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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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COMPUTER SCIENCES CORPORATION
(NAME OF SUBJECT COMPANY)
COMPUTER SCIENCES CORPORATION
(NAME OF PERSON FILING STATEMENT)
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COMMON STOCK, PAR VALUE $1.00 PER SHARE
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS
(TITLE OF CLASS OF SECURITIES)
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20536310-4
(CUSIP NUMBER OF CLASS OF SECURITIES)
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HAYWARD D. FISK, ESQ.
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
COMPUTER SCIENCES CORPORATION
2100 EAST GRAND AVENUE
EL SEGUNDO, CALIFORNIA 90245
(310) 615-0311
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING THIS STATEMENT)
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Copies to:
RONALD S. BEARD, ESQ.
GIBSON, DUNN & CRUTCHER LLP
333 SOUTH GRAND AVENUE
LOS ANGELES, CA 90071-3197
(213) 229-7000
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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") relates to an offer by CAI Computer Services Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Computer Associates
International, Inc., a Delaware corporation ("Parent"), to purchase all of the
issued and outstanding Shares (as hereinafter defined) of Computer Sciences
Corporation, a Nevada corporation (the "Company").
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Computer Sciences Corporation. The
address of the principal executive office of the Company is 2100 East Grand
Avenue, El Segundo, California 90245. The title of the class of equity
securities to which this Schedule 14D-9 relates is the Company's common stock,
par value $1.00 per share, including associated Series A Junior Participating
Preferred Stock Purchase Rights (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Schedule 14D-9 relates to the tender offer disclosed in the Schedule
14D-1, dated February 17, 1998, filed with the Securities and Exchange
Commission (the "Commission") by Purchaser (as amended, the "Schedule 14D-1"),
relating to an offer by Purchaser to purchase all of the issued and outstanding
Shares for an amount equal to $108.00 per Share, net to the seller in cash,
without interest (the "Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated February 17, 1998, and the
related Letter of Transmittal (which, together with the Offer to Purchase, as
amended or supplemented from time to time, constitute the "Offer"). As set forth
in the Schedule 14D-1, the principal executive office of Purchaser and Parent is
located at One Computer Associates Plaza, Islandia, NY 11788.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 of this Schedule 14D-9.
(b) Reference is made to the information contained under the captions
"Election of Directors -- Compensation of Directors," "Proposed 1997 Nonemployee
Director Stock Incentive Plan" and "Executive Compensation" in, and in Appendix
A to, the Company's proxy statement dated July 2, 1997 relating to the Company's
1997 Annual Meeting of Stockholders (the "1997 Proxy Statement"), the relevant
portions of which are filed as Exhibit (c)(1) hereto and are incorporated herein
by reference. Except as described herein or incorporated herein by reference,
there are no material contracts, agreements, arrangements or understandings or
any actual or potential conflicts of interest between the Company or its
affiliates and (i) any of the Company's executive officers, directors or
affiliates or (ii) Purchaser and its executive officers, directors or
affiliates.
Supplemental Executive Retirement Plan.
Effective as of February 2, 1998, the Company amended and restated its
Supplemental Executive Retirement Plan (the "SERP"), which was described in the
Company's 1997 Proxy Statement. The following summary of the material amendments
to the SERP is qualified in its entirety by reference to the full text of the
SERP, as amended and restated, a copy of which is filed as Exhibit (c)(2) to
this Schedule 14D-9 and is incorporated herein by reference.
Change in Control Provisions. The definition of "Change in Control" in the
SERP was expanded to include a merger, consolidation, reorganization or other
business combination to which the Company is a party and the consummation of
which does not result in the outstanding voting securities of the Company being
exchanged for or converted into cash, property and/or securities not issued by
the Company, provided that the outstanding voting securities of the Company
immediately prior to such business combination (or, if applicable, the
securities of the Company into which such voting securities are converted as a
result of such
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business combination) represent less than 50% of the voting power of the Company
immediately following such business combination.
The amendments to the SERP redefine "involuntary separation" (the
occurrence of which within 36 months following a Change in Control entitles a
participant to certain benefits under the SERP) to include voluntary separation
for "Good Reason." Voluntary separation for Good Reason is defined in the SERP
as the participant's separation from the Company within six months of the
occurrence of any of the following without the participant's express written
consent: (i) a substantial change in the nature, or diminution in the status, of
the participant's duties or position from those in effect immediately prior to
the Change in Control; (ii) a reduction in the participant's annual base salary
from that in effect or, from any increases approved prior to the Change in
Control; (iii) a reduction in the overall benefits provided to the participant
by the Company from the amounts in effect on, or, from any increases approved
prior to the Change in Control; (iv) a termination of, or reduction in the
participant's participation under, any stock option or other incentive
compensation plan in effect immediately prior to the Change in Control, where
the participant is not offered the opportunity to participate in an alternative
incentive plan of reasonably equivalent value; (v) a reduction in the number of
paid vacation days per year available to the participant or a material reduction
or elimination of any perquisite enjoyed by the participant immediately prior to
the Change in Control; (vi) a relocation of the participant's principal place of
employment to greater than 35 miles from his previous place of employment; (vii)
a material breach by the Company of any stock option or restricted stock
agreement; or (viii) conduct by the Company, against the participant's volition,
that would cause the participant to commit fraudulent acts or would expose him
to criminal liability. For purposes of clauses (ii) through (viii), Good Reason
shall not exist if (x) the aggregate value of all compensation received by the
participant after the Change in Control is reasonably equivalent to that
received or approved to be received prior to the Change in Control or (y) if the
reduction in aggregate value is due to reduced performance by the Company, the
business unit of the Company for which the participant is responsible, or the
participant.
The amendments to the SERP provide that, upon a Change in Control, the
Company will transfer to an irrevocable grantor trust (as described in Section
671 of the Internal Revenue Code), assets equal in value to all accrued
obligations under the SERP as of the date that is one day after a Change in
Control. The Company's obligation to establish and fund such a trust does not
affect the Company's obligation to provide supplemental pension payments under
the SERP to the extent that such benefits are not paid out of the assets of the
trust.
Amendment and Termination. Prior to the February 2, 1998 amendments, the
SERP provided that the amendment, modification, suspension or termination of the
SERP following a Change in Control would cause the full vesting of benefits
accrued under the SERP to any SERP participant who was a participant prior to
the Change in Control. As amended, the SERP provides that it may not be amended,
modified, suspended or terminated following a Change in Control without the
express written consent of all participants.
Claim Review Procedure. The amendments to the SERP establish a procedure
for the review of claims relating to benefits allegedly owing under the SERP.
Any participant who believes that he is owed benefits under the SERP may, within
90 days after such benefits were to have been received, file a request for
review of the claim with one of certain designated officers of the Company. If
such a request is filed and the claim is denied, the officer with whom the
request was filed must notify the claimant of the specific reasons for the
denial of the claim. At such time, the claimant will also be advised of his
right to appeal the denial of his claim to the Plan Appeal Committee and of the
means by which such an appeal should be made. The Plan Appeal Committee is
obligated to act upon any appeal made to it within 90 days unless unusual
circumstances exist, in which case the Plan Appeal Committee must respond to the
appeal within 180 days.
Stock Options and Restricted Stock
Effective February 2, 1998, the Company amended the terms of certain
outstanding stock options and restricted stock, as described below.
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Amendment of Stock Options. All nonqualified stock options currently held
by employees of the Company and its affiliates who are participants in the SERP
were amended in the following respects:
(a) Minimum three-month exercise period after termination of
employment. Each option was amended to provide that it will not terminate,
or cease to be exercisable to purchase the underlying shares with respect
to which it had vested as of the date of the optionee's termination of
employment, prior to the earlier of (i) the expiration date of the option
or (ii) three months after the date of termination of employment.
(b) Retirement age reduced from 65 to 62. Each option provided that:
(i) if the optionee retired, the option would remain exercisable for three
years thereafter to purchase the underlying shares with respect to which it
had vested as of the date of retirement; and (ii) if the optionee
terminated employment prior to retirement age, the option would remain
exercisable for three months thereafter to purchase the underlying shares
with respect to which it had vested as of the date of termination of
employment. Each option was amended to reduce the retirement age from 65 to
62.
(c) Certain determinations to be made by continuing members of the
Compensation Committee. Each option provided that unless the Compensation
Committee of the Board of Directors determined otherwise within 10 business
days thereafter, the option would become exercisable in full upon the date
that any person became the beneficial owner of 30% or more of the
outstanding Common Stock. Each option was amended so that this
determination may only be made by vote of a majority of the directors of
the Company who are, and immediately prior to such event were, members of
the Compensation Committee.
(d) Amendment of definition of Change in Control. Each option defined
"Change in Control" as the first to occur of the following events: (i) the
dissolution or liquidation of the Company; (ii) a sale of substantially all
of the property and assets of the Company; (iii) a reorganization, merger
or consolidation of the Company the consummation of which results in the
outstanding securities of any class then subject to the option being
exchanged for or converted into cash, property and/or securities not issued
by the Company; (iv) any date upon which the directors of the Company who
were nominated by the Board of Directors for election as directors cease to
constitute a majority of the directors of the Company or (v) a change of
control of the Company of the type required to be disclosed in a proxy
statement pursuant to Item 6(e) (or any successor provision) of Schedule
14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Each option was amended to add the
following additional event (the "Additional Event"): a merger,
consolidation, reorganization or other business combination to which the
Company is a party and the consummation of which does not result in the
outstanding securities of any class then subject to the option being
exchanged for or converted into cash, property and/or securities not issued
by the Company, provided that the outstanding voting securities of the
Company immediately prior to such business combination (or, if applicable,
the securities of the Company into which such voting securities are
converted as a result of such business combination) represent less than 50%
of the voting power of the Company immediately following such business
combination.
(e) Acceleration of option upon Change of Control. Each option
provided that if the optionee's employment with the Company or any of its
subsidiaries were voluntarily or involuntarily terminated within three
years after a Change of Control, then (i) the portion of the option that
had not vested on or prior to the date of termination of employment would
fully vest on such date and (ii) the option would remain exercisable until
the earliest of the third anniversary of such date, the expiration date of
the option, or, if applicable, the first anniversary of the optionee's
death. Each option was amended to provide that upon a Change of Control:
(1) the portion of the option that has not vested on or prior thereto will
fully vest on such date and (2) the option will remain exercisable until
the earliest of the third anniversary of such date, the expiration date of
the option, or, if applicable, the first anniversary of the optionee's
death.
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All nonqualified stock options which are currently held by employees of the
Company and its affiliates who are not participants in the SERP, and which were
granted by the Company under its 1978, 1980, 1984, 1987, 1990, 1992 or 1995
Stock Incentive Plans, other than options granted pursuant to Schedules approved
by the taxing authorities in the United Kingdom or France, were amended in the
same manner as described in clauses (a), (b) and (c) above, and were also
amended as described below:
(x) Additional event causing acceleration of option. Each option
provided that unless the Compensation Committee of the Board of Directors
determined otherwise, the option would become exercisable in full upon the
approval of any of the following three types of transaction by the Board
and the stockholders of the Company: (i) the dissolution or liquidation of
the Company, (ii) a sale of substantially all of the property and assets of
the Company or (iii) a reorganization, merger of consolidation of the
Company the consummation of which would result in the outstanding
securities of any class then subject to the option being exchanged for or
converted into cash, property and/or securities not issued by the Company.
Each option was amended to add the Additional Event described in clause (d)
above as a fourth type of transaction the approval of which has the effect
described in the preceding sentence.
Amendment of Restricted Stock. All restricted stock currently held by
employees of the Company and its affiliates who are participants in the SERP was
amended in the following respects:
(a) Certain determinations to be made by continuing members of the
Compensation Committee. All such restricted stock provided that unless the
Compensation Committee of the Board of Directors determined otherwise
within 10 business days thereafter, all restrictions imposed upon the
restricted stock would lapse if any person became the beneficial owner of
30% or more of the outstanding Common Stock. All restricted stock was
amended so that this determination may only be made by vote of a majority
of the directors of the Company who are, and immediately prior to such
event were, members of the Compensation Committee.
(b) Lapse of restrictions upon a Change of Control. All such
restricted stock provided that if the holder's employment with the Company
or any of its subsidiaries were voluntarily or involuntarily terminated
within three years after any of the events described in clauses (d)(i),
(ii), (iii), (iv) or (v) in Amendment of Stock Options above, then all
restrictions imposed upon the restricted stock would lapse. All such
restricted stock was amended to add the Additional Event described in such
clause (d), and to provide that all restrictions imposed upon the
restricted stock would automatically lapse upon the first to occur of such
events (rather than upon the termination of the holder's employment within
three years thereafter).
All restricted stock which is currently held by employees of the Company
and its affiliates who are not participants in the SERP, and which was granted
by the Company under its 1990 or 1992 Stock Incentive Plans, was amended in the
following respects:
(x) Certain determinations to be made by continuing members of the
Compensation Committee. All such restricted stock provided that all
restrictions imposed upon the restricted stock would lapse upon the
occurrence of any of the following events: (i) unless the Compensation
Committee of the Board of Directors determined otherwise within ten
business days thereafter, the first date upon which any person became the
beneficial owner of 30% or more of the outstanding Common Stock; (ii) any
date upon which the directors of the Company who were nominated by the
Board of Directors for election as directors cease to constitute a majority
of the directors of the Company, unless, prior to such date, the Board of
Directors shall determine otherwise; or (iii) a change in control of the
Company of the type required to be disclosed in a proxy statement pursuant
to Item 6(e) (or any successor provision) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act, unless, prior to such change in
control, the Board of Directors shall determine otherwise. All restricted
stock was amended so that the determination described in clause (i) above
may only be made by vote of a majority of the directors of the Company who
are, and immediately prior to such event were, members of the Compensation
Committee.
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(y) Lapse of restrictions upon a Change in Control. All such
restricted stock provided that unless the Compensation Committee of the
Board of Directors determined otherwise, all restrictions imposed upon the
restricted stock would lapse upon any of the events described in clauses
(d)(i), (ii) or (iii) in Amendment of Stock Options above. All such
restricted stock was amended to add the Additional Event described in such
clause (d).
Deferred Compensation Plan
The Company has a Deferred Compensation Plan (as amended and restated to
date, the "Deferred Compensation Plan"). The following summary of the material
terms of the Deferred Compensation Plan is qualified in its entirety by
reference to the full text of the Deferred Compensation Plan, a copy of which is
filed as Exhibit (c)(5) hereto and is incorporated herein by reference. The
Deferred Compensation Plan permits nonemployee members of the Company's Board of
Directors and certain designated officers and employees of the Company to defer
into a deferred compensation account some or all of such person's retainer,
consulting fees, committee fees and meeting fees (in the case of a nonemployee
director) or such person's annual bonus pursuant to the Company's Annual
Management Incentive Plan (in the case of officers or employees) pursuant to an
election made by such person no later than the last day of the next preceding
fiscal year. The annual rate of return credited to each deferred compensation
account equals 120% of the 120-month rolling average yield on a ten-year U.S.
Treasury Note, calculated as of December 31 of the preceding year. The full
value of the deferred compensation account becomes payable upon death,
retirement after the person turns 62 or upon termination prior to retirement. Up
to the full value may be withdrawn within three years of a Change in Control (in
which event a 5% withdrawal penalty applies), in the event of certain hardship
events (in which event no penalty applies) or otherwise (in which event a 10%
withdrawal penalty applies).
"Change in Control" is defined as (a) the acquisition by any person, entity
or group (as defined in Section 13(d)(3) of the Exchange Act), as beneficial
owner, directly or indirectly, of securities of the Company representing twenty
percent (20%) or more of the combined voting power of the then outstanding
securities of the Company, (b) a change during any period of two (2) consecutive
years of a majority of the Board as constituted as of the beginning of such
period, unless the election of each director who was not a director at the
beginning of such period was approved by vote of at least two-thirds of the
directors then in office who were directors at the beginning of such period, (c)
a sale of substantially all of the property and assets of the Company, (d) a
merger, consolidation, reorganization or other business combination to which the
Company is a party and the consummation of which results in the outstanding
voting securities of the Company being exchanged for or converted into cash,
property and/or securities not issued by the Company, (e) a merger,
consolidation, reorganization or other business combination to which the Company
is a party and the consummation of which does not result in the outstanding
voting securities of the Company being exchanged for or converted into cash,
property and/or securities not issued by the Company, provided that the
outstanding voting securities of the Company immediately prior to such business
combination (or, if applicable, the securities of the Company into which such
voting securities are converted as a result of such business combination)
represent less than 50% of the voting power of the Company immediately following
such business combination, or (f) any other event constituting a change in
control of the Company for purposes of Schedule 14A of Regulation 14A under the
Exchange Act.
Upon a Change in Control, the Company will transfer to an irrevocable
grantor trust (as described in Section 671 of the Internal Revenue Code), assets
equal in value to all accrued obligations under the Deferred Compensation Plan
as of the date that is one day after a Change in Control. The Company's
obligation to establish and fund such a trust does not affect the Company's
obligation to provide benefits payments under the Deferred Compensation Plan to
the extent such benefits are not paid out of the assets of the trust.
Severance Plan.
On February 2, 1998, the Company's Board of Directors adopted the Computer
Sciences Corporation Severance Plan for Senior Management and Key Employees (the
"Severance Plan"). The following summary of the Severance Plan is qualified in
its entirety by reference to the full text of the Severance Plan, a copy of
which is filed as Exhibit (c)(3) to this Schedule 14D-9 and is incorporated
herein by reference.
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The Severance Plan provides for certain payments to covered employees
("Participants") in the event of a change in control of the Company. The payment
is a multiple of the Participant's annual base salary plus the average annual
incentive bonus over the three years prior to the Participant's termination of
employment. The multiple is two for all Participants except Mr. Honeycutt, whose
multiple is three. Participants are also entitled to receive medical and similar
benefits for a period of years equal to the applicable multiple (two or three).
On February 2, a total of 17 Participants (including Mr. Honeycutt) were
designated to be eligible for benefits under the Severance Plan.
Payments are to be made under the Severance Plan if a Participant has a
voluntary employment termination for "Good Reason" within 24 months following a
Change in Control (as defined in the SERP) or an involuntary employment
termination other than for cause within 36 months following a Change in Control.
In addition, Mr. Honeycutt is entitled to payments under the Severance Plan if
he has a voluntary employment termination, with or without "Good Reason," during
the thirteenth month following a Change in Control. No payments under the
Severance Plan are due if a Participant's employment is terminated for cause or
because of death or disability.
"Good Reason" is defined generally to include a substantial change or
diminution in duties or position, a reduction in annual base salary, a reduction
in the aggregate value of all other benefits (subject to certain exceptions), or
a relocation of the Participant's principal office of more than 35 miles.
The Severance Plan further provides that the Company will reimburse
Participants for any and all excise taxes which must be paid by the Participants
as a consequence of a Change in Control of the Company.
On February 18, 1998, the Company's Board of Directors authorized Mr.
Honeycutt to designate up to 150 additional employees as Participants entitled
to the benefits described above (with the multiple being two). The benefits
would be payable to these additional employees, however, only if the Change in
Control resulted in Parent directly or indirectly controlling the Company. As of
the date hereof, an additional 135 employees have been designated as
Participants under the Severance Plan on the basis described in this paragraph.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
The Board of Directors of the Company presently expects to meet on Friday,
February 27, 1998 to consider the Offer. As of the date hereof, the Board has
not yet met to consider or act upon the Offer. Accordingly, at this time the
Company has not yet made any recommendation to its stockholders regarding the
Offer, but as previously disclosed publicly, will do so on or before March 2,
1998.
On February 10, 1998, the Company received a widely publicized letter from
Parent in which Parent's Chairman proposed that Parent and the Company enter
into a consensual merger in which the Company's stockholders would receive $108
per share in cash. The Company scheduled a Board of Directors meeting for
February 18, 1998 to consider this proposal. On Sunday, February 15, 1998, an
investment banker employed by Parent orally advised the Company's financial
advisor that Parent would be prepared to pay $114 per share in cash for the
Company's outstanding Shares if a negotiated transaction were completed
promptly. Subsequently, the Company received another widely publicized letter
from Parent, which made reference to such conversation. Monday, February 16,
1998, was a Federal holiday. On the morning of February 17, 1998, Parent issued
a press release in which it stated that it had filed with the SEC a Schedule
14D-1 and a Preliminary Solicitation and Proxy Statement, as part of a tender
offer for the Company. In fact, Parent did not file its Schedule 14D-1 and
Preliminary Proxy Statement until approximately 5:20 p.m. on Tuesday, February
17, 1998.
On February 18, 1998, the Company's Board of Directors met to consider
Parent's consensual merger proposal. Neither the Company's Board of Directors
nor its financial or legal advisors had, by that time, completed their review of
Parent's 181 page Schedule 14D-1 filed the previous night.
After receiving the advice of the Company's financial and legal advisors,
and after a thorough discussion among members of the Board concerning the
advantages, disadvantages, risks and problems associated with Parent's
consensual merger proposal, the Board of Directors voted unanimously to reject
it. The Board of
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Directors was aware, in taking such action, of the indication by Parent's
investment banker that in a negotiated transaction the cash consideration to the
Company's stockholders could be $114 per share.
On February 19, 1998, the Company issued a press release and released a
letter from the Company's Chairman and CEO, Van B. Honeycutt, to Parent's
Chairman and CEO. The press release and the letter stated that, in the opinion
of the Company's Board, Parent's proposal for a consensual merger did not
represent fair value for the Company's stockholders and that any effort to
combine the Company and Parent would not make business sense. A copy of the
press release is attached hereto as Exhibit (a)(1). A copy of the letter is
attached hereto as Exhibit (a)(2). With respect to the value component of the
Board's decision, Mr. Honeycutt's letter stated that:
"We believe that CSC has far greater near- and long-term
prospects than are reflected in your bid. Based on our assessment of
CSC's opportunities for growth and revenues and earnings per share,
and the potential such growth has to effect significant appreciation
in our stock price, we do not believe your offer rewards our
shareholders for the true value of their investment. In addition, your
offer fails to recognize that CSC shareholders own a unique asset that
is impossible to replicate in the information technology marketplace.
"CSC is in robust financial condition with a compound annual
growth rate of 20.4% in revenue over the past five years and a 26.3%
increase in income before special items for the same period. We have
larger gains in market share and revenue than our primary competitor
in 15 of the last 16 quarters. We have won or implemented $6.7 billion
in large outsourcing contracts over the past 12 months and our
pipeline of major new business prospects is extremely promising.
"CSC is on course to grow our business in all of our markets
through strong internal growth and an acquisition strategy designed to
enhance our growth in geographical markets, key vertical industries
and specialized service segments."
With respect to the conclusion of the Board that the combination of the
Company and Parent would not make business sense, Mr. Honeycutt's letter stated
that:
"CSC's strong financial condition, as reflected by our 'A' credit
rating, is critical to our ability to secure the large, long-term
outsourcing contracts that are key to growth in IT services. A
combined CSC and CA would be irresponsibly leveraged and thus have a
much lower credit rating and be at a distinct disadvantage in the
competition for such business.
"CSC's ability to provide independent solutions is a threshold
issue for customers who demand platform neutrality. This neutrality
would be severely compromised if CSC were to be acquired by CA and, as
a result, we would lose substantial credibility in the marketplace.
You have already stated publicly that you would redirect the efforts
of many CSC employees to sales and service of CA's software products,
a prospect that both our customers and employees would find
unacceptable.
"More than 25% of CSC's total anticipated revenues for fiscal
1999 are derived from outsourcing contracts that contain change in
control provisions which would allow customers who are concerned about
such issues to move to another services firm. We have already been
notified by a number of such clients that they would either exercise
such provisions or curtail or reduce the flow of new business to CSC
should a CA takeover occur. In addition, software critical to CSC's
data centers and other operations is licensed to CSC under contracts
which are terminable by the licensor if CA acquires CSC.
"The most important asset of Computer Sciences is our people.
They create sustainable, competitive advantage and customer
satisfaction and revenue generation, and are the best in the business.
It is widely recognized that CSC and CA have dramatically different
cultures, and it is clear that many of the very assets you are trying
to buy -- our employees -- will decline to join your company.
"Our Board of Directors and our management are committed to
maximizing the value of our stockholders' investment, consistent with
the highest standards of responsibility to our customers and
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employees. Consistent with our fiduciary duty to stockholders, we are
always prepared to give serious consideration to strategic options
which fairly reflect the value of our corporation and which make
business sense. Clearly, your offer does neither."
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Goldman, Sachs & Co. ("Goldman Sachs") and J.P. Morgan Securities Inc.
("J.P. Morgan") have been retained by the Company to act as its financial
advisors with respect to the acquisition proposal which Parent has made for the
stock of the Company; Goldman Sachs also has been retained as financial advisor
to assist the Company in responding to any other acquisition proposals it may
receive or any other attempts to acquire control of the Company. Pursuant to the
terms of their engagement letters, Goldman Sachs and J.P. Morgan will receive
the following fees for their services:
(a) a quarterly retainer fee of $2,500,000 for Goldman Sachs and
$1,000,000 for J.P Morgan, payable on the first day of each three-month
period during which they provide such services; and
(b) a fee of $10,000,000 for Goldman Sachs and $4,000,000 for J.P.
Morgan (with the quarterly retainer fees paid under clause (a) above
credited on a one-time basis against such fees), payable on February 11,
1999 and February 13, 1999, respectively, in the event that Parent has not,
directly or indirectly, become the beneficial owner of more than 50% of the
outstanding Shares on or prior to such date.
The Goldman Sachs engagement letter also provides that in the event that
the Company determines to undertake a specific transaction in which all or a
majority of the Company is sold to another person or persons, Goldman Sachs will
have the right to act on the Company's behalf in connection with such
transaction on customary terms and conditions, including customary fee
provisions. The J.P. Morgan engagement letter provides that in the event the
Company determines to proceed with a sale, merger, consolidation, business
combination, or certain other specified transactions, during the term of the
engagement the Company will enter into an amendment to the engagement letter
providing for fees to J.P. Morgan in an amount to be determined after taking
into account the results obtained and the custom and practice among investment
bankers acting in similar transactions.
The Company has also agreed to reimburse Goldman Sachs and J.P. Morgan for
their reasonable out-of-pocket expenses, including fees and expenses of counsel,
and to indemnify Goldman Sachs and J.P. Morgan and certain related persons
against certain liabilities in connection with their engagement.
Goldman Sachs and J.P. Morgan have each in the past been retained by the
Company to render investment banking and advisory services, and each has
received reasonable and customary compensation for such services.
The Company has also retained Bozell Sawyer Miller Group ("BSMG") as a
public relations advisor in connection with the Offer, and has retained Morrow &
Co., Inc. ("Morrow") to assist the Company in communicating with its
stockholders and to provide other services in connection with the Offer. The
Company has agreed to pay BSMG and Morrow reasonable and customary compensation
for such services, reimburse them for their reasonable out-of-pocket expenses
and provide customary indemnities.
Except as described above, neither the Company nor any person on its behalf
has employed, retained or compensated any person or class of persons to make
solicitations or recommendations to security holders concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) On February 2, 1998, the Board of Directors of the Company declared a
2-for-1 stock split in the form of a 100% stock dividend with respect to its
common stock, par value $1.00 per share (the "Common Stock") payable on March
23, 1998 to the holders of record of Common Stock on March 2, 1998.
On February 18, 1998, the Board of Directors of the Company authorized and
declared a dividend of one preferred stock purchase right (a "New Right") for
each share of Common Stock. The dividend is payable on
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<PAGE> 10
February 27, 1998 to the holders of record of Common Stock as of the close of
business on such date. The New Rights will be issued pursuant to a Rights
Agreement dated as of February 18, 1998 by and between the Company and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "New Rights
Agreement"), a copy of which was included as Exhibit 10.23 to the Form 8-A filed
by the Company with the Commission on February 25, 1998. The following summary
of the New Rights Agreement is qualified in its entirety by reference to the
full text of the New Rights Agreement, a copy of which is filed as Exhibit
(c)(4) to this Schedule 14D-9 and is incorporated herein by reference in its
entirety.
On February 18, 1998, the Board of Directors of the Company also amended
the first sentence of Section 3(a) of the Rights Agreement dated as of December
21, 1988, as amended and restated as of August 1, 1996, by and between the
Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Old
Rights Agreement"), in order to add the following additional language at the end
of such sentence:
"provided, however, that, notwithstanding anything to the contrary in the
foregoing definition of the 'Distribution Date,' clause (ii) of the
definition does not apply to the tender offer commenced by CAI Computer
Services Corp. on February 17, 1998."
A copy of the Old Rights Agreement, as amended and restated effective
February 18, 1998 is attached as Exhibit (c)(15) hereto and is incorporated
herein by reference in its entirety.
In addition, the Board of Directors indicated that it will redeem the Old
Rights promptly after the dividend of the New Rights has been paid.
The following executive officers of the Company effected the following
transactions in the Shares during the past 60 days. No other executive officer,
director, affiliate or subsidiary of the Company effected any transaction in the
Shares during such period.
(i) Van B. Honeycutt, Chairman, President and Chief Executive Officer,
exercised a stock option and purchased 4,200 Shares for $15.25 per Share on
February 20, 1998, the last day prior to the expiration of the option. Mr.
Honeycutt retained the Shares acquired upon such exercise.
(ii) C. Bruce Plowman, Vice President, Corporate and Marketing
Communications, exercised a stock option and purchased 3,000 shares of
Common Stock for $39.25 per share on January 6, 1998. Mr. Plowman sold
these 3,000 shares for $85.06 per share in an open market sale later that
day.
(b) To the best knowledge of the Company, all of its executive officers and
directors presently intend to hold, and not tender to Purchaser, all of the
Shares which they hold of record or beneficially own.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) The Board has not yet met to consider the Offer. Such a Board meeting
is presently scheduled for February 27, 1998. No negotiation has been or is
being undertaken or is underway by the Company in response to the Offer which
relates to or would result in: (1) an extraordinary transaction such as a merger
or reorganization, involving the Company or any subsidiary of the Company; (2) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (3) a tender offer for or other acquisition of
securities by or of the Company; or (4) any material change in the present
capitalization or dividend policy of the Company. In light of the fact that the
Board has not yet met to consider the Offer, no decision has, as yet, been made
whether to undertake such negotiations in the future.
(b) Other than the Board resolution adopted at the February 18, 1998
meeting of the Board to declare a dividend of Rights to acquire shares of the
Company's Preferred Stock described in Item 6(a) hereof, there is no
transaction, Board resolution, agreement in principle, or signed contract in
response to the Offer that relates to or would result in one or more of the
matters referred to in clauses (1), (2), (3) or (4) of Item 7(a) hereof.
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<PAGE> 11
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
At a meeting on February 16, 1998, the Board adopted an amendment to the
Company's Bylaws "opting out" of the "Control Shares" provisions of the Nevada
General Corporation Law. The "Control Shares" provisions deny voting rights to
shares acquired by a person, with reference to percentage thresholds stated in
the provisions, unless a sufficient number of other shares are voted in favor of
restoring such voting rights. At its February 18, 1998 meeting, the Board
adopted a number of other amendments to the Company's Bylaws designed to protect
against hasty, ill-considered, actions to disrupt, remove or replace the
Company's Board of Directors with employees of Parent in advance of the Annual
Meeting of Stockholders. The amendments are also intended to assure that within
the limits of applicable Nevada law the Board of Directors will retain
reasonable discretion in scheduling the Annual Meeting in order to assure
adequate time for stockholders to be fully informed concerning the Offer and all
other alternatives which may be available to them. In addition, the Bylaw
amendments conform the provisions for indemnification of directors and officers
to provisions covering the same subject set forth in the Restated Articles of
Incorporation, and more generally remove or mitigate certain ambiguities in the
Bylaws, as they existed prior to such amendments. A copy of the Amended and
Restated Bylaws is attached hereto as Exhibit (c)(6).
The following paragraphs are intended to briefly summarize the substantive
changes made in the several Bylaw amendments. They are subject in all respects
to the exact language of the amended Bylaws, as set forth in Exhibit (c)(6).
The amendment of Article II, Section 2 of the Bylaws deletes language from
the former provision stating that annual meetings of the stockholders shall be
held on the second Monday in August, or at such other time and date as the Board
of Directors shall determine. As amended, the reference to the second Monday in
August is deleted. The amendment of Article II, Section 3 of the Bylaws removes
the ability of holders of a simple majority of the Common Stock to call a
special meeting of stockholders, except for a special meeting called to elect
directors if an Annual Meeting has not been held for 18 months or if directors
were not elected at the last Annual Meeting. The amendment of Article II,
Section 6, which states the general majority voting requirement for action by
stockholders, conforms the Bylaws to the Nevada General Corporation Law and adds
an explicit cross-reference to supermajority provisions elsewhere in the Bylaws.
The amendment of Article II, Section 10 increases from 75% to 90% the
number of shares required for action by written consent of the stockholders. The
amendment of Article II, Section 12 adds a 120-day advance notice requirement
for stockholder proposals to be considered at an Annual Meeting. The amendment
of Article III, Section 1 removes certain language considered superfluous. The
amendment of Article III, Section 2 removes a provision in the Bylaws, as they
existed prior to such amendments, pursuant to which the Board could remove any
director for cause. The amendment also removes language taken from the Nevada
General Corporation Law concerning the 2/3 supermajority of shares required to
remove a director of a Nevada corporation. The amendment further provides that,
because the Company's charter provides for cumulative voting in the election of
directors, the proportion of the outstanding shares required to remove any
director must be no less than the proportion equal to (a) one minus (b) the
ratio of (x) one divided by (y) the sum of one plus the authorized number of
directors. It is the Company's position that such interpretation is consistent
with applicable Nevada law, although the Company is aware that Parent has made a
contrary assertion in the Nevada federal court lawsuit described in the
following paragraph. The amendment of Article III, Section 7 provides that 24
hours' notice is required for special meetings of the Board, if such notice is
given orally, or by telegraph, facsimile, or electronic means instead of three
days' notice as previously required. The amendment of Article VII revises the
indemnification provisions of the Bylaws to mirror the provisions of the
Company's Restated Articles of Incorporation. The amendment of Article VIII,
Section 1 requires the affirmative vote of more than 80% of the outstanding
stock in order to amend or repeal Bylaws by stockholder action.
From the time that Parent publicly commenced its efforts to acquire the
Company, a number of lawsuits involving the Company have been filed. As noted in
response to Item 4, on February 10, 1998, Parent sent and publicly disclosed a
letter in which it proposed to acquire the Company. On February 11, 1998 a class
action lawsuit was filed in Clark County, Nevada district court seeking to
enjoin the proposed merger transaction
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<PAGE> 12
from occurring. Other class action lawsuits were filed in subsequent days by the
same counsel seeking contrary relief. On February 17, 1998, the same date on
which it filed its Schedule 14D-1 and its Preliminary Solicitation and Proxy
Statement, Parent filed suit in the United States District Court for the
District of Nevada, captioned Computer Associates International, Inc. v.
Computer Sciences Corporation (Case No. CV-S-98-00278-LDG), seeking (i) a
declaratory judgment that "Computer Associates Schedule 14D-1 complies with
applicable federal law," (ii) to enjoin the Company from amending its Bylaws in
certain respects, (iii) to order the Company to redeem its "poison pill" and to
make the provisions of the Nevada Business Combination Statute inapplicable to
the Offer by approving the Offer, and (iv) a declaration that certain sections
of the Bylaws, in conjunction with certain sections of the Nevada General
Corporation Law, inter alia permit a vote or consent of holders of a majority of
the outstanding shares of the Company to amend the Bylaws, permit Parent, with
the vote of two-thirds of the outstanding voting shares of the Company, to
remove a sufficient number of directors to designate a majority of the Board,
permit a majority of the Company's stockholders to fill vacancies of removed
directors or additional seats on the Board by written consent, prohibit the
Company from setting the record date for determining stockholders entitled to
give written consents and agent solicitations, require that the Company hold its
annual meeting on August 10, 1998 and certain other matters. A copy of Parent's
Complaint and Parent's Ex Parte Motion for Expedited Hearing on Claims for
Declaratory Relief are attached hereto as Exhibits (c)(7) and (c)(8),
respectively. A copy of Parent's brief in support of such Motion and on the
merits of the relief requested is attached hereto as Exhibit (c)(9).
On February 23, 1998, the Company filed its Response of Defendant Computer
Sciences Corporation to Plaintiff Computer Associates International, Inc.'s Ex
Parte Motion for Expedited Hearing on Claims for Declaratory Relief. The
Response, inter alia, pointed out that the amendments adopted to the Company's
Bylaws on February 16, 1998 and February 18, 1998 had rendered moot all of the
claims in Parent's Complaint other than Parent's claim that its filings with the
Securities and Exchange Commission were in compliance with all applicable
federal law. The Response also stated that Parent's positions regarding
corporate governance had no merit even under the pre-amendment Bylaws. A copy of
the Response is attached hereto as Exhibit (c)(10).
Also on February 23, 1998, Parent filed with the United States District
Court for the District of Nevada its Supplemental and Amended Complaint. The
Supplemental and Amended Complaint seeks emergency delaratory relief to void the
amendments to the Company's Bylaws and to determine definitively the legality of
Parent's Proxy Solicitation. Parent also sought an injunction against the use of
a "poison pill" and other anti-takeover measures and certain other unspecified
actions. A copy of the Supplemental and Amended Complaint is attached hereto as
Exhibit (c)(11).
Also on February 23, 1998, the Company filed a lawsuit in the Superior
Court of the State of California for the County of Los Angeles, Central
District, captioned Computer Sciences Corporation v. Computer Associates
International, Inc., et al.(Case No. BC 186394). This Complaint by the Company
included a number of causes of action, including (1) unfair, unlawful, and
fraudulent business acts and practices in violation of California Business and
Professions Code Sections 17200, et seq., including (a) improper attempt to buy
loyalty; (b) attempted economic duress; (c) fraud and deceit; (d) improper
intentional interference; and (e) unfair business acts; (2) economic duress; (3)
intentional interference with prospective economic advantage and contractual
relations; and (4) conspiracy. A copy of the Company's Complaint is attached
hereto as Exhibit (c)(12).
The information contained in all of the Exhibits referred to in Item 9
below is incorporated herein by reference in its entirety.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS
(a)(1) Press release issued by the Company dated February 19, 1998.+
(a)(2) Letter from Van B. Honeycutt to Charles Wang, dated February 19, 1998.+
(c)(1) Excerpts from the Company's Proxy Statement dated July 2, 1997.+
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<PAGE> 13
(c)(2) The Company's Supplemental Executive Retirement Plan, as amended and
restated effective as of February 2, 1998.+
(c)(3) The Company's Severance Plan for Senior Management and Key Employees, as
amended and restated effective as of February 18, 1998.+
(c)(4) Rights Agreement dated as of February 18, 1998 by and between the
Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.+
(c)(5) The Company's Deferred Compensation Plan, as amended and restated
effective as of February 2, 1998.+
(c)(6) The Company's Bylaws, as amended and restated February 18, 1998.+
(c)(7) Complaint for Injunctive and Declaratory Relief in Computer Associates
International, Inc. v. Computer Sciences Corporation, case no.
CV-S-98-00278-LDG.*
(c)(8) Ex Parte Motion for Expedited Hearing on Claims for Declaratory Relief
in Computer Associates International, Inc. v. Computer Sciences
Corporation.*
(c)(9) Brief in Support of Motion for Expedited Hearing on Claims for
Declaratory Relief and on the Merits of the Relief Requested in Computer
Associates International, Inc. v. Computer Sciences Corporation.*
(c)(10) Response of the Company to the Ex Parte Motion for Expedited Hearing on
Claims for Declaratory Relief in Computer Associates International, Inc.
v. Computer Sciences Corporation.*
(c)(11) Supplemental and Amended Complaint in Computer Associates International,
Inc. v. Computer Sciences Corporation.*
(c)(12) Complaint for (1) Unfair, Unlawful, and Fraudulent Business Acts and
Practices in violation of California Business and Professions Code
Sections 17200 et seq.; (2) Economic Duress; (3) Intentional
Interference with Prospective Economic Advantage and Contractual
Relations; and (4) Conspiracy in Computer Sciences Corporation v.
Computer Associates International, Inc., case no. BC186394.*
(c)(13) Form of Stock Option Agreement.++
(c)(14) Form of Restricted Stock Agreement.++
(c)(15) Amended and Restated Rights Agreement dated as of December 21, 1988, as
amended and restated as of February 18, 1998 by and between the Company
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.+
- ------------------------
+ Filed herewith.
* Filed in paper form under cover of Form SE pursuant to a Rule 202(d)
Continuing Hardship Exemption.
++ To be filed with an amendment to this Schedule 14D-9
13
<PAGE> 14
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete, and
correct.
COMPUTER SCIENCES CORPORATION
By: /s/ VAN B. HONEYCUTT
------------------------------------
Van B. Honeycutt
Chairman, President and
Chief Executive Officer
Dated: February 25, 1998
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<PAGE> 15
EXHIBIT INDEX
(a)(1) Press release issued by the Company dated February 19, 1998.
(a)(2) Letter from Van B. Honeycutt to Charles Wang, dated February 19, 1998.
(c)(1) Excerpts from the Company's Proxy Statement dated July 2, 1997.
(c)(2) The Company's Supplemental Executive Retirement Plan, as amended and
restated effective February 2, 1998.
(c)(3) The Company's Severance Plan for Senior Management and Key Employees,
dated as of February 2, 1998.
(c)(4) Rights Agreement dated as of February 18, 1998 by and between Computer
Sciences Corporation and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent.
(c)(5) The Company's Deferred Compensation Plan, as amended and restated
effective as of February 2, 1998.
(c)(6) The Company's Bylaws, as amended and restated February 18, 1998.
(c)(7) Complaint for Injunctive and Declaratory Relief in Computer Associates
International, Inc. v. Computer Sciences Corporation, case no.
CV-S-98-00278-LDG.
(c)(8) Ex Parte Motion for Expedited Hearing on Claims for Declaratory Relief
in Computer Associates International, Inc. v. Computer Sciences
Corporation.
(c)(9) Brief in Support of Motion for Expedited Hearing on Claims for
Declaratory Relief and on the Merits of the Relief Requested in Computer
Associates International, Inc. v. Computer Sciences Corporation.
(c)(10) Response of the Company to the Ex Parte Motion for Expedited Hearing on
Claims for Declaratory Relief in Computer Associates International, Inc.
v. Computer Sciences Corporation.
(c)(11) Supplemental and Amended Complaint in Computer Associates International,
Inc. v. Computer Sciences Corporation.
(c)(12) Complaint for (1) Unfair, Unlawful, and Fraudulent Business Acts and
Practices in violation of California Business and Professions Code
Sections 17200 et seq.; (2) Economic Duress; (3) Intentional
Interference with Prospective Economic Advantage and Contractual
Relations; and (4) Conspiracy in Computer Sciences Corporation v.
Computer Associates International, Inc., case no. BC186394.
(c)(13) Form of Stock Option Agreement
(c)(14) Form of Restricted Stock Agreement
(c)(15) Amended and Restated Rights Agreement dated as of December 21, 1988, as
amended and restated as of February 18, 1998 by and between the Company
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
15
<PAGE> 1
EXHIBIT (a)(1)
COMPUTER SCIENCES CORPORATION BOARD REJECTS COMPUTER ASSOCIATES'
UNSOLICITED ACQUISITION OFFER
EL SEGUNDO, Calif., Feb. 19 /PRNewswire/ -- Computer Sciences Corporation (NYSE:
CSC - news; the "Company") announced today that its Board of Directors voted
unanimously to reject an unsolicited acquisition offer from Computer Associates
International, Inc. (NYSE: CA - news) and that Computer Sciences will not enter
into negotiations with Computer Associates.
Computer Sciences said that its Board's action was in response to an unsolicited
offer contained in a letter from Computer Associates dated February 10, 1998,
and subsequent indications from Computer Associates that it would offer $114 per
share for the stock of Computer Sciences in a friendly acquisition. The Company
said that its Board is not formally responding to Computer Associates' tender
offer, filed February 17, 1998, but rather to all other materials that CSC's
Board has seen, read and deliberated on, and that the Company's formal response
to the tender offer will be made in a filing with the Securities and Exchange
Commission within the requisite ten business days.
In a letter from Computer Sciences' Chairman and CEO, Van Honeycutt, to Computer
Associates' Chairman and CEO Charles Wang, Computer Sciences said that the terms
of Computer Associates' proposal do not represent fair value for CSC
shareholders and that any effort to combine Computer Sciences and Computer
Associates would not make business sense. CSC also advised CA that the Company
has moved to strengthen its protections against CA's attempt to force an
acquisition by threatening damage to the value of CSC and that it would use
every legal means necessary to defeat that attempt.
In his letter to Wang, Honeycutt said: "We believe that CSC has far greater
near- and long-term prospects than are reflected in your bid. Based on our
assessment of CSC's opportunities for growth in revenues and earnings per share,
and the potential such growth has to effect significant appreciation in our
stock price, we do not believe your offer rewards our shareholders for the true
value of their investment."
Computer Sciences said that a combination with Computer Associates does not make
business sense because it would result in a lower credit rating for the combined
company, compromise CSC's "platform neutrality", and trigger the departure of
key CSC employees.
"CSC's strong financial condition, as reflected by our 'A' credit rating, is
critical to our ability to secure the large, long-term outsourcing contracts
that are a key to growth in IT services," said Honeycutt in the letter. "A
combined CSC and CA would be irresponsibly leveraged and thus have a much lower
credit rating and be at a distinct disadvantage in the competition for such
business."
In the letter, Honeycutt said that the loss of platform neutrality, or the
ability of CSC consultants to recommend a variety of software products to meet
customers' individual needs, "would be severely compromised if CSC were to be
acquired by CA, and, as a result, we would lose credibility in the marketplace."
CSC will be filing today with the Securities and Exchange Commission a periodic
report on Form 8-K disclosing specific measures approved by its Board of
Directors.
CSC provides clients with a wide range of professional services, including
management consulting, information systems consulting and integration, and
operations support. The company has more than 44,000 employees in nearly 600
offices worldwide. For the 12 months ended December 26, 1997, CSC had $6.3
billion in revenue. More information about CSC, including a copy of the letter
to Computer Associates referred to herein, is available at www.csc.com.
Computer Sciences Corporation cautions that any statements in this document as
to future business results are forward looking statements and by their nature
are necessarily subject to uncertainties concerning events beyond the company's
control, and no assurances can be given that such results will be achieved.
<PAGE> 2
February 19, 1998
Mr. Charles Wang
Chairman and Chief Executive Officer
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11788
Dear Charles:
Our Board of Directors has met and carefully considered the offer contained in
your letter of February 10, 1998 and your subsequent indications that you would
offer $114 per share for the stock of Computer Sciences Corporation in a
friendly transaction. We have not had the time to review the disclosures in your
tender offer and will furnish you our further responses to the tender offer at a
later time.
Our board voted unanimously to reject your proposal and not to enter into
negotiations with Computer Associates on the sale of Computer Sciences. We
believe that the terms of your proposal do not represent fair value for our
shareholders and that any effort to combine Computer Sciences and Computer
Associates does not make business sense.
On the advice of counsel, we have moved to strengthen our protections against
your ill-considered and unwelcome attempt to force an acquisition by threatening
damage to the value of our company. We will utilize every legal means necessary
to defeat your attempt and will hold you and your company responsible for any
damages we sustain.
Our rationale for rejecting a merger of our companies is clear and compelling.
Your Offer Does Not Represent Fair Value
We believe that CSC has far greater near-and long-term prospects than are
reflected in your bid. Based on our assessment of CSC's opportunities for growth
in revenues and earnings per share, and the potential such growth has to effect
significant appreciation in our stock price, we do not believe your offer
rewards our shareholders for the true value of their investment. In addition,
your offer fails to recognize that CSC shareholders own a unique asset that is
impossible to replicate in the information technology marketplace. CSC is in
robust financial condition with a compound annual growth rate of 20.4 percent in
revenue over the past five years, and a 26.3 percent increase in income before
special items for the same period. We have made larger gains in market share and
revenue than our primary competitor in fifteen of the last sixteen quarters. We
have won or implemented $6.7 billion in large outsourcing contracts over the
past twelve months and our pipeline of major new business prospects is extremely
promising.
CSC is on course to grow our business in all of our markets through strong
internal growth and an acquisition strategy designed to enhance our growth in
geographic markets, key vertical industries and specialized service segments.
Combining CSC and CA Does Not Make Sense
CSC's strong financial condition, as reflected by our 'A' credit rating, is
critical to our ability to secure the large, long-term outsourcing contracts
that are a key to growth in IT services. A combined CSC and CA would be
irresponsibly leveraged and thus have a much lower credit rating and be at a
distinct disadvantage in the competition for such business.
CSC's ability to provide independent solutions is a threshold issue for
customers who demand platform neutrality. This neutrality would be severely
compromised if CSC were to be acquired by CA and, as a result, we would lose
substantial credibility in the marketplace. You have already stated publicly
that you would redirect the efforts of many CSC employees to sales and service
of CA's software products, a prospect that both our customers and employees
would find unacceptable.
More than 25 percent of CSC's total anticipated revenues for fiscal 1999 are
derived from outsourcing contracts that contain change in control provisions
which would allow customers who are concerned about such issues to move to
another services firm. We have already been notified by a number of such clients
that they will either exercise such provisions or curtail or reduce the flow of
new business to CSC should a CA takeover occur. In addition, software critical
to CSC's data centers and other operations is licensed to CSC under contracts
which are terminable by the licensor if CA acquires CSC.
The most important asset of Computer Sciences is our people. They create
sustainable competitive advantage in customer satisfaction and revenue
generation, and are the best in the business. It is widely recognized that CSC
and CA have dramatically different cultures, and it is clear that many of the
very assets you are trying to buy -- our employees -- will decline to join your
company.
Our Board of Directors and our management are committed to maximizing the value
of our stockholders' investment, consistent with the highest standards of
responsibility to our customers and employees. Consistent with our fiduciary
duty to stockholders, we are always prepared to give serious consideration to
strategic options which fairly reflect the value of our corporation and which
make business sense. Clearly, your offer does neither.
Charles, we respectfully suggest that you withdraw your offer immediately and
move on.
Sincerely,
Van B. Honeycutt
cc: Computer Associates Board of Directors
<PAGE> 1
EXHIBIT (a)(2)
February 19, 1998
Mr. Charles Wang
Chairman and Chief Executive Officer
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, new York 11788
Dear Charles:
Our Board of Directors has met and carefully considered the offer contained in
your letter of February 10, 1998 and your subsequent indications that you would
offer $114 per share for the stock of Computer Sciences Corporation in a
friendly transaction. We have not had the time to review the disclosures in
your tender offer and will furnish you our further responses to the tender
offer at a later time.
Our board voted unanimously to reject your proposal and not to enter into
negotiations with Computer Associates on the sale of Computer Sciences. We
believe that the terms of your proposal do not represent fair value for our
shareholders and that any effort to combine Computer Sciences and Computer
Associates does not make business sense.
On the advice of counsel, we have moved to strengthen our protections against
your ill-considered and unwelcome attempt to force an acquisition by
threatening damage to the value of our company.
We will utilize every legal means necessary to defeat your attempt and will
hold you and your company responsible for any damages we sustain.
Our rationale for rejecting a merger of our companies is clear and compelling.
Your Offer Does Not Represent Fair Value
We believe that CSC has far greater near- and long-term prospects than are
reflected in your bid. Based on our assessment of CSC's opportunities for
growth in revenues and earnings per share, and the potential such growth has to
effect significant appreciation in our stock price, we do not believe your
offer rewards our shareholders for the true value of their investment. In
addition, your offer fails to recognize that CSC shareholders own a unique
asset that is impossible to replicate in the information technology
marketplace. CSC is in robust financial condition with a compound annual growth
rate of 20.4 percent in revenue over the past five years, and a 26.3 percent
increase in income before special items for the same period. We have made
larger gains in market share and revenue than our primary competitor in fifteen
of the last sixteen quarters. We have won or implemented $6.7 billion in large
outsourcing contracts over the past twelve months and our pipeline of major new
business prospects is extremely promising.
CSC is on course to grow our business in all of our markets through strong
internal growth and an acquisition strategy designed to enhance our growth in
geographic markets, key vertical industries and specialized service segments.
Combining CSC and CA Does Not Make Sense
CSC's strong financial condition, as reflected by our "A" credit rating, is
critical to our ability to secure the large, long-term outsourcing contracts
that are a key to growth in IT services. A combined CSC and CA would be
irresponsibly leveraged and thus have a much lower credit rating and be at a
distinct disadvantage in the competition for such business.
CSC's ability to provide independent solutions is a threshold issue for
customers who demand platform neutrality. This neutrality would be severely
compromised if CSC were to be acquired by CA and, as a result, we would lose
substantial credibility in the marketplace. You have already stated publicly
that you would redirect the efforts of many CSC employees to sales and service
of CA's software products, a prospect that both our customers and employees
would find unacceptable.
More than 25 percent of CSC's total anticipated revenues for fiscal 1999 are
derived from outsourcing contracts that contain change in control provisions
which would allow customers who are concerned about such issues to move to
another services firm. We have already been notified by a number of such
clients that they will either exercise such provisions or curtail or reduce the
flow of new business to CSC should a CA takeover occur. In addition, software
critical to CSC's data centers and other operations is licensed to CSC under
contracts which are terminable by the licensor if CA acquires CSC.
The most important asset of Computer Sciences is our people. They create
sustainable competitive advantage in customer satisfaction and revenue
generation, and are the best in the business. It is widely recognized that CSC
and CA have dramatically different cultures, and it is clear that many of the
very assets you are trying to buy -- our employees -- will decline to join your
company.
Our Board of Directors and our management are committed to maximizing the value
of our stockholders' investment, consistent with the highest standards of
responsibility to our customers and employees. Consistent with our fiduciary
duty to stockholders, we are always prepared to give serious consideration to
strategic options which fairly reflect the value of our corporation and which
make business sense. Clearly, your offer does neither.
Charles, we respectfully suggest that you withdraw your offer immediately and
move on.
Sincerely,
Van B. Honeycutt
cc: Computer Associates Board of Directors
<PAGE> 1
EXHIBIT (c)(1)
COMPENSATION OF DIRECTORS
Cash Compensation
Each director who is not an employee of the Company receives an annual
retainer of $34,000 per year, and a meeting fee of $1,000 for each day of
attendance, in person or telephonically, at a regularly scheduled Board meeting,
and for each day of attendance in person at a special Board meeting. Each such
director who is a member of the Audit Committee or Compensation Committee
receives an additional $5,000 per year.
Retirement Plan
The 1990 Nonemployee Director Retirement Plan (the "Retirement Plan")
provides specified benefits for directors who served as a director prior to
December 6, 1996, who retire from the Board of Directors with at least five
years of service, and who are not, and have never been, employees of the
Company. Pursuant to the Retirement Plan, each such director is entitled to
receive an annual benefit equal to the sum of (1) the annual retainer for
nonemployee directors in effect as of the date of the director's retirement,
plus (2) the daily Board meeting fee in effect as of such date multiplied by the
number of regularly scheduled Board meetings held during the year ending on such
date. These benefits commence on the later of (i) the director's 65th birthday
or (ii) the date upon which he or she retires from the Board. With respect to
directors who, at the time of retirement, have served on the Board for more than
five but less than ten years, these benefits will be payable for the number of
years of service. If such a director dies prior to the payment in full of these
benefits, the remaining benefits will be paid to the beneficiary designated by
the director for such purpose. With respect to directors who, at the time of
retirement, have served on the Board for at least ten years, these benefits will
be payable for ten years or until the director's death, if later. If such a
director dies prior to the payment of benefits for ten years, the remaining
benefits will be paid to the director's beneficiary.
Messrs. Allen, Bailey, Lawton, McFarlan and Mellor are currently eligible
to receive benefits under the Retirement Plan upon retirement from the Board of
Directors. Messrs. Allen and Lawton will reach mandatory retirement age in
October 1997 and
8
<PAGE> 2
June 1998, respectively, and the other three nonemployee directors will reach
mandatory retirement age thereafter. If the 1997 Nonemployee Director Stock
Incentive Plan is approved by the stockholders at the Annual Meeting, the Board
will amend the Retirement Plan so that no current or future directors other than
Messrs. Allen and Lawton will be eligible to receive benefits thereunder. In
lieu of such Retirement Plan benefits, all current and future nonemployee
directors other than Messrs. Allen and Lawton will receive stock-based
incentives of substantially equivalent value, as described below.
Stock-Based Incentives
1997 Nonemployee Director Stock Incentive Plan. In order further to align
the interests of nonemployee directors with the interests of stockholders
generally, and to enable the Company to award stock-based incentives to
nonemployee directors in lieu of the Retirement Plan benefits to which they
would otherwise be entitled, the Board of Directors adopted the 1997 Nonemployee
Director Stock Incentive Plan (the "1997 Plan") on June 16, 1997 and is
submitting it to the stockholders for their approval at the Annual Meeting. See
"ITEM 2 -- PROPOSED 1997 NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN" below.
As described below, the 1997 Plan authorizes the Board to award any type
of stock-based incentive to nonemployee directors. If the 1997 Plan is approved
by the stockholders at the Annual Meeting, then, immediately thereafter, the
Board will take the following actions:
(1) The Retirement Plan will be amended so that no current or future
directors other than Messrs. Allen and Lawton will be eligible to
receive benefits thereunder.
(2) Messrs. Bailey, McFarlan and Mellor will each receive an award of
Restricted Stock Units, as described below ("RSUs"), in lieu of his
currently vested Retirement Plan benefits. The number of RSUs to be
awarded to Messrs. Bailey, McFarlan and Mellor will be equal to the
number of shares of CSC Common Stock, rounded to the nearest whole
share, which have an aggregate market value of $73,000, $127,000 and
$149,000, respectively, on August 11, 1997, based on the closing
price of CSC Common Stock on that date reported on the Composite
Tape for NYSE listed companies.
(3) Messrs. Bailey, McDonnell, McFarlan, Mellor and Rutledge will each
receive an award of RSUs in lieu of the future Retirement Plan
benefits that would otherwise accrue during the next five years. The
number of RSUs to be awarded to each director will be equal to the
number of shares of CSC Common Stock, rounded to the nearest whole
share, which have an aggregate market value of $109,000, on August
11, 1997, based on the closing price of CSC Common Stock on that
date reported on the Composite Tape for NYSE listed companies
These awards of RSUs are designed to be substantially equivalent in value
to the individual Retirement Plan benefits for which they are being substituted.
Since Messrs. Bailey, McFarlan and Mellor are different ages and have served as
directors for different periods of time, their currently vested Retirement Plan
benefits are different. The
9
<PAGE> 3
Retirement Plan benefit that would otherwise accrue during the next five years
with respect to each of the five nonemployee directors is deemed to have the
same value.
The Board currently intends to make similar RSU awards in five years to
compensate for the Retirement Plan benefits that would otherwise accrue
thereafter. Although these future awards may be in the form of stock-based
incentives other than RSUs, and the timing of these future awards may be
different than as described herein, the value of such stock-based incentives
will be substantially equivalent to the value of the Retirement Plan benefits
for which they are substituted.
The Board of Directors reviews nonemployee director compensation on a
periodic basis. Although the Board has no such intention at this time, it may
utilize the 1997 Plan to award stock-based incentives to nonemployee directors
in addition to the stock-based incentives it will award to them in lieu of
Retirement Plan benefits.
Restricted Stock Units. The Restricted Stock Units to be awarded under the
1997 Plan, as described above, will be evidenced by written agreements between
the Company and the nonemployee directors to whom they are awarded (the "RSU
Agreements"). Pursuant to the terms and conditions set forth in the RSU
Agreements, the Company will deliver to the director or, after the director's
death, the beneficiary designated by the director for such purpose, upon the
automatic redemption of the RSUs:
(1) shares of CSC Common Stock; and
(2) cash in an amount equal to the regular, quarterly cash dividends
that would have accrued and been payable with respect to such shares
from the date of award of the RSUs through and including the date of
redemption of the RSUs, together with interest thereon at the rate
accrued on cash bonuses deferred under the Company's Deferred
Compensation Plan, as such rate may be reset from time to time
(collectively, with respect to each such share, a "Dividend
Equivalent").
Each RSU Agreement will set forth the director's irrevocable election with
respect to the timing of redemption of the RSUs subject thereto, which election
must be made within 30 days after the date of award. At the director's election,
the RSUs may be automatically redeemed (1) as an entirety, upon the date he or
she ceases to be a director (the "Retirement Date"), or (2) in substantially
equal amounts upon the first five, ten or fifteen anniversaries of the
Retirement Date. The total number of shares of CSC Common Stock and Dividend
Equivalents to be delivered by the Company pursuant to an RSU Agreement will be
determined as follows:
(i) if the RSUs are awarded in lieu of currently vested Retirement Plan
benefits, the total number of shares and Dividend Equivalents to be
delivered will be equal to the total number of RSUs subject to the
RSU Agreement; and
(ii) if the RSUs are awarded in lieu of future Retirement Plan benefits,
the total number of shares and Dividend Equivalents to be delivered
will be equal to
10
<PAGE> 4
the following percentage, multiplied by the total number of RSUs
subject to the RSU Agreement:
<TABLE>
<CAPTION>
Number of Full Years
of Service as Director Percentage of
after Date of RSU Award Total RSUs Awarded
----------------------- ------------------
<S> <C>
At least 1, but less than 2 20%
At least 2, but less than 3 40%
At least 3, but less than 4 60%
At least 4, but less than 5 80%
At least 5 100%
</TABLE>
All RSUs will be nontransferable other than by will or the laws of
intestate succession.
If the outstanding shares of CSC Common Stock are exchanged for or
converted into cash, property and/or a different number or kind of securities,
or cash, property and/or securities are distributed in respect of such
outstanding shares, in either case as a result of a reorganization, merger,
consolidation, recapitalization, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split or the like, or if substantially all of the property and assets of
the Company are sold, then the Board of Directors will make appropriate and
proportionate adjustments in the number and type of shares or other securities
or cash or other property that will thereafter be delivered upon redemption of
the RSUs.
11
<PAGE> 5
ITEM 2.
PROPOSED 1997 NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
In order to continue to attract and retain qualified, independent
nonemployee directors, and further align the interests of nonemployee directors
with the interests of stockholders generally, the Company believes it is
necessary to provide for the award of stock-based incentives to such directors.
In connection therewith, the Board of Directors adopted the 1997 Nonemployee
Director Stock Incentive Plan on June 16, 1997 and is submitting it to the
stockholders for their approval at the Annual Meeting.
The following description of the 1997 Plan is qualified in its entirety by
reference to the full text of the Plan, a copy of which is attached as Appendix
A to this Proxy Statement.
GENERAL
Each director of the Company who is not an employee of the Company or any
of its subsidiaries will be eligible for the grant of awards under the 1997
Plan. The maximum number of shares of CSC Common Stock that may be issued
pursuant to awards granted under the 1997 Plan is 50,000, subject to certain
adjustments to prevent dilution. The 1997 Plan will be administered by the Board
of Directors, which, subject to the provisions of the 1997 Plan, will have full
and final authority to grant awards thereunder and determine the terms and
conditions of such awards, including the number of shares to be issued pursuant
thereto.
AWARDS
The 1997 Plan authorizes the Board to enter into any type of arrangement
with a nonemployee director that, by its terms, involves or might involve the
issuance of (1) shares of CSC Common Stock, (2) an option, warrant, convertible
security, stock appreciation right or similar right with an exercise or
conversion privilege at a price related to the CSC Common Stock, or (3) any
other security or benefit with a value derived from the value of the CSC Common
Stock.
Awards under the 1997 Plan are not restricted to any specified form or
structure and may include arrangements such as sales, bonuses and other
transfers of stock, restricted stock, stock options, reload stock options, stock
purchase warrants, other rights to acquire stock, restricted stock units, other
securities convertible into or redeemable for stock, stock appreciation rights,
limited stock appreciation rights, phantom stock, dividend equivalents,
performance units or performance shares. An award may consist of one such
arrangement or two or more such arrangements in tandem or in the alternative. An
award may provide for the issuance of CSC Common Stock for any lawful
consideration, including services rendered.
An award under the 1997 Plan may permit the recipient to pay all or part
of the purchase price of the shares or other property issuable pursuant to the
award, and/or to pay all or part of the recipient's tax withholding obligations
with respect to such issuance, by delivering previously owned shares of capital
stock of the Company or other property, or by reducing the amount of shares or
other property otherwise issuable pursuant to the award. If an option granted
under the 1997 Plan permitted the recipient to pay for the shares issuable
pursuant thereto with previously owned shares, the recipient would be able
12
<PAGE> 6
to "pyramid" his or her previously owned shares, i.e., to exercise the option in
successive transactions, starting with a relatively small number of shares and,
by a series of exercises using shares acquired from each transaction to pay the
purchase price of the shares acquired in the following transaction, to exercise
the option for a larger number of shares with no more investment than the
original share or shares delivered.
If the 1997 Plan is approved by the stockholders at the Annual Meeting,
then, immediately thereafter, the Board will award Restricted Stock Units to
nonemployee directors as described in "ITEM 1 -- ELECTION OF DIRECTORS;
Compensation of Directors," above.
PLAN DURATION
The 1997 Plan became effective upon its adoption by the Board of Directors
on June 16, 1997, but no shares of CSC Common Stock may be issued or sold under
the 1997 Plan until it has been approved by the Company's stockholders. No
awards may be granted under the 1997 Plan after June 16, 2007.
AMENDMENTS
The Board of Directors may amend or terminate the 1997 Plan at any time
and in any manner, subject to the following:
(1) the recipient of any award may not, without his or her consent,
be deprived thereof or of any of his or her rights thereunder or with
respect thereto as a result of such amendment or termination; and
(2) if any national securities exchange upon which any of the
Company's securities are listed requires that any such amendment be
approved by the Company's stockholders, then such amendment will not be
effective until it has been approved by the Company's stockholders.
EFFECT OF SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF 1934
The acquisition and disposition of CSC Common Stock by directors is
subject to Section 16(b) of the Securities Exchange Act of 1934. Pursuant to
Section 16(b), a purchase of CSC Common Stock by a director within six months
before or after a sale of CSC Common Stock by the director could result in
recovery by the Company of all or a portion of any amount by which the sale
proceeds exceed the purchase price. Directors are required to file reports of
changes in beneficial ownership under Section 16(a) of the Securities Exchange
Act of 1934 upon acquisitions and dispositions of shares. Rule 16b-3 provides an
exemption from Section 16(b) liability for certain transactions pursuant to
certain benefit plans. The 1997 Plan is designed to comply with Rule 16b-3.
FEDERAL INCOME TAX TREATMENT
The following is a brief description of the federal income tax treatment
that will generally apply to awards granted under the 1997 Plan, based on
federal income tax laws in effect on the date hereof. The exact federal income
tax treatment of awards will depend on the specific nature of the award. An
award may be taxable as an option, as
13
<PAGE> 7
restricted or unrestricted stock, as a Restricted Stock Unit, as a cash payment,
or otherwise.
14
<PAGE> 8
Stock Options
The grant to a nonemployee director of an option or other similar right to
acquire CSC Common Stock is generally not a taxable event for the director.
Upon exercise of the option, the director will generally recognize
ordinary income in an amount equal to the excess of the fair market value of the
shares on the date of exercise over the exercise price, and the Company will be
entitled to a deduction equal to such amount. If the director exercises the
option within six months of the date of grant, he or she will generally not
recognize ordinary income until the date of sale of the shares or, if earlier,
six months after the date of grant of the option. Special rules apply to a
director who exercises an option having an exercise price greater than the fair
market value of the underlying shares on the date of exercise.
A subsequent sale of the shares generally will give rise to capital gain
or loss equal to the difference between the sales price and the sum of the
exercise price paid with respect to such shares plus the ordinary income
recognized with respect to such shares.
Restricted Stock and Restricted Stock Units
Awards to nonemployee directors under the 1997 Plan may include sales,
bonuses or other grants of shares, or Restricted Stock Units or other
convertible or redeemable securities, which are subject to restrictions or
vesting schedules. The director will generally not be taxed until such shares or
other securities vest, or the restrictions thereon expire or are removed. At
such time, the director will recognize ordinary income, and the Company will be
entitled to a deduction, in an amount equal to the excess of the fair market
value of the shares or other vested benefit on that date over the purchase
price. For example, each of the nonemployee directors who receives one of the
awards of Restricted Stock Units described in "ITEM 1 -- ELECTION OF DIRECTORS;
Compensation of Directors" above will recognize ordinary income, and the Company
will be entitled to a deduction, on the date or dates upon which such RSUs are
automatically redeemed.
If a nonemployee director makes an election under Section 83(b) of the
Internal Revenue Code within 30 days after receiving restricted shares, he or
she will recognize ordinary income, and the Company will be entitled to a
deduction, on the date of receipt of the restricted shares, equal to the excess
of the fair market value of the shares on that date over the purchase price.
Miscellaneous Tax Issues
Awards may be granted under the 1997 Plan that do not fall clearly into
the categories described above. The federal income tax treatment of these awards
will depend upon their specific terms.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE PROPOSED 1997 NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN. A
majority of the votes cast at the Annual Meeting is necessary for the approval
of this proposal.
15
<PAGE> 9
16
<PAGE> 10
EXECUTIVE COMPENSATION
REPORT OF COMPENSATION COMMITTEE ON ANNUAL COMPENSATION OF EXECUTIVE OFFICERS
General
The Company's executive compensation program is designed to provide
competitive levels of cash compensation and long-term incentives based on the
Company's performance, and includes base salary, annual cash incentive awards
and stock option grants. In addition, the Company has adopted various employee
benefit plans, including retirement plans, health plans, insurance plans and
others, in which executive officers are eligible to participate.
Executive compensation levels and the mix of pay components (base salary
and short-term and long-term incentives) are determined by the Compensation
Committee. An executive's base salary and stock option awards are based
primarily on his or her position and long-term contribution to the Company. The
annual cash incentive award is based primarily on the performance of the
executive's business unit compared to prior year performance and established
annual goals. Performance factors include revenue, operating margin, net income
and cash flow, as well as specific individual achievements.
In determining these pay components, the Compensation Committee also
considers executive compensation data from comparable companies, which is
provided by Hewitt Associates, a recognized international compensation
consulting firm. The comparator group used in determining fiscal year 1997
compensation was comprised of 17 publicly-held and 2 privately-owned companies
in the information technology and services industries.
The Company's executive compensation program takes into account any
potential limitations on the deductibility of compensation in excess of
$1,000,000 per year imposed by Internal Revenue Code Section 162(m), but does
not require that all compensation qualify for exemption from such limitation.
The Company will deduct all compensation paid to executive officers for fiscal
year 1997.
The Compensation Committee believes that the Company's executive
compensation program allows the Company to attract and retain outstanding
executives in the information technology field and is well structured to align
management's and stockholders' interest in the enhancement of stockholder value
through stock ownership programs and incentive programs based on performance and
stock value.
Relationship of Company Performance to Executive Compensation
Fiscal year 1997 compensation was determined on an individual basis in
accordance with the above policies and programs. The Company's performance
substantially met its financial goals. Fiscal year 1997 revenue was $5.6
billion, representing growth of 18.5% over the prior fiscal year; operating
margin was 7.6%, compared to 7.2%; net income was $228 million, representing
growth of 33.0% (before the effect of special charges); and free cash flow was
$54,000,000, up 49%. These results were considered strong and compared quite
favorably to the results of the Company's comparator group.
17
<PAGE> 11
Fiscal Year 1997 Stock Option Grants
The Company granted stock options to various executive officers during
fiscal year 1997, including each of the five Named Executive Officers, as shown
in the Options Granted in Last Fiscal Year table on page [17].
Chief Executive Officer Compensation
Mr. Honeycutt's base salary for fiscal year 1997 reflected an increase of
$89,616, or 14.3%, over his base salary for fiscal year 1996. In determining Mr.
Honeycutt's base salary for fiscal year 1997, the Committee compared his base
salary to the base salaries of chief executive officers at the comparator
companies. The Committee also considered the Company's financial performance for
fiscal year 1996, Mr. Honeycutt's individual performance during that year and
his long-term contributions to the success of the Company. During fiscal year
1996 (before restatement to reflect an acquisition accounted for as a pooling of
interests), revenue growth of 25.8%, operating margin of 7.1%, net income growth
of 28.0% and free cash flow of approximately $27,000,000 were considered strong
results.
For fiscal year 1997, Mr. Honeycutt received an award of 25,000 stock
options, and an annual cash incentive award of $652,500, which he elected to
defer pursuant to the Company's Deferred Compensation Plan. These pay components
reflect the following: (1) the Company substantially met its fiscal 1997
financial goals, (2) record new business was announced during the year and (3)
the Company acquired and integrated The Continuum Company, Inc., the largest
acquisition in the Company's history.
As of June 10, 1997, Mr. Honeycutt had options to purchase an aggregate of
413,563 shares of CSC Common Stock and beneficially owned 221,848 shares of CSC
Common Stock, including 188,190 shares underlying options which will be
exercisable on or prior to August 20, 1997.
Conclusion
The Committee believes that this executive compensation program serves the
interests of stockholders and the Company effectively. The various pay vehicles
offered are appropriately balanced to motivate executives to contribute to the
Company's overall future successes, thereby enhancing the value of the Company
for the stockholders.
We will continue to address the effectiveness of the Company's total
compensation program to meet the needs of the Company and serve the interests of
its stockholders.
Howard P. Allen
Irving W. Bailey, II
James R. Mellor
18
<PAGE> 12
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation of the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company (collectively, the "Named Executive Officers") for
services rendered to the Company in all capacities during the fiscal years ended
March 28, 1997, March 29, 1996, and March 31, 1995.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ----------- ALL OTHER
SALARY(2) BONUS(3) OPTIONS(4) COMPENSATION (5)
NAME AND PRINCIPAL POSITION (1) YEAR ($) ($) (#) ($)
-------------------------------- ---- -------- ------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Van B. Honeycutt ........................... 1997 714,616 652,500 25,000 2,492
Chairman, President and ................ 1996 625,000 (6) 11,758(6) 1,548
Chief Executive Officer ................ 1995 490,385 (6) 113,605(6) 2,637
Thomas R. Madison, Jr ...................... 1997 409,404 288,400 15,000 2,194
Corporate Vice President and ........... 1996 379,231 269,500 10,000 2,492
President, Financial Services Group .... 1995 n/a n/a n/a n/a
Ronald W. Mackintosh ....................... 1997 376,193 272,541 15,000 31,866
Corporate Vice President and ........... 1996 335,607 236,633 10,000 31,473
President, European Group .............. 1995 311,266 124,506 23,967
Leon J. Level .............................. 1997 361,637 217,980 10,000 2,320
Corporate Vice President and ........... 1996 343,789 173,000 5,000 2,343
Chief Financial Officer ................ 1995 321,269 162,000 2,272
Milton E. Cooper ........................... 1997 326,827 231,000 15,000 2,383
Corporate Vice President and ........... 1996 295,173 207,900 10,000 2,327
President, Systems Group ............... 1995 276,750 195,000 2,249
</TABLE>
- ----------
(1) During fiscal year 1997, Mr. Honeycutt served as President and Chief
Executive Officer of the Company. Effective March 29, 1997, he assumed the
additional title of Chairman.
During fiscal year 1997, Mr. Madison served as Corporate Vice President
and President, Integrated Business Services. Since May 1, 1997, he has
served as Corporate Vice President and President, Financial Services
Group. Mr. Madison was appointed an executive officer of the Company
effective August 14, 1995. Although he served as an executive officer for
only a portion of fiscal year 1996, the amounts shown reflect his
compensation for the entire fiscal year.
(2) The amounts shown reflect all salary earned during the covered fiscal
year.
(3) Cash bonuses earned during any fiscal year are determined and paid in the
following fiscal year pursuant to the Company's Annual Incentive Plan.
Payment of such bonuses may be deferred pursuant to the Company's Deferred
Compensation Plan. The amounts shown reflect all cash bonuses earned
during the covered fiscal year, whether or not the payment thereof was
deferred.
(4) The amounts shown reflect the aggregate number of shares underlying stock
options granted during the covered fiscal year.
(5) The amounts shown for Messrs. Honeycutt, Madison, Level, and Cooper
reflect contributions by the Company to the Matched Asset Plan, a defined
contribution plan. The amount shown for Mr. Mackintosh reflects
contributions by the Company to a defined contribution plan in the United
Kingdom.
The amounts shown for Mr. Madison in fiscal years 1997 and 1996 do not
include aggregate incremental expenses of $216,565 incurred by the Company
during those years in connection with his relocation from Georgia to
Virginia. See "Certain Relationships and Related Transactions" on page
[19].
(6) The amounts shown in the Options column for Mr. Honeycutt in fiscal years
1996 and 1995 include 11,758 and 13,605 shares, respectively, underlying
stock options granted in lieu of the cash bonuses he earned during fiscal
years 1996 and 1995. These stock options, which were granted approximately
one month after fiscal year-end, have exercise prices of $17.72 and $12.25
per share, respectively (25% of the market value per share on the date of
grant), and will become exercisable to purchase one-third of the
underlying shares on each of the first three anniversaries of the option
grant date.
19
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning stock options granted to
the Named Executive Officers during the fiscal year ended March 28, 1997. No
stock appreciation rights were granted in such fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
-------------------------------------------------------- AT ASSUMED ANNUAL RATES OF
PERCENT OF STOCK PRICE APPRECIATION
TOTAL OPTIONS FOR OPTION TERM (1)
OPTIONS GRANTED TO EXERCISE OR --------------------------
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION 5% 10%
NAME (#) FISCAL YEAR ($)/SH. DATE ($) ($)
---- ------- ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Van B. Honeycutt ................ 11,758(2) 0.75% 17.72 5/9/06 1,149,085 1,953,139
25,000(3) 1.59% 70.88 5/9/06 1,114,323 2,823,912
Thomas R. Madison, Jr ........... 15,000(3) 0.95% 70.88 5/9/06 668,594 1,694,347
Ronald W. Mackintosh ............ 15,000(3) 0.95% 70.88 5/9/06 668,594 1,694,347
Leon J. Level ................... 10,000(3) 0.64% 70.88 5/9/06 445,729 1,129,565
Milton E. Cooper ................ 15,000(3) 0.95% 70.88 5/9/06 668,594 1,694,347
</TABLE>
- ----------
(1) Amounts shown reflect the potential realizable value of each grant of
stock options, assuming that the market price of the underlying shares
appreciates in value from the date of grant to the expiration date at an
annualized rate of 5% or 10%. These potential values are reported in order
to comply with Securities and Exchange Commission requirements, and the
Company cannot predict whether these values will be achieved.
(2) This nonqualified stock option was granted to Mr. Honeycutt in lieu of a
cash bonus for fiscal year 1996. (See Note (6) to the Summary Compensation
Table on page [16]) The option has an exercise price equal to 25% of the
market value of the underlying shares on the date of grant, will become
exercisable to purchase one-third of the underlying shares on each of the
first three anniversaries of the date of grant of the option.
(3) These nonqualified stock options granted, which have an exercise price
equal to the market value of the underlying shares on the date of grant,
will become exercisable to purchase 20% of the underlying shares on each
of the first five anniversaries of the date of grant of the option.
FISCAL YEAR END OPTION VALUES
The following table sets forth information concerning the value of unexercised
in-the-money stock options held by the Named Executive Officers on March 28,
1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED ON --------------------------- ---------------------------
EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- ---------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Van B. Honeycutt ................... none n/a 147,735 165,828 5,300,992 3,937,312
Thomas R. Madison, Jr............... none n/a 20,000 50,000 500,750 816,125
Ronald W. Mackintosh ............... 2,500 172,708 42,200 36,800 1,780,000 645,625
Leon J. Level ...................... 10,000 654,875 59,400 29,000 2,559,025 632,875
Milton E. Cooper ................... none n/a 89,000 29,000 3,835,000 343,750
</TABLE>
- ----------
(1) The amounts shown reflect the spread between the exercise price and the
market value of the underlying shares of CSC Common Stock on March 28,
1997 (based on the $62.375 closing price of the CSC Common Stock on that
date reported on the Composite Tape for NYSE listed companies).
20
<PAGE> 14
DEFINED BENEFIT PLANS
Messrs. Honeycutt, Madison, Level and Cooper participate in the Pension
Plan and the Supplemental Executive Retirement Plan (the "SERP"). Mr.
Mackintosh does not participate in either Plan.
Pension Plan
The Pension Plan is a contributory, career average defined benefit plan.
Benefits are determined based on the participant's average base salary during
all years of participation. There is no deduction for Social Security or other
offset amounts, and base salary does not include any bonus, overtime or shift
differential compensation. At age 65, Messrs. Honeycutt, Madison, Level and
Cooper will have participated in the Pension Plan for 24, 16, 16 and 19 years,
respectively, and, assuming no increase in base salary, will have received an
average base salary during all years of Pension Plan participation of $524,811,
$401,974, $327,415 and $238,839, respectively.
Pursuant to Internal Revenue Code requirements, the maximum base salary
covered by the Pension Plan is limited each year. For calendar year 1997, the
maximum base salary is $160,000. The excess benefit that would be payable under
the Pension Plan absent these limitations (the "Excess Benefit"), is paid under
the SERP to persons who participate in both Plans, as described in the following
section.
The table below shows the estimated annual benefit, on a single life
annuity basis, payable under the Pension Plan and the Excess Benefit restoration
provision of the SERP to a person who retires at age 65 and participates in both
Plans.
<TABLE>
<CAPTION>
Average Annual Years of Service
Base -----------------------------------------------------------
Compensation 5 10 15 20 25 30
-------------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000 $16,875 $ 33,750 $ 50,625 $ 67,500 $ 84,375 $101,250
250,000 28,125 56,250 84,375 112,500 140,625 168,750
350,000 39,375 78,750 118,125 157,500 196,875 236,250
450,000 50,625 101,250 151,875 202,500 253,125 303,750
550,000 61,875 123,750 185,625 247,500 309,375 371,250
</TABLE>
Supplemental Executive Retirement Plan
The SERP provides retirement benefits to certain designated officers and
key executives of the Company who satisfy its minimum service requirements. It
provides two types of benefits: (1) as described above, an Excess Benefit
restoration, which restores the shortfall of Pension Plan benefits resulting
from Internal Revenue Code limits on the base salary used to compute those
benefits ($160,000 in calendar year 1997), is provided for SERP participants who
also participate in the Pension Plan, and (2) an Additional Benefit is provided
for all SERP participants.
The Additional Benefit is equal to 50% of the average of the participant's
highest three (of the last five) annual base salaries, with a deduction of 100%
of the amount of
21
<PAGE> 15
primary Social Security benefits payable at the time of determination. Upon the
death of the participant, a spousal benefit of 50% of the participant's benefit
is generally payable for the spouse's lifetime.
In the event of a change-in-control of the Company, a SERP participant
would become entitled to accelerated benefit entitlement under the SERP if his
or her employment with the Company were involuntarily terminated within 36
months thereafter, or voluntarily terminated more than 12 but within 36 months
thereafter.
For the fiscal year ended March 28, 1997, the base salary covered by the
SERP for Messrs. Honeycutt, Madison, Level and Cooper was $714,616, $409,404,
$361,637 and $326,827, respectively. Assuming no increase in base salary, the
estimated annual Additional Benefit, on a single life annuity basis, payable to
Messrs. Honeycutt, Madison, Level and Cooper upon retirement at age 65 is
$340,988, $188,286, $164,451 and $146,950, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to its executive relocation program, the Company purchased Thomas R.
Madison's home for $375,000 in fiscal year 1996, and Edward P. Boykin's home for
$595,000 in fiscal year 1997. In each case, the purchase price was equal to the
average of two independent appraisals. Both residences were sold at a loss
during fiscal year 1997.
DST Systems, Inc. provides data processing and consulting services and licenses
certain software products to the Company. During fiscal year 1997, the Company
incurred aggregate expenses of $22,788,000 related thereto. DST Systems, Inc.
beneficially owns 5.6% of the outstanding CSC Common Stock, and Thomas A
McDonnell, President, Chief Executive Officer and Director of DST Systems, Inc.,
is a Director of the Company.
22
<PAGE> 16
APPENDIX A
COMPUTER SCIENCES CORPORATION
1997 NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
SECTION 1: PURPOSE OF PLAN
The purpose of this 1997 Nonemployee Director Stock Incentive Plan
("Plan") of Computer Sciences Corporation, a Nevada corporation (the "Company"),
is to enable the Company and its subsidiaries to attract, retain and motivate
their nonemployee directors by providing for or increasing the proprietary
interests of such directors in the Company.
SECTION 2: PERSONS ELIGIBLE UNDER PLAN
Any director of the Company who is not and has never been an
employee of the Company or any of its subsidiaries (a "Director") shall be
eligible to be considered for the grant of Awards (as hereinafter defined)
hereunder.
SECTION 3: AWARDS
(a) The Board of Directors of the Company (the "Board"), on behalf
of the Company, is authorized under this Plan to enter into any type of
arrangement with a Director that is not inconsistent with the provisions of this
Plan and that by its terms, involves or might involve the issuance of (i) shares
of common stock, par value $1.00 per share, of the Company ("Common Shares"), or
(ii) a Derivative Security (as such term is defined in Rule 16a-1 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
such Rule may be amended from time to time) with an exercise or conversion
privilege at a price related to the Common Shares or with a value derived from
the value of the Common Shares. The entering into of any such arrangement is
referred to herein as the "grant" of an "Award."
(b) Awards are not restricted to any specified form or structure and
may include, but are not limited to, sales, bonuses and other transfers of
stock, restricted stock, stock options, reload stock options, stock purchase
warrants, other rights to acquire stock, restricted stock units, other
securities convertible into or redeemable for stock, stock appreciation rights,
limited stock appreciation rights, phantom stock or dividend equivalents, and an
Award may consist of one such security or benefit, or two or more of them in
tandem or in the alternative.
(c) Common Shares may be issued pursuant to an Award for any lawful
consideration as determined by the Board, including, without limitation,
services rendered by the recipient of such Award.
(d) Subject to the provisions of this Plan, the Board, in its sole
and absolute discretion, shall determine all of the terms and conditions of each
Award granted hereunder, which terms and conditions may include, among other
things, a provision permitting the recipient of such Award to pay the purchase
price of the Common Shares or other property issuable pursuant to such Award, in
whole or in part, by delivering previously owned shares of capital stock of the
Company (including "pyramiding") or other
A-1
<PAGE> 17
property, and/or by reducing the amount of Common Shares or other property
otherwise issuable pursuant to such Award.
SECTION 4: STOCK SUBJECT TO PLAN
(a) At any time, the aggregate number of Common Shares issued and
issuable pursuant to all Awards granted under this Plan shall not exceed 50,000,
subject to adjustment as provided in Section 7 hereof.
(b) For purposes of Section 4(a) hereof, the aggregate number of
Common Shares issued and issuable pursuant to Awards granted under this Plan
shall at any time be deemed to be equal to the sum of the following:
(i) the number of Common Shares which were issued prior to
such time pursuant to Awards granted under this Plan, other than Common
Shares which were subsequently reacquired by the Company pursuant to the
terms and conditions of such Awards and with respect to which the holder
thereof received no benefits of ownership such as dividends; plus
(ii) the number of Common Shares which were otherwise issuable
prior to such time pursuant to Awards granted under this Plan, but which
were withheld by the Company as payment of the purchase price of the
Common Shares issued pursuant to such Awards; plus
(iii) the maximum number of Common Shares which are or may be
issuable at or after such time pursuant to Awards granted under this Plan.
SECTION 5: DURATION OF PLAN
No Awards may be granted under this Plan after June 16, 2007.
SECTION 6: ADMINISTRATION OF PLAN
This Plan shall be administered by the Board, which shall be
authorized and empowered to do all things necessary or desirable in connection
with the administration of this Plan, including, without limitation, the
following:
(a) adopt, amend and rescind rules and regulations relating to
this Plan;
(b) determine which persons are Directors, and to which of such
Directors, if any, Awards shall be granted hereunder;
(c) grant Awards to Directors and determine the terms and conditions
thereof, including the number of Common Shares issuable pursuant thereto;
(d) determine whether, and the extent to which adjustments are
required pursuant to Section 7 hereof; and
(e) interpret and construe this Plan and the terms and conditions of
all Awards granted hereunder.
A-2
<PAGE> 18
SECTION 7: ADJUSTMENTS
If the outstanding securities of the class then subject to this Plan
are increased, decreased or exchanged for or converted into cash, property
and/or a different number or kind of securities, or if cash, property and/or
securities are distributed in respect of such outstanding securities, in either
case as a result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly cash
dividend) or other distribution, stock split, reverse stock split or the like,
or if substantially all of the property and assets of the Company are sold,
then, unless the terms of such transaction shall provide otherwise, the Board
shall make appropriate and proportionate adjustments in:
(a) the number and type of shares or other securities or cash or
other property that may be acquired pursuant to Awards theretofore granted
under this Plan;
(b) the maximum number and type of shares or other securities that
may be issued pursuant to Awards thereafter granted under this Plan; and
(c) the maximum number of Common Shares with respect to which
options or rights may thereafter be granted under this Plan to any
Director during any fiscal year.
SECTION 8: AMENDMENT AND TERMINATION OF PLAN
The Board may amend or terminate this Plan at any time and in any
manner, subject to the following:
(a) no recipient of any Award shall, without his or her consent, be
deprived thereof or of any of his or her rights thereunder or with respect
thereto as a result of such amendment or termination; and
(b) if any rule, regulation or procedure of any national securities
exchange upon which any securities of the Company are listed, or any
listing agreement with any such securities exchange, requires that any
such amendment be approved by the stockholders of the Company, then such
amendment shall not be effective unless and until it is approved by the
affirmative vote of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting of the
stockholders of the Company.
SECTION 9: EFFECTIVE DATE OF PLAN
This Plan shall be effective as of June 16, 1997, the date upon
which it was approved by the Board; provided, however, that no Common Shares may
be issued under this Plan until it has been approved by the affirmative votes of
the holders of a majority of the securities of the Company present, and entitled
to vote at a meeting of the stockholders of the Company at which a quorum is
present.
A-3
<PAGE> 1
EXHIBIT (c)(2)
COMPUTER SCIENCES CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I
Purpose
The purpose of this Supplemental Executive Retirement Plan ("Supplemental
Plan") is to provide retirement benefits to designated officers and key
executives of Computer Sciences Corporation (the "Company") in addition to
retirement benefits that may be payable under the Computer Sciences Corporation
Employee Pension Plan, and in addition to any other retirement plan (other than
the social security system to the extent provided herein) under which benefits
may be payable with respect to such person.
It is intended that this Supplemental Plan be a plan "for a select group
of management or highly compensated employees" as set forth in Section 201(2) of
the Employee Retirement Income Security Act of 1974.
Subject to Article X hereof, benefits under this Supplemental Plan shall
be payable solely from the general assets of the Company and no Participant or
other person shall be entitled to look to any source for payment of such
benefits other than the general assets of the Company.
ARTICLE II
Effective Date/Restatement Date
The Supplemental Plan was effective as of September 1, 1985. It is hereby
amended and restated effective February 2, 1998.
ARTICLE III
Participants
No person shall be a Participant in this Supplemental Plan unless (a) such
individual is specifically designated as such in a written instrument executed
by the Chief Executive Officer of the Company (the "Chief Executive Officer"),
and (b) such individual has consented to be governed by the terms of this
Supplemental Plan by execution of a written instrument in form satisfactory to
the Company.
A person shall cease to be a Participant in this Supplemental Plan in the
event of (a) a Plan amendment having such effect, or (b) the occurrence of an
event described in this Supplemental Plan which terminates such participation,
or
<PAGE> 2
(c) prior to a Change in Control (as hereinafter defined), the Chief Executive
Officer notifies such person, in writing, of the discontinuance of such person's
participation pursuant to Article XVIII of this Supplemental Plan. In
determining whether any person shall commence or cease to be a Participant
herein, the Chief Executive Officer, acting in such capacity, shall have
complete and unfettered discretion.
ARTICLE IV
Retirement Benefits
The amount of retirement benefit payable to each Participant upon
Separation from Service (as defined in paragraph (d) below) shall be as
determined in this Article IV.
(a) A Participant who is entitled to receive a benefit under the Computer
Sciences Corporation Employee Pension Plan ("Pension Plan"), shall be entitled
to receive his Excess Benefit under this Supplemental Plan. The Excess Benefit
is the additional monthly amount which the Participant would otherwise be
entitled to receive under the Pension Plan as if the Participant had elected the
normal form of life annuity payment option under the Pension Plan except for the
limitations imposed by Sections 401(a)(17) and 415 of the Internal Revenue Code,
as amended. In addition to the benefit described in this paragraph (a), a
benefit as described in paragraph (b) following shall be payable to the
Participant.
(b) Each Participant, upon Separation from Service on or after attainment
of age sixty-two (62) (the "Retirement Date"), shall receive an amount as
determined under this paragraph (b) which is payable monthly in the form of a
life annuity. The amount payable shall be equal to one-twelfth (1/12) of fifty
percent (50%) of the Participant's Average Base Salary Rate (as defined in
paragraph (d) below) reduced by the amount determined under paragraph (c) below
and, as applicable, paragraph (e) below.
(c) The amount determined under this paragraph (c) shall generally be
equal to the primary social security benefit paid or payable to the Participant
at the time benefits commence under this Supplemental Plan, whether or not the
Participant is denied social security benefits because of other income or
voluntarily forgoes social security income. However, where a Participant
commences to receive benefits under this Supplemental Plan prior to attaining
the minimum age (the "Minimum Social Security Age") at which he will be entitled
to commence receiving social security benefits (currently age sixty-two (62)),
his benefits under this Plan shall be reduced by the amount of social security
benefits it is estimated he would be entitled to receive monthly. The estimated
social security benefit will be calculated based on the Participant's
compensation through his Separation from Service date as though he were the
Minimum Social Security Age on such date,
2
<PAGE> 3
and in accordance with social security rules in effect at the time of his
Separation from Service.
(d) The term "Base Salary Rate" means the annual salary rate of a
Participant exclusive of overtime, bonus, incentive or any other type of special
compensation. The term "Average Base Salary Rate" means the average of the
highest three (3) of the last five (5) Base Salary Rates of a Participant which
are the Base Salary Rates in effect on his Retirement Date and on the same day
and month for each of the four (4) years (or the period of Continuous Service if
fewer than four (4) years) immediately preceding the Retirement Date.
Unless otherwise determined in writing with respect to a Participant by
the Chief Executive Officer, the term "Continuous Service" means the period of
service without interruption of a person commencing as of the date of hire of
such person by the Company or an Affiliate and ending on the date of separation
from service for any reason from the Company and all Affiliates ("Separation
from Service"). The term "Affiliate" means a corporation or other entity of
which fifty-one percent (51%) or more of the capital stock or capital or profits
interest (in the case of a noncorporate entity) is directly or indirectly owned
by the Company. A medical leave of absence not exceeding twelve (12) months
authorized by a Company written policy or any other leave of absence authorized
by a Company written policy or approved in writing by the Chief Executive
Officer shall not be deemed an interruption in Continuous Service or a
Separation from Service.
In the event the Company acquires a corporation or other entity
("Acquisition"), and any employee of the Acquisition, by written determination
of the Chief Executive Officer of the Company, becomes a Participant in the
Supplemental Plan, such Participant's period of Continuous Service shall
commence no sooner than the date the Acquisition becomes an Affiliate of the
Company unless the Company's Chief Executive Officer otherwise determines and so
confirms in writing.
(e) If upon Separation from Service on or after attaining age sixty-two
(62), or upon the granting of a special early separation benefit pursuant to
paragraph (b) of Article V, a Participant has fewer than twelve (12) years of
Continuous Service, the benefit otherwise payable under this Supplemental Plan
shall be proportionately reduced, except for the benefit payable under paragraph
(a) of this Article IV which shall not be reduced. By way of example, if a
Participant otherwise entitled to benefits hereunder commencing at age sixty-two
(62) has completed only ten (10) years of Continuous Service upon attainment of
age sixty-two (62), such Participant's benefit shall be 10/12, or 83.33%, of the
benefit otherwise payable hereunder.
Unless expressly determined to the contrary in writing by the Chief
Executive Officer, no period of service completed by a person after attainment
3
<PAGE> 4
of age sixty-five (65) and no adjustment to any person's Base Salary Rate which
occurs after attainment of age sixty-five (65) shall be taken into account in
computing benefits hereunder.
ARTICLE V
Eligibility for Benefits
(a) Participants shall become eligible to commence receiving retirement
benefits under this Supplemental Plan after Separation from Service on or after
attaining age sixty-two (62) and such benefits shall be calculated in accordance
with the provisions of Article IV. Except as otherwise provided in paragraph (a)
of Article IV and in Articles VII, IX and X, no Participant in this Supplemental
Plan shall have any vested interest in or right to receive a benefit hereunder
until attainment of the age of sixty-two (62). Unless otherwise determined in
writing by the Chief Executive Officer, any interruption in the Continuous
Service of a Participant herein prior to the attainment of age sixty-two (62)
shall terminate the participation in this Supplemental Plan of such Participant,
and no benefit shall be payable to or with respect to such Participant.
(b) In the sole and unfettered discretion of the Chief Executive Officer,
a Participant whose Separation from Service occurs prior to attainment of age
sixty-two (62) may qualify for a special early separation benefit, payable
monthly as calculated in accordance with the provisions of Article IV, except as
follows:
(i) For purposes of determining the Participant's Base Salary Rate, the
Average Base Salary Rate and the number of years of Continuous
Service completed by the Participant, the Participant's date of
Separation from Service shall apply instead of the date of the
Participant's attainment of age sixty-two (62); and
(ii) For each twelve (12) month period by which the date of commencement
of the Participant's benefit precedes the Participant's sixty-second
(62nd) birthday, the benefit otherwise payable shall be reduced by
five percent (5%), except for the benefit payable under paragraph
(a) of Article IV which shall not be reduced. Proportionate
fractional reduction shall be used for periods of fewer than twelve
(12) months.
ARTICLE VI
Form of Benefit Payments
(a) Except as provided in Article VII, benefits payable based on the
calculations in Article IV of this Supplemental Plan shall be paid monthly for
the
4
<PAGE> 5
life-time of the Participant (unless an optional form is selected under
paragraphs (b) or (c) of this Article VI). Upon the death of the Participant,
benefits shall continue to be paid to the Participant's spouse for the lifetime
of such spouse at the rate of fifty percent (50%) of Participant's benefit,
provided certain conditions are met. The conditions of such Spousal Benefit are
(1) that the spouse shall be married to the Participant as of the date of the
Participant's Separation from Service and (2) the spouse shall be no more than
five years younger than the Participant. In the event the spouse is more than
five years younger than the Participant, the Participant may elect to receive
benefit payments in the form of a joint and survivor option as described in
paragraph (c) following.
(b) Any Participant, who before September 1, 1993 has commenced to receive
benefits and has not made a written election to receive an annuity pursuant to
paragraph (a) preceding or paragraph (c) following, shall be entitled to one
hundred twenty (120) monthly benefit payments in the amount specified in
paragraph (b) of Article IV preceding and a life annuity of the Excess Benefit
as defined in paragraph (a) of Article IV preceding. If a Participant, who
before September 1, 1993, has commenced to receive benefits and has not made a
written election to receive an annuity pursuant to paragraph (a) preceding or
paragraph (c) following, dies after Separation from Service and before receiving
one hundred and twenty (120) monthly benefit payments, the remainder of the one
hundred and twenty (120) monthly benefit payments shall be made to the
Participant's designated beneficiary or, if no such beneficiary is then living
or no such beneficiary can be located, to the Participant's estate. In the event
a Participant has made a written election, prior to September 1, 1993, to
receive an annuity pursuant to paragraph (a) preceding or paragraph (c)
following, no benefit shall be payable under this paragraph (b), except that any
Excess Benefit under the Pension Plan, as provided in paragraph (a) of Article
IV, shall be payable at the rate of fifty percent (50%) thereof to the
Participant's spouse.
(c) In the event that the Participant's spouse is more than five years
younger than Participant, at any time prior to the later of September 1, 1993 or
the commencement of benefits under this Supplemental Plan, a Participant may, in
lieu of receiving benefits in the form described in paragraph (a) of this
Article VI, elect to receive benefit payments under this Supplemental Plan in
the form of a joint and survivor option providing monthly benefits for the
lifetime of the Participant with a stipulated percentage of such amount
continued after the Participant's death to the spouse to whom the Participant is
married as of the date of the Participant's Separation from Service, for the
lifetime of such spouse. The amount of monthly payments available under this
option shall be determined by reference to factors such as the Participant's
life expectancy, the life expectancy of the Participant's spouse, prior benefits
received under the Supplemental Plan, and the percentage of the Participant's
monthly benefit which is continued after the Participant's death to the
Participant's spouse, so that the value of the joint
5
<PAGE> 6
and survivor option is the actuarial equivalent of the benefits otherwise
payable under paragraph (a) (or paragraph (b) if the Participant has elected
coverage under paragraph (b) preceding) of this Article VI inclusive of the
Participant and the spousal fifty percent (50%) survivor benefits, which shall
be calculated assuming the Participant's spouse was exactly five years younger
than Participant. In determining the monthly amount payable under the joint and
survivor option with respect to any Participant, the Company may rely upon such
information as it, in its sole discretion, deems reliable, including but not
limited to, the opinion of an enrolled actuary or annuity purchase rates quoted
by an insurance company licensed to conduct an insurance business in the State
of California. The election of a joint and survivor option is irrevocable after
benefit payments have commenced, and the monthly amount payable during the
lifetime of the Participant shall in no event be adjusted by reason of the death
of the Participant's spouse prior to the death of the Participant, or by reason
of the dissolution of the marriage between the Participant and such spouse, or
for any other reason.
ARTICLE VII
Pre-retirement Death Benefits
In the event of the death of a Participant hereunder during a period of
Continuous Service and participation in this Supplemental Plan, the beneficiary
or the spouse of the Participant shall be entitled to benefits as provided below
in paragraphs (a) and (b):
(a) Participant's spouse shall be entitled to a fifty percent (50%) or the
actuarial equivalent spousal benefit (as determined pursuant to Article VI,
paragraphs (a) or (c), as applicable), attributable to Participant's Excess
Benefit under the Pension Plan provided the Participant is entitled to receive a
benefit under the Pension Plan.
(b) At the written election of the Participant, either a benefit under
paragraph (i) below or a benefit under paragraph (ii) below shall be paid by the
Company. Such election shall be signed by the Participant and notarized and, if
the Participant is married at the time of election, the election must also be
signed by the Participant's spouse and notarized. The latest election on file in
the Company's records shall be controlling.
(i) A lump sum death benefit shall be payable by the Company to the
Participant's designated beneficiary or, if no such beneficiary
is then living or no such beneficiary can be located, to the
Participant's estate. The amount of such death benefit shall be
two (2) times the Participant's Base Salary Rate in effect on the
date of the Participant's death. On the written request of a
beneficiary but subject to the approval in writing of the Chief
Executive Officer, the
6
<PAGE> 7
amount payable under this paragraph (b)(i) may be paid to a
beneficiary in monthly or other installments over a period not
exceeding one hundred and twenty (120) months.
(ii) Participant's spouse shall receive a spousal fifty percent (50%)
or the actuarial equivalent spousal benefit (as determined
pursuant to Article Vl, paragraphs (a) or (c), as applicable), as
provided for in paragraph (a) preceding and in Article IV and
Article Vl. In the event a Participant is not married at the time
of Participant's death and the Participant has elected the fifty
percent (50%) spousal benefit, a lump sum death benefit shall be
payable in accordance with paragraph (b)(i) preceding.
No benefits shall be payable under this Article Vll if the Participant's
death occurs as a result of an act of suicide within twenty-five (25) months
after commencement of participation in this Supplemental Plan.
ARTICLE VIII
No Disability Benefits
No disability benefit is payable under this Supplemental Plan.
ARTICLE IX
Right to Amend, Modify, Suspend or Terminate Plan
By action of the Company's Board of Directors, the Company may amend,
modify, suspend or terminate this Supplemental Plan without further liability to
any employee or former employee or any other person. Notwithstanding the
preceding sentence:
(a) this Supplemental Plan may not be amended, modified, suspended or
terminated as to a Participant whose Separation from Service has occurred and
who is entitled to receive or has commenced to receive benefits under this
Supplemental Plan, without the express written consent of such Participant or,
if deceased, such Participant's designated beneficiary or, if no beneficiary is
then living or if no beneficiary can be located, such Participant's legal
representative; and
(b) following a Change in Control (as defined in Article X), this
Supplemental Plan may not be amended, modified, suspended or terminated as to
any Participant who was a Participant prior to such Change in Control, without
the express written consent of such Participant.
ARTICLE X
7
<PAGE> 8
Change in Control
The term "Change in Control" means, after the effective date of this
Supplemental Plan, (a) the acquisition by any person, entity or group (as
defined in Section 13(d)3 of the Securities Exchange Act of 1934, as amended) as
beneficial owner, directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting power of the
then outstanding securities of the Company, (b) a change during any period of
two (2) consecutive years of a majority of the Board of Directors as constituted
as of the beginning of such period, unless the election of each director who was
not a director at the beginning of such period was approved by vote of at least
two-thirds of the directors then in office who were directors at the beginning
of such period, (c) a sale of substantially all of the property and assets of
the Company, (d) a merger, consolidation, reorganization or other business
combination to which the Company is a party and the consummation of which
results in the outstanding voting securities of the Company being exchanged for
or converted into cash, property and/or securities not issued by the Company,
(e) a merger, consolidation, reorganization or other business combination to
which the Company is a party and the consummation of which does not result in
the outstanding voting securities of the Company being exchanged for or
converted into cash, property and/or securities not issued by the Company,
provided that the outstanding voting securities of the Company immediately prior
to such business combination (or, if applicable, the securities of the Company
into which such voting securities are converted as a result of such business
combination) represent less than 50% of the voting power of the Company
immediately following such business combination, or (f) any other event
constituting a change in control of the Company for purposes of Schedule 14A of
Regulation 14A under the Securities Exchange Act of 1934.
In the event a Participant who was a Participant as of the date of a
Change in Control either (a) has an involuntary Separation from Service for any
reason (which, for purposes of this Article X, shall include a voluntary
Separation from Service for Good Reason, as hereinafter defined) within
thirty-six full calendar months following such Change in Control, or (b) has a
voluntary Separation from Service for any reason other than Good Reason
(including the death of the Participant) more than twelve (12) full calendar
months after, but within thirty-six (36) full calendar months following, such
Change in Control, such Participant shall be entitled to receive immediately
upon such Separation from Service benefits hereunder in accordance with Articles
IV, Vl and Vll, as applicable, without regard to approval by the Chief Executive
Officer or any other person(s). Such benefits shall be calculated as if, on the
date of such Separation from Service, the Participant (i) had completed a number
of years of Continuous Service equal to the greater of twelve (12) or the actual
number of years of his or her Continuous
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<PAGE> 9
Service, and (ii) had attained an age equal to the greater of sixty-two (62) or
his or her actual age.
For purposes of this Supplemental Plan, a Participant's voluntary
Separation from Service shall be deemed to be for "Good Reason" if it occurs
within six months of any of the following without the Participant's express
written consent:
(a) a substantial change in the nature, or diminution in the status, of
the Participant's duties or position from those in effect immediately prior to
the Change in Control;
(b) a reduction by the Company in the Participant's annual base salary as
in effect on the date of a Change in Control or as in effect thereafter if such
compensation has been increased and such increase was approved prior to the
Change in Control;
(c) a reduction by the Company in the overall value of benefits provided
to the Participant, as in effect on the date of a Change in Control or as in
effect thereafter if such benefits have been increased and such increase was
approved prior to the Change in Control (as used herein, "benefits" shall
include all profit sharing, retirement, pension, health, medical, dental,
disability, insurance, automobile, and similar benefits);
(d) a failure to continue in effect any stock option or other equity-based
or non-equity based incentive compensation plan in effect immediately prior to
the Change in Control, or a reduction in the Participant's participation in any
such plan, unless the Participant is afforded the opportunity to participate in
an alternative incentive compensation plan of reasonably equivalent value;
(e) a failure to provide the Participant the same number of paid vacation
days per year available to him prior to the Change in Control, or any material
reduction or the elimination of any material benefit or perquisite enjoyed by
the Participant immediately prior to the Change in Control;
(f) relocation of the Participant's principal place of employment to any
place more than 35 miles from the Participant's previous principal place of
employment;
(g) any material breach by the Company of any stock option or restricted
stock agreement; or
(h) conduct by the Company, against the Participant's volition, that would
cause the Participant to commit fraudulent acts or would expose the Participant
to criminal liability;
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<PAGE> 10
provided that for purposes of clauses (b) through (e) above, "Good Reason" shall
not exist (A) if the aggregate value of all salary, benefits, incentive
compensation arrangements, perquisites and other compensation is reasonably
equivalent to the aggregate value of salary, benefits, incentive compensation
arrangements, perquisites and other compensation as in effect immediately prior
to the Change in Control, or as in effect thereafter if the aggregate value of
such items has been increased and such increase was approved prior to the Change
in Control, or (B) if the reduction in aggregate value is due to reduced
performance by the Company, the business unit of the Company for which the
Participant is responsible, or the Participant, in each case applying standards
reasonably equivalent to those utilized by the Company prior to the Change in
Control.
Not later than the occurrence of a Change in Control, the Company shall
cause to be transferred to a grantor trust described in Section 671 of the
Internal Revenue Code, assets equal in value to all accrued obligations under
this Supplemental Plan as of one day following a Change in Control, in respect
of both active employees of the Company and retirees as of that date. Such trust
by its terms shall, among other things, be irrevocable. The value of liabilities
and assets transferred to the trust shall be determined by one or more
nationally recognized firms qualified to provide actuarial services as described
in Section 4 of the Computer Sciences Corporation Severance Plan for Senior
Management and Key Employees. The establishment and funding of such trust shall
not affect the obligation of the Company to provide supplemental pension
payments under the terms of this Supplemental Plan to the extent such benefits
are not paid from the trust.
ARTICLE XI
No Assignment
Benefits under this Supplemental Plan may not be assigned or alienated and
shall not be subject to the claims of any creditor.
ARTICLE XII
Administration
This Supplemental Plan shall be administered by the Chief Executive
Officer or by such other person or persons to whom the Chief Executive Officer
may delegate functions hereunder. With respect to all matters pertaining to this
Supplemental Plan, the determination of the Chief Executive Officer or his
designated delegate shall be conclusive and binding. The Chief Executive Officer
shall be eligible to participate in this Supplemental Plan in the same manner as
any other employee; provided, however, that the designation of the Chief
Executive Officer as a Participant and any other action provided herein with
respect to the
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Chief Executive Officer's participation shall be taken by the Compensation
Committee of the Board of Directors of the Company.
ARTICLE XIII
Release
In connection with any benefit or benefit payment under this Supplemental
Plan, or the designation of any beneficiary or any election or other action
taken or to be taken under the Supplemental Plan by any Participant or any other
person, the Company, acting through its Chief Executive Officer or his delegate,
may require such consents or releases as are reasonable under the circumstances,
and further may require any such designation, election or other action to be in
writing and in form reasonably satisfactory to the Chief Executive Officer or
his delegate.
ARTICLE XIV
No Waiver
The failure of the Company, the Chief Executive Officer or any other
person acting on behalf thereof to demand a Participant or other person claiming
rights with respect to a Participant to perform any act which such person is or
may be required to perform hereunder shall not constitute a waiver of such
requirement or a waiver of the right to require such act. The exercise of or
failure to exercise any discretion reserved to the Company, its Chief Executive
Officer or his delegate, to grant or deny any benefit to any Participant or
other person under this Supplemental Plan shall in no way require the Company,
its Chief Executive Officer or his delegate to similarly exercise or fail to
exercise such discretion with respect to any other Participant.
ARTICLE XV
No Contract
This Supplemental Plan is strictly a voluntary undertaking on the part of
the Company and, except with respect to the obligations of the Company upon and
following a Change in Control, which shall be absolute and unconditional, shall
not be deemed to constitute a contract or part of a contract between the Company
(or an Affiliate) and any employee or other person, nor shall it be deemed to
give any employee the right to be retained for any specified period of time in
the employ of the Company (or an Affiliate) or to interfere with the right of
the Company (or an Affiliate) to discharge or retire any employee at any time,
nor shall this Supplemental Plan interfere with the right of the Company (or an
Affiliate) to establish the terms and conditions of employment of any employee.
ARTICLE XVI
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<PAGE> 12
Indemnification
The Company shall defend, indemnify and hold harmless the Officers and
Directors of the Company acting in their capacity as such (and not as
Participants herein) from any and all claims, expenses and liabilities arising
out of their actions or failure to act hereunder, excluding fraud or willful
misconduct.
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ARTICLE XVII
Claim Review Procedure
Benefits will be provided to each Participant or beneficiary as specified
in this Supplemental Plan. If such person (a "Claimant") believes that he has
not been provided with benefits due under this Supplemental Plan, then he may
file a request for review under this procedure with the Company's Vice President
of Human Resources or Chief Financial Officer, as the Claimant may elect, within
ninety (90) days after the date he should have received such benefits. If the
Claimant files such a request with the Company's Vice President of Human
Resources or Chief Financial Officer and that claim is denied, in whole or in
part, then, within thirty (30) calendar days after making that request, the
Company's officer with whom the Claimant shall have filed a request for review
shall notify the Claimant of the specific reasons for the denial with specific
references to pertinent Supplemental Plan provisions on which the denial is
based. At that time the Claimant will be advised of his right to appeal that
determination and given a description of any additional material or information
necessary for the Claimant to perfect an appeal, an explanation of why such
material or information is necessary, and an explanation of the Supplemental
Plan's review and appeal procedure.
A Claimant may appeal from a denial by submitting a written statement to
the Plan Appeal Committee within sixty-five (65) calendar days after receiving
the notice of denial:
(a) requesting a review by the Plan Appeal Committee of the claim;
(b) setting forth all of the grounds upon which the request for review is
based and any facts in support thereof; and
(c) setting forth any issues or comments which the Claimant deems relevant
to the claim.
The Plan Appeal Committee shall be the Board of Directors of the Company
or its Compensation Committee or any other duly authorized committee thereof, or
any committee appointed by any such committee.
The Plan Appeal Committee shall act upon an appeal within ninety (90) days
or one hundred eighty (180) days in unusual circumstances, if the Plan Appeal
Committee in its reasonable discretion finds that such unusual circumstances
exist, after the later of its receipt of the appeal or its receipt of all
additional material reasonably requested by the Plan Appeal Committee. The Plan
Appeal Committee shall review the claim and all written materials submitted by
the Claimant, and may require him to submit, within (10) days of its written
notice, such additional facts,
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<PAGE> 14
documents, or other evidence as the Plan Appeal Committee in its sole discretion
deems necessary or advisable in making such a review. On the basis of its
review, the Plan Appeal Committee shall make an independent good faith
determination with respect to the Claimant's claim.
If the Plan Appeal Committee denies a claim in whole or in part, the
Committee shall give the Claimant written notice of its decision setting forth
the specific reasons for the denial and specific references to the pertinent
Supplemental Plan provisions on which its decision was based.
ARTICLE XVIII
Termination of Benefits and Participation
Prior, but only prior to a Change in Control, the retirement benefits
payable to any Participant under this Supplemental Plan, and the participation
of such Participant in this Supplemental Plan, may be terminated if in the
judgment of the Chief Executive Officer, upon the advice of counsel, such
Participant, directly or indirectly:
(a) breaches any obligation to the Company under any agreement relating to
assignment of inventions, disclosure of information or data, or similar matters;
or
(b) competes with the Company, or renders competitive services (as a
director, officer, employee, consultant or otherwise) to, or owns more than a 5%
interest in, any person or entity that competes with the Company; or
(c) solicits, diverts or takes away any person who is an employee of the
Company or advises or induces any employee to terminate his or her employment
with the Company; or
(d) solicits, diverts or takes away any person or entity that is a
customer of the Company, or advises or induces any customer or potential
customer not to do business with the Company; or
(e) discloses to any person or entity other than the Company, or makes any
use of, any information relating to the technology, know-how, products, business
or data of the Company or its subsidiaries, suppliers, licensors or customers,
including but not limited to the names, addresses and special requirements of
the customers of the Company.
14
<PAGE> 1
EXHIBIT (c)(3)
COMPUTER SCIENCES CORPORATION
SEVERANCE PLAN FOR SENIOR MANAGEMENT
AND KEY EMPLOYEES
AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 18, 1998
This Severance Plan (the "Plan") shall become effective with respect to
any particular Designated Employee (as defined below) as of the date a Senior
Management and Key Employee Severance Agreement, incorporating all or any
portion of the terms hereof, is executed between such Designated Employee and
Computer Sciences Corporation (the "Company").
1. PURPOSE
The principal purposes of the Plan are to (i) provide an incentive
to the Designated Employees to remain in the employ of the Company,
notwithstanding any uncertainty and job insecurity which may be created by
an actual or prospective Change of Control, (ii) encourage the Designated
Employee's full attention and dedication to the Company currently and in
the event of any actual or prospective Change of Control, and (iii)
provide an incentive for the Designated Employees to be objective
concerning any potential Change of Control and to fully support any Change
of Control transaction approved by the Board of Directors.
2. DEFINITIONS
Certain terms not otherwise defined in this Plan shall have the
meanings set forth in this Section 2.
(a) "CA Control Event" shall mean a Change of Control (as
hereinafter defined), as a consequence of which Computer Associates
International, Inc., or any of its Affiliates or Associates, acquires
Control (as such three capitalized terms are defined in Rule 405, as
presently in effect, promulgated under the Securities Act of 1933, as
amended) of the Company.
(b) Compensation. "Compensation" shall mean the sum of:
(i) the Designated Employee's annual base salary as in effect
immediately prior to the date the Notice of Termination provided for in
Section 3(c) of the Plan is given or in effect immediately prior to the
date of the Change of Control, whichever is greater, and
(ii) the average annual cash "short-term incentive
compensation bonus," as defined below, for the Designated Employee,
whether pursuant to a then existing plan of the Company or otherwise, (x)
over the three most recent fiscal years preceding the year in which the
<PAGE> 2
Date of Termination occurs for which a "short-term incentive compensation
bonus" was paid or deferred or for which the amount of "short-term
incentive compensation bonus," if any, was finally determined; or (y) for
a Designated Employee employed by the Company for less than the three
fiscal years to which reference is made in (i), over the most recent
complete fiscal year or years prior to the Date of Termination during
which such Designated Employee was employed and for which a "short-term
incentive compensation bonus" was paid or for which the amount of
"short-term incentive compensation bonus," if any, was finally determined;
or (z) for a Designated Employee employed by the Company for less than a
single complete fiscal year prior to the year in which the Date of
Termination occurs, the average annual cash "short-term incentive
compensation bonus" shall be based on the target annual bonus for the
fiscal year during which the Date of Termination occurs.
(c) Short-Term Incentive Compensation Bonus. For purposes of this
Plan, a "short-term incentive compensation bonus" shall mean a lump sum
cash amount or other form of payment including payment in kind, whether
contingent or fixed, determined on an annual basis under the Company's
Annual Management Incentive Plan dated April 2, 1983 or such successor
plan or plans as shall be in effect for the whole or partial fiscal year
or years applicable under Section 2(a) of this Plan.
(d) Change of Control. The term "Change of Control" shall have the
same meaning that the term "Change in Control" has in the SERP (as defined
in Section 4, below), as such definition may be amended or modified from
time to time; provided, however, that such amendment or modification shall
only be effective for purposes of this Plan if made prior to the Change of
Control to which such amended or modified definition is sought to be
applied.
(e) Designated Employees. "Designated Employees" shall refer to
those employees of the Company and its subsidiaries who are parties to
agreements with the Company, substantially in the form of Exhibit A (with
respect to employees in Group A, Group B or Group C) or Exhibit B (with
respect to employees in Group D) attached hereto (with such changes as may
be approved by the Board of Directors or the Compensation Committee or
other duly authorized committee thereof), incorporating the terms and
provisions of this Plan. Each such agreement shall indicate whether the
particular Designated Employee is in one or more of Group A, Group B,
Group C or Group D, or such other Group as may hereafter be duly defined
by amendment of this Plan.
(f) Good Reason. A Designated Employee's termination of employment
with the Company shall be deemed for "Good Reason" if it
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<PAGE> 3
occurs within six months of any of the following without the Designated
Employee's express written consent:
(i) A substantial change in the nature, or diminution in the
status, of the Designated Employee's duties or position from those
in effect immediately prior to the Change of Control;
(ii) A reduction by the Company in the Designated Employee's
annual base salary as in effect on the date of a Change of Control
or as in effect thereafter if such compensation has been increased
and such increase was approved prior to the Change of Control;
(iii) A reduction by the Company in the overall value of
benefits provided to the Designated Employee, as in effect on the
date of a Change of Control or as in effect thereafter if such
benefits have been increased and such increase was approved prior to
the Change of Control. As used herein, "benefits" shall include all
profit sharing, retirement, pension, health, medical, dental,
disability, insurance, automobile, and similar benefits;
(iv) A failure to continue in effect any stock option or other
equity-based or non-equity based incentive compensation plan in
effect immediately prior to the Change of Control, or a reduction in
the Designated Employee's participation in any such plan, unless the
Designated Employee is afforded the opportunity to participate in an
alternative incentive compensation plan of reasonably equivalent
value;
(v) A failure to provide the Designated Employee the same
number of paid vacation days per year available to him or her prior
to the Change of Control, or any material reduction or the
elimination of any material benefit or perquisite enjoyed by the
Designated Employee immediately prior to the Change of Control;
(vi) Relocation of the Designated Employee's principal place
of employment to any place more than 35 miles from the Designated
Employee's previous principal place of employment;
(vii) Any material breach by the Company of any provision of
the Plan or of any agreement entered into pursuant to the Plan or
any stock option or restricted stock agreement;
(viii) Conduct by the Company, against the Designated
Employee's volition, that would cause the Designated Employee to
commit fraudulent acts or would expose the Designated Employee to
criminal liability; or
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<PAGE> 4
(ix) Any failure by the Company to obtain the assumption of
the Plan or any agreement entered into pursuant to the Plan by any
successor or assign of the Company;
provided that for purposes of clauses (ii) through (v) above, "Good
Reason" shall not exist (A) if the aggregate value of all salary,
benefits, incentive compensation arrangements, perquisites and other
compensation is reasonably equivalent to the aggregate value of salary,
benefits, incentive compensation arrangements, perquisites and other
compensation as in effect immediately prior to the Change of Control, or
as in effect thereafter if the aggregate value of such items has been
increased and such increase was approved prior to the Change of Control,
or (B) if the reduction in aggregate value is due to reduced performance
by the Company, the business unit of the Company for which the Designated
Employee is responsible, or the Designated Employee, in each case applying
standards reasonably equivalent to those utilized by the Company prior to
the Change of Control.
(g) Cause. For purposes of this Plan and any agreements entered into
pursuant to the Plan only, Cause shall mean:
(i) fraud, misappropriation, embezzlement or other act of
material misconduct against the Company or any of its affiliates;
(ii) conviction of a felony involving a crime of moral
turpitude;
(iii) willful and knowing violation of any rules or
regulations of any governmental or regulatory body material to the
business of the Company; or
(iv) substantial and willful failure to render services in
accordance with the terms of this Agreement (other than as a result
of illness, accident or other physical or mental incapacity),
provided that (A) a demand for performance of services has been
delivered to the Designated Employee in writing by or on behalf of
the Board of Directors of the Company at least 60 days prior to
termination identifying the manner in which such Board of Directors
believes that the Designated Employee has failed to perform and (B)
the Designated Employee has thereafter failed to remedy such failure
to perform.
3. TERMINATION FOLLOWING CHANGE OF CONTROL
(a) Termination of Employment.
(i) In the event a Designated Employee in Group A, Group B or
Group C, following the date of a Change of Control, either (A) has a
voluntary employment termination for Good Reason within twenty-four
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<PAGE> 5
(24) full calendar months following such Change of Control, (B) has
a voluntary termination of employment with or without Good Reason
more than twelve (12) full calendar months after, but within
thirteen (13) full calendar months following, such Change of
Control, or (C) has an involuntary employment termination for any
reason other than for Cause within thirty-six full calendar months
following such Change of Control, such Designated Employee shall be
entitled to receive immediately upon such employment termination
such payments and benefits hereunder as such Designated Employee
shall be entitled to receive upon such employment termination in
accordance with Sections 2(e) and 5 of this Plan.
(ii) In the event a Designated Employee in Group D, following
the date of a CA Control Event, either (A) has a voluntary
employment termination for Good Reason within twenty-four (24) full
calendar months following such CA Control Event or (B) has an
involuntary employment termination for any reason other than for
Cause within thirty-six full calendar months following such CA
Control Event, such Designated Employee shall be entitled to receive
immediately upon such employment termination such payments and
benefits hereunder as such Designated Employee shall be entitled to
receive upon such employment termination in accordance with Sections
2(e) and 5 of this Plan.
(iii) Notwithstanding any other provision of this Plan, no
payments shall be made under or measured by this Plan in the event
that the Designated Employee's employment is terminated by his
Disability or by his death or for Cause.
(b) Disability. If, as a result of the Designated Employee's
incapacity due to physical or mental illness, accident or other incapacity
(as determined by the Board in good faith, after consideration of such
medical opinion and advice as may be available to the Board from medical
doctors selected by the Designated Employee or by the Board or both
separately or jointly), the Designated Employee shall have been absent
from his duties with the Company on a full-time basis for six consecutive
months and, within 30 days after written Notice of Termination thereafter
given by the Company, the Designated Employee shall not have returned to
the full-time performance of the Designated Employee's duties, the Company
may terminate the Designated Employee's employment for "Disability".
(c) Notice of Termination. Any purported termination of the
Designated Employee's employment by the Company or the Designated Employee
hereunder shall be communicated by a Notice of Termination to the other
party in accordance with the terms of the agreement entered into
pursuant to the Plan. For purposes of the Plan and any agreement entered
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<PAGE> 6
into pursuant hereto, a "Notice of Termination" shall mean a written
notice which shall indicate those specific termination provisions in the
Plan applicable to the termination and which sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for
application of the provisions so indicated.
(d) Date of Termination. "Date of Termination" shall mean (i) if the
Designated Employee is terminated by the Company for Disability, thirty
(30) days after Notice of Termination is given to the Designated Employee
(provided that the Designated Employee shall not have returned to the
performance of the Designated Employee's duties on a full-time basis
during such thirty (30) day period) or (ii) if the Designated Employee's
employment is terminated by the Company for any other reason or by the
Designated Employee, the date on which a Notice of Termination is given.
4. FUNDING OF SERP OBLIGATIONS UPON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company shall fund
that portion, if any, of the obligations of the Company to each Designated
Employee, under any supplemental executive retirement plan ("SERP") that
may then cover the Designated Employee, that is not then irrevocably
funded by establishing and irrevocably funding a trust for the benefit of
the Designated Employee. Such trust shall be a grantor trust described in
Internal Revenue Code Section 671. The trust shall provide for
distribution of amounts to Designated Employee in order to pay taxes, if
any, that become due prior to payment of supplemental pension benefit
amounts pursuant to the trust. The amount of such fund shall equal the
then present value of the supplemental pension obligation due as
determined by a nationally recognized firm qualified to provide actuarial
services which has not rendered services to the Company during the two
years preceding such determination. The actuary shall be selected by the
Company, subject to approval by the Designated Employee (which approval
shall not unreasonably be withheld), and paid by the Company. The
establishment and funding of such trust shall not affect the obligation of
the Company to provide supplemental pension payments under the terms of
the applicable SERP.
5. SEVERANCE COMPENSATION UPON TERMINATION OF EMPLOYMENT
If the employment with the Company of a Designated Employee in Group
A, Group B or Group C shall be terminated following a Change of Control as
set forth in Section 3 of the Plan, or the employment with the Company of
a Designated Employee in Group D shall be terminated following a CA
Control Event as set forth in Section 3 of the Plan, then the Company
shall pay and provide as follows to such Designated Employee:
(a) For a Designated Employee in Group A or Group B, upon voluntary
termination for Good Reason within twenty-four (24) full calendar
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<PAGE> 7
months following a Change of Control, or upon involuntary employment
termination for any reason other than for Cause within thirty-six (36)
full calendar months following such Change of Control, the Company shall:
(i) Pay to the Designated Employee as severance pay in a lump
sum, in cash, on or before the tenth business day following the Date
of Termination, an amount equal to the multiple specified on Exhibit
C and made applicable to such Designated Employee by this Plan and
such Designated Employee's agreement hereunder, multiplied by the
Designated Employee's Compensation; and
(ii) Provide the Designated Employee, for the number of years
calculated for such Designated Employee pursuant to Section 5(a)(i)
of this Plan (or such shorter period as the Designated Employee may
elect) with disability, health, life and accidental death and
dismemberment benefits substantially similar to those benefits which
the Designated Employee is receiving immediately prior to the Change
of Control or, if greater, immediately prior to the Notice of
Termination (followed by the period of COBRA continuation if COBRA
benefits are elected by the Designated Employee at such Designated
Employee's expense). Benefits otherwise receivable by the Designated
Employee pursuant to this Section 5(a)(ii) shall be reduced to the
extent comparable benefits are actually received by the Designated
Employee during such period as the result of his or her employment
with another person.
(b) For a Designated Employee in Group C:
A Designated Employee in Group C shall receive severance pay under
Section 5(a)(i) and the benefits under Section 5(a)(ii) as shown on
Exhibit C in the circumstance of voluntary termination with or without
Good Reason more than twelve (12) full calendar months after, but within
thirteen (13) full calendar months following, a Change of Control, as such
Designated Employee's exclusive entitlement to payment and benefits in
such circumstance under this Plan.
(c) For a Designated Employee in Group D, upon voluntary termination
for Good Reason within twenty-four (24) full calendar months following a
CA Control Event, or upon involuntary employment termination for any
reason other than for Cause within thirty-six (36) full calendar months
following such CA Control Event, the Company shall:
(i) Pay to the Designated Employee as severance pay in a lump
sum, in cash, on or before the tenth business day following the Date
of Termination, an amount equal to the multiple specified on Exhibit
C and made applicable to such Designated Employee by this
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<PAGE> 8
Plan and such Designated Employee's agreement hereunder, multiplied
by the Designated Employee's Compensation; and
(ii) Provide the Designated Employee, for the number of years
calculated for such Designated Employee pursuant to Section 5(c)(i)
of this Plan (or such shorter period as the Designated Employee may
elect) with disability, health, life and accidental death and
dismemberment benefits substantially similar to those benefits which
the Designated Employee is receiving immediately prior to the CA
Control Event or, if greater, immediately prior to the Notice of
Termination (followed by the period of COBRA continuation if COBRA
benefits are elected by the Designated Employee at such Designated
Employee's expense). Benefits otherwise receivable by the Designated
Employee pursuant to this Section 5(c)(ii) shall be reduced to the
extent comparable benefits are actually received by the Designated
Employee during such period as the result of his or her employment
with another person.
6. CERTAIN FURTHER PAYMENTS BY THE COMPANY
The Company shall be obligated to make certain further payments or
contributions to or for the benefit of the Designated Employees as set
forth in this Section 6. With respect to a Designated Employee in Group A,
Group B or Group C, such obligations of the Company shall arise upon a
Change of Control. With respect to a Designated Employee in Group D, such
obligations of the Company shall arise upon a CA Control Event.
(a) Tax Reimbursement Payment. In the event that any amount or
benefit that may be paid, distributed or otherwise provided to the
Designated Employee by the Company or any affiliated company, whether
pursuant to this Plan or otherwise (collectively, the "Covered Payments"),
is or may become subject to the tax imposed under Section 4999 of the Code
(the "Excise Tax") or any similar tax that may hereafter be imposed, the
Company shall either pay to the Designated Employee or irrevocably
contribute for the benefit of the Designated Employee to a trust
conforming with the requirements of Section 4 above (and may be part of
that trust) established by the Company prior to the Change of Control
giving rise to the Excise Tax, at the time specified in Section 6(e)
below, the Tax Reimbursement Payment (as defined below). The Tax
Reimbursement Payment is defined as an amount, which when reduced by any
Excise Tax on the Covered Payments and any Federal, state and local income
taxes, employment and excise taxes (including the Excise Tax) on the Tax
Reimbursement Payment (but without reduction for any Federal, state or
local income or employment taxes on such Covered Payments), shall be equal
to the product of any deductions disallowed for Federal, state or local
income tax purposes because of the inclusion of the Tax Reimbursement
Payment in Designated Employee's
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<PAGE> 9
adjusted gross income and the highest applicable marginal rate of Federal,
state and local income taxation, respectively, for the calendar year in
which the Tax Reimbursement Payment is to be made.
(b) Determining Excise Tax. For purposes of determining whether any
of the Covered Payments shall be subject to the Excise Tax and the amount
of such Excise Tax:
(i) such Covered Payments shall be treated as "parachute
payments" within the meaning of Section 280G of the Code, and all
"parachute payments" in excess of the "base amount" (as defined
under Section 280G(b)(3) of the Code) shall be treated as subject to
the Excise Tax, unless, and except to the extent that, in the
opinion of the "Accountants" (as defined below), such Covered
Payments (in whole or in part) either do not constitute "parachute
payments" or represent reasonable compensation for services actually
rendered (within the meaning of Section 280G(b)(4) of the Code) in
excess of the "base amount," or such "parachute payments" are
otherwise not subject to such Excise Tax, and
(ii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in
accordance with the principles of Section 280G of the Code.
For the purposes of this Section 6 the "Accountants" shall mean the
Company's independent certified public accountants serving immediately
prior to the Change of Control. In the event that such Accountants decline
to serve as the Accountants for purposes of this Section 6 or are serving
as accountant or auditor for the individual, entity or group effecting the
Change of Control, the Designated Employee shall appoint another
nationally recognized public accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accountants hereunder). All fees and expenses of the Accountants in
connection with matters relating to this Section 6 shall be paid by the
Company.
(c) Applicable Tax Rates and Deductions. For purposes of determining
the amount of the Tax Reimbursement Payment, the Designated Employee shall
be deemed:
(i) to pay Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the calendar year in
which the Tax Reimbursement Payment is to be made; and
(ii) to pay any applicable state and local income taxes at the
highest applicable marginal rate of taxation for the calendar year
in which the Tax Reimbursement Payment is to be made, net of the
9
<PAGE> 10
maximum reduction in Federal income taxes which could be obtained
from the deduction of such state or local taxes if paid in such year
(determined without regard to limitations on deductions based upon
the amount of the Designated Employee's adjusted gross income.)
(d) Subsequent Events.
(i) In the event that the Excise Tax is subsequently
determined by the Accountants to be less than the amount taken into
account hereunder in calculating the Tax Reimbursement Payment made,
the Designated Employee shall repay to the Company, at the time that
the amount of such reduction in the Excise Tax is finally
determined, the portion of such prior Tax Reimbursement Payment that
has been paid to the Designated Employee or to Federal, state or
local tax authorities on the Designated Employee's behalf and that
would not have been paid if such Excise Tax had been applied in
initially calculating such Tax Reimbursement Payment, plus interest
on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the
event any portion of the Tax Reimbursement Payment to be refunded to
the Company has been paid to any Federal, state or local tax
authority, repayment thereof shall not be required until actual
refund or credit of such portion has been made to the Designated
Employee, and interest payable to the Company shall not exceed
interest received or credited to the Designated Employee by such tax
authority for the period it held such portion.
(ii) In the event that the Excise Tax is later determined by
the Accountants to exceed the amount taken into account hereunder at
the time the Tax Reimbursement Payment is made (including, but not
limited to, by reason of any payment the existence or amount of
which cannot be determined at the time of the Tax Reimbursement
Payment), the Company shall make an additional Tax Reimbursement
Payment in respect of such excess which Tax Reimbursement Payment
shall include any interest or penalty (any such payment in respect
of interest or penalty to be subject to the gross-up principles set
forth in this Section 6) payable with respect to such excess, at the
time that the amount of such excess is finally determined. For
purposes of this Section 6(d)(ii), if a final determination as to
the Excise Tax applicable to a Covered Payment is made by the
Internal Revenue Service, or a court with jurisdiction, such
determination shall be deemed to be determined by the Accountants.
(iii) In the event it is later determined by the Accountants
that Designated Employee owes additional Federal, state or local
income or employment taxes with respect to any Tax Reimbursement
Payment,
10
<PAGE> 11
the Company shall promptly pay him the difference between (A) the
Tax Reimbursement Payment determined based on the Federal, state and
local income and employment taxes due in respect of the Tax
Reimbursement Payment as so determined by the Accountants and (B)
the Tax Reimbursement Payment that had been previously paid to him
or for his benefit. For purposes of this Section 6(d)(iii),
determination by the Accountants shall include a final determination
by the Internal Revenue Service, a state or local government or tax
agency or a court with jurisdiction.
(e) Date of Payment. The portion of the Tax Reimbursement Payment
attributable to a Covered Payment shall be paid to the Designated Employee
or remitted to the appropriate tax authority or irrevocably contributed
for the benefit of the Designated Employee to a trust as described in
Section 4 above within ten (10) business days following the payment,
distribution or other provision of the Covered Payment. If the amount of
such Tax Reimbursement Payment (or portion thereof) cannot be finally
determined on or before the date on which payment, distribution or
provision is due, the Company shall either pay to the Designated Employee
or contribute for the benefit of the Designated Employee to the trust
described in the preceding sentence, an amount estimated in good faith by
the Accountants to be the minimum amount of such Tax Reimbursement Payment
and shall pay the remainder of such Tax Reimbursement Payment (which Tax
Reimbursement Payment shall include interest at the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined, but in no event later than forty-five (45) calendar days after
payment, distribution or other provision of the related Covered Payment.
In the event that the amount of the estimated Tax Reimbursement Payment
exceeds the amount subsequently determined to have been due, such excess
shall be repaid or refunded pursuant to the provisions of Section 6(d)(i)
above.
(f) The establishment and funding of the trust described in Section
4 above shall not affect the obligations of the Company to provide the
benefits subject to this Section 6.
7. DISPUTE RESOLUTION; CLAIMS PROCEDURE; ARBITRATION
(a) Claims Procedure.
(i) Benefits will be provided to each Designated Employee as
specified in this Plan. If a Designated Employee believes that he has not
been provided with benefits due under the Plan, then the Designated
Employee may file a request for review under this procedure with the
Company's Vice President of Human Resources or Chief Financial Officer, as
the Designated Employee may elect, within ninety (90) days after the date
he
11
<PAGE> 12
should have received such benefits. Alternatively, such Designated
Employee may elect the arbitration procedure in Section 7(b) of this Plan.
If such Designated Employee elects to proceed under this Section 7(a) and
files such a request for a benefit under the Plan with the Company's Vice
President of Human Resources or Chief Financial Officer and that claim is
denied, in whole or in part, then within thirty (30) calendar days after
making that request, the Company's Officer with whom the Designated
Employee shall have filed a request for review under this Section 7(a)(i)
shall notify the Designated Employee of the specific reasons for the
denial with specific references to pertinent Plan provisions on which the
denial is based. At that time the Designated Employee will be advised of
his right to appeal that determination and given a description of any
additional material or information necessary for the Designated Employee
to perfect an appeal, an explanation of why such material or information
is necessary, and an explanation of the Plan's review and appeal
procedure.
(ii) A Designated Employee may appeal from a determination or denial
under Section 7(a)(1) by submitting to the Plan Appeal Committee within
sixty-five (65) calendar days after receiving the notice of determination
or denial a written statement:
(x) requesting a review by the Plan Appeal Committee of the
claim;
(y) setting forth all of the grounds upon which the request
for review is based and any facts in support thereof; and
(z) setting forth any issues or comments which the Designated
Employee deems relevant to the claim.
(iii) The Plan Appeal Committee shall be the Board of Directors of
the Company or its Compensation Committee or any other duly authorized
committee thereof, or any committee appointed by any such committee.
(iv) The Plan Appeal Committee shall act upon the appeal within
ninety (90) days or one hundred eighty (180) days in unusual
circumstances, if the Plan Appeal Committee in its reasonable discretion
finds that such unusual circumstances exist, after the later of its
receipt of the appeal or its receipt of all additional materials
reasonably requested by the Plan Appeal Committee. The Plan Appeal
Committee shall review the claim and all written materials submitted by
the Designated Employee, and may require him to submit, within ten (10)
days of its written notice, such additional facts, documents, or other
evidence as the Plan Appeal Committee in its sole discretion deems
necessary or advisable in making such a review. On the basis of its
review, the Plan Appeal Committee shall make an independent good faith
determination with respect to the Designated Employee's claim.
12
<PAGE> 13
(v) If the Plan Appeal Committee denies a claim in whole or in part,
the Committee shall give the Designated Employee written notice of its
decision setting forth the specific reasons for the denial and specific
references to the pertinent Plan provisions on which its decision was
based. The Designated Employee may then either pursue his claim in a
judicial forum or invoke the arbitration provisions of Section 7(b) of
this Plan.
(b) Arbitration
(i) In the event of any dispute between the parties concerning the
validity, interpretation, enforcement or breach of this Agreement or in
any way related to the Designated Employee's employment or any termination
of such employment (including any claims involving any officers, managers,
directors, employees, shareholders or agents of the Company) excepting
only any rights the parties may have to seek injunctive relief, the
dispute shall be resolved by final and binding arbitration administered by
JAMS/Endispute in Los Angeles, California in accordance with the then
existing JAMS/Endispute Arbitration Rules and Procedures for Employment
Disputes. Resolution by arbitration, either in lieu of or after exhausting
the procedures of Section 7(a) of this Plan, shall be at the election of
the Designated Employee with respect to any claim to which Section 7(a)
shall apply. In the event of such an arbitration proceeding, the parties
shall select a mutually acceptable neutral arbitrator from among the
JAMS/Endispute panel of arbitrators. In the event the parties cannot agree
on an arbitrator, the Administrator of JAMS/Endispute shall appoint an
arbitrator. Neither party nor the arbitrator shall disclose the existence,
content, or results of any arbitration hereunder without the prior written
consent of all parties, except as may be compelled by court order. Except
as provided herein, the Federal Arbitration Act shall govern the
interpretation and enforcement of such arbitration and all proceedings.
The arbitrator shall apply the substantive law (and the law of remedies,
if applicable) of the State of California, or Federal law, or both, as
applicable and the arbitrator is without jurisdiction to apply any
different substantive law. The arbitrator shall have the authority to
entertain a motion to dismiss and/or a motion for summary judgment by any
party and shall apply the standards governing such motions under the
Federal Rules of Civil Procedure. The arbitrator shall render an award and
a written, reasoned opinion in support thereof. Judgment upon the award
may be entered in any court having jurisdiction thereof. The parties
intend this arbitration provision