


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TABLE OF CONTENTS


Page


7. Miscellaneous...........................................................................................32
7.1 Dispute Resolution.............................................................................32
7.2 Survival.......................................................................................32
7.3 Complete Agreement.............................................................................32
7.4 Authority......................................................................................32
7.5 Governing Law..................................................................................33
7.6 Consent to Exclusive Jurisdiction..............................................................33
7.7 Notices........................................................................................33
7.8 Amendment and Modification.....................................................................35
7.9 Binding Effect; Assignment.....................................................................35
7.10 Third Party Beneficiaries......................................................................35
7.11 Counterparts...................................................................................35
7.12 Waiver.........................................................................................35
7.13 Severability...................................................................................36
7.14 Remedies.......................................................................................36
7.15 Performance....................................................................................36
7.16 References; Construction.......................................................................36


Exhibits


Agreements Subject to Section 5.2(c)......................................................................Exhibit A


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INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT


This INITIAL PUBLIC OFFERING AND DISTRIBUTION AGREEMENT (the "Agreement") is made and entered into as of _________ __, 1999, by and between General Motors Corporation, a Delaware corporation ("GM"), and Delphi Automotive Systems Corporation, a Delaware corporation and a wholly owned subsidiary of GM ("Delphi"). Certain capitalized terms used herein are defined in Section 1 of this Agreement.


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;


WHEREAS, GM and Delphi have previously entered into the Separation Agreement and the Ancillary Agreements (other than this Agreement and the Registration Rights Agreement), each effective as of January 1, 1999, pursuant to which GM has contributed and transferred to Delphi, and Delphi has received and assumed, the assets and liabilities then associated with the Delphi Business as described therein;


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


WHEREAS, GM currently owns all of the issued and outstanding Delphi Common Stock;


WHEREAS, Delphi has previously filed the IPO Registration Statement with the SEC but it has not yet become effective;


WHEREAS, the parties currently contemplate that, reasonably promptly following the execution of this Agreement, Delphi shall consummate the Initial Public Offering;


WHEREAS, immediately following the consummation of the Initial Public Offering, GM shall own approximately 82.3% of the outstanding shares of Delphi Common Stock (or approximately 80.2% if the underwriters exercise their over-allotment option in full in accordance with the Underwriting Agreement);


WHEREAS, concurrently with the execution of this Agreement, GM and Delphi are entering into the Registration Rights Agreement;


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WHEREAS, GM currently intends to divest itself of its entire ownership of Delphi during 1999 by distributing in the Distribution all of its shares of Delphi Common Stock to the holders of GM $1 2/3 Common Stock;


WHEREAS, GM currently expects to accomplish the Distribution by means of a split-off, a spin-off or some combination of both transactions;


WHEREAS, GM and Delphi intend that the Distribution will be tax-free to GM and its stockholders under Section 355 of the Code;


WHEREAS, the parties intend in this Agreement to set forth the principal arrangements between them regarding the Initial Public Offering and the Distribution; and


WHEREAS, the parties hereto have determined that in order to accomplish the objectives of the Initial Public Offering and the Distribution and to facilitate the consummation thereof, it is necessary and desirable to restructure certain intercompany relationships, allocate certain liabilities and provide for certain indemnification, all as set forth herein;


NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereby agree as follows:


1. DEFINITIONS.


"Abandonment Notice" has the meaning set forth in Section 2.6.


"Acquisition Target" has the meaning set forth in Section 5.3(a)(i).


"Active Trade or Business" means the active conduct of the trade or business (as defined in Section 355(b)(2) of the Code) conducted by Delphi immediately prior to the applicable Distribution Date.


"Adjusted Delphi Indebtedness" has the meaning set forth in Section 5.3.


"Affiliate" means a Delphi Affiliate or a GM Affiliate, as the case may be.


"Agreement" has the meaning set forth in the Preamble.


"Ancillary Agreements" has the meaning ascribed to such term in the Separation Agreement.


"Annual Financial Statements" has the meaning set forth in Section 5.1 (a)(vi).


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"Business" means the Delphi Business or the GM Business, as the case may be.


"Business Day" means any 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.


"Claim" has the meaning set forth in Section 6.7.


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


"Contribution" means the transfer of certain assets by GM to Delphi (and the assumption by Delphi of certain liabilities) as contemplated by the Separation Agreement.


"Control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.


"CPR Rules" means the Rules for Non-Administered Arbitration of Business Disputes promulgated by the Center for Public Resources, as in effect on the date hereof.


"D Reorganization" means a transaction qualifying as a reorganization under Section 368(a)(1)(D) of the Code.


"Delphi" has the meaning set forth in the Preamble.


"Delphi Affiliate" means a Person that, after giving effect to the Distribution, directly or indirectly through one or more intermediaries, is Controlled by, or is under common Control with Delphi.


"Delphi Automotive Systems Business" has the meaning ascribed to such term in the Separation Agreement.


"Delphi Business" means any business or operations of Delphi or any Delphi Affiliates, including, in all cases, any predecessor entities (including, without limitation, the Delphi Automotive Systems Business).


"Delphi Capital Stock" means all classes or series of capital stock of Delphi.


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


"Delphi Indebtedness" has the meaning set forth in Section 5.3.


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"Delphi Public Documents" has the meaning set forth in Section 5.1(a)(ix).


"Delphi Transfer Agent" means BankBoston, N.A., in its capacity as the transfer agent and registrar for the Delphi Common Stock.


"Delphi's Auditors" has the meaning set forth in Section 5.1(b)(i).


"Dispute Notice" means written notice of any dispute between GM and Delphi arising out of or relating to this Agreement, which shall set forth, in reasonable detail, the nature of the dispute.


"Distribution" means the distribution of Delphi Common Stock by GM in one or more transactions occurring after the Initial Public Offering that collectively have the effect that all shares of Delphi Common Stock held by GM are distributed to GM stockholders, whenever such transaction(s) shall occur.


"Distribution Date" means any date or dates, as the case may be, determined by GM, in its sole and absolute discretion, to be a date on which shares of Delphi Common Stock held by GM are distributed in connection with the Distribution.


"Distribution Registration Statement" means any and all registration statements, information statements or other documents filed by any party with the SEC in connection with any transaction constituting part of the Distribution, in each case as supplemented or amended from time to time.


"Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, together with the rules and regulations promulgated thereunder.


"FFO to Debt Ratio" has the meaning set forth in Section 5.3(c).


"GAAP" means generally accepted accounting principles, consistently applied.


"GM" has the meaning set forth in the Preamble.


"GM Affiliate" means a Person that, after giving effect to the Distribution, directly or indirectly through one or more intermediaries, is Controlled by GM.


"GM Annual Statements" has the meaning set forth in Section 5.1(b)(ii).


"GM Business" means any business or operations of GM or any GM Affiliates other than the Delphi Business.


"GM Disclosure Portions" means all material set forth in, or incorporated by reference into, either the IPO Registration Statement or the Distribution Registration Statement, as applicable, to the extent relating exclusively to (i) GM and the GM Affiliates (excluding Delphi and the Delphi


- 4 - 8 Affiliates), (ii) the GM Business, (iii) GM's intentions with respect to the Distribution or (iv) the terms of the Distribution, including, without limitation, the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing of and conditions to the consummation of the Distribution.


"GM Public Filings" has the meaning set forth in Section 5.1(a)(xiii).


"GM Transfer Agent" means BankBoston, N.A., in its capacity as the transfer agent and registrar for the GM $1 2/3 Common Stock.


"GM $1 2/3 Common Stock" means the Common Stock, par value $1 2/3 per share, of GM.


"GM's Auditors" has the meaning set forth in Section 5.1(b)(ii).


"Indemnifying Party" means a Person that is obligated to provide indemnification under this Agreement.


"Indemnitee" means a Person that is entitled to seek indemnification under this Agreement.


"Indemnity Payment" means an amount that an Indemnifying Party is required to pay to an Indemnitee under this Agreement.


"Initial Public Offering" means the initial public offering by Delphi of shares of Delphi Common Stock as contemplated by the IPO Registration Statement.


"Insurance Proceeds" means the payment received by an insured from an insurance carrier or paid by an insurance carrier on behalf of the insured, net of any applicable premium adjustment and tax effect.


"IPO Registration Statement" means the Registration Statement on Form S-1, Registration No. 333-67333, of Delphi, as supplemented and amended from time to time.


"IRS" means Internal Revenue Service of the U.S. Department of Treasury or any successor agency.


"Losses" means all losses, liabilities, claims, obligations, demands, judgments, damages, dues, penalties, assessments, fines (civil or criminal), costs, liens, expenses, forfeitures, settlements, or fees, reasonable attorneys' fees and court costs, of any nature or kind, whether or not the same would properly be reflected on a balance sheet, and "Loss" means any of these.


"Negotiation Period" means the period of 20 Business Days following the initial meeting of the representatives of GM and Delphi following the receipt of a Dispute Notice.


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"Notice" means any notice, request, claim, demand, or other communication under this Agreement.


"Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.


"Pre-Distribution Period" means the period of time from the date hereof until the completion of the Distribution.


"Proposed Acquisition Transaction" means a transaction or series of transactions as a result of which any Person or any group of related Persons would (directly or indirectly) acquire, or have the right to acquire, from Delphi or one or more holders of outstanding shares of Delphi Capital Stock, a number of shares of Delphi Capital Stock that would comprise 50% or more of (A) the value of all outstanding shares of Delphi Capital Stock as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (B) the total combined voting power of all outstanding shares of Voting Stock of Delphi as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series.


"Quarterly Financial Statements" has the meaning set forth in Section 5.1(a)(v).


"Registration Rights Agreement" means the Registration Rights Agreement to be entered into between GM and Delphi concurrently with the execution and delivery of this Agreement.


"Regulation S-K" means Regulation S-K of the General Rules and Regulations promulgated by the SEC.


"Regulation S-X" means Regulation S-X of the General Rules and Regulations promulgated by the SEC.


"Representation Date" means any date on which Delphi makes any representation (i) to the IRS or to counsel selected by GM for the purpose of obtaining a Subsequent Tax Opinion/Ruling, or (ii) to GM for the purpose of any determination required to be made by GM pursuant to Section 4.2.


"Representation Letters" means the representation letters and any other materials (including, without limitation, the ruling request and the related supplemental submissions to the IRS) delivered or deliverable by GM and others in connection with the rendering by Tax Counsel and the issuance by the IRS of the Tax Opinions/Rulings, which to the extent related to Delphi shall be in form and substance reasonably satisfactory to Delphi.


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"Representative" means, with respect to any Person, any of such Person's directors, officers, employees, agents, consultants, advisors, accountants or attorneys.


"Request" has the meaning set forth in Section 6.7.


"Rights Plan" means the Agreement by and between Delphi and BankBoston, N.A., as Rights Agent, as amended from time to time.


"SEC" means the United States Securities and Exchange Commission or any successor agency.


"Securities Act" means the Securities Act of 1933, as amended from time to time, together with the rules and regulations promulgated thereunder.


"Separate Counsel" has the meaning set forth in Section 6.6(b).


"Separation Agreement" means the Master Separation Agreement by and among GM, Delphi, Delphi Automotive Systems LLC, a Delaware limited liability company and a wholly owned subsidiary of GM, Delphi Technologies, Inc., a Delaware corporation and a wholly owned subsidiary of GM, and Delphi Automotive Systems (Holding), Inc., a Delaware corporation and a wholly owned subsidiary of GM, dated as of December 22, 1998, as amended from time to time.


"Service Agent" means (i) for GM, The Corporation Trust Company, with offices on the date hereof at 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801; and (ii) for Delphi, The Corporation Trust Company, with offices on the date hereof at 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801.


"Subsequent Tax Opinion/Ruling" means either (i) an opinion of counsel selected by GM, in its sole and absolute discretion, confirming, in form and substance reasonably satisfactory to GM, that, as a consequence of the consummation of a subsequent transaction, no income, gain or loss for U.S. federal income tax purposes will be recognized by GM, the stockholders or former stockholders of GM, or any GM Affiliate with respect to the Distribution, or (ii) an IRS private letter ruling to the same effect.


"Subsidiary" means with respect to any specified Person, any corporation or other legal entity of which such Person or any of its Subsidiaries Controls or owns, directly or indirectly, more than 50% of the stock or other equity interest entitled to vote with respect to the election of members to the board of directors or similar governing body; provided, however, that for the purposes of this Agreement, neither Delphi nor any of the Subsidiaries of Delphi shall be deemed to be Subsidiaries of GM or of any of the Subsidiaries of GM.


"Tax" means (i) any income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Section 59A of


- 7 - 11 the Code), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on, minimum, estimated, or other tax, assessment, or governmental charge of any kind whatsoever imposed by any governmental authority, including any interest, penalty, or addition thereto, whether disputed or not; (ii) liability for the payment of any amounts of the type described in clause (i) above arising as a result of being (or having been) a member of any group or being (or having been) included or required to be included in any Tax Return related thereto; and (iii) liability for the payment of any amounts of the type described in clause (i) above as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the liability of any other Person.


"Tax Agreements" means, collectively, the (i) Agreement for the Allocation of United States Federal, State and Local Income Taxes between GM and Delphi, dated as of December 16, 1998, as amended from time to time; (ii) Agreement for the Indemnification of United States Federal, State and Local Non-Income Taxes between GM and Delphi, dated as of December 16, 1998, as amended from time to time; (iii) Amended and Restated Agreement for the Allocation of United States Federal, State and Local Income Taxes between GM and Delphi, dated as of December 16, 1998, as amended from time to time; (iv) Customs Consulting Agreement between GM and Delphi, dated as of December 16, 1998, as amended from time to time; and (v) Tax Compliance and Planning Services Agreement by and between GM and Delphi, dated as of December 16, 1998, as amended from time to time.


"Tax Control" means, with respect to Delphi, ownership of Delphi Capital Stock which constitutes at least 80% of both (i) the total combined voting power of all outstanding shares of Voting Stock of Delphi and (ii) each class and series of Delphi Capital Stock other than Voting Stock of Delphi.


"Tax Counsel" means the law firm of Kirkland & Ellis.


"Tax-Free Status of the Distribution" means the nonrecognition of taxable gain or loss for U.S. federal income tax purposes to GM, GM Affiliates and GM's stockholders in connection with the Distribution.


"Tax Opinions/Rulings" means the opinions of Tax Counsel and the rulings by the IRS deliverable to GM in connection with the Contribution and the Distribution.


"Tax-Related Losses" means (i) all federal, state and local Taxes (including interest and penalties thereon) imposed pursuant to any settlement, final determination, judgment or otherwise; (ii) all accounting, legal and other professional fees, and court costs incurred in connection with such taxes; and (iii) all costs and expenses that may result from adverse tax consequences to GM or GM's stockholders (including all costs, expenses and damages associated with stockholder litigation or controversies) payable by GM or GM Affiliates.


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"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 GM or any GM Affiliate or Delphi or any Delphi Affiliate which gives rise to a right of indemnification hereunder.


"Underwriting Agreement" means the Underwriting Agreement between Delphi and the underwriters relating to the Initial Public Offering, as amended from time to time.


"Value" means with respect to any trade or business (or portion thereof), the fair market value of the assets constituting such trade or business, less the current liabilities associated with such trade or business, in each case determined as of the applicable Distribution Date.


"Voting Stock" means with respect to any Person, all classes and series of the capital stock of such Person entitled to vote generally in the election of directors.


2. THE INITIAL PUBLIC OFFERIN ...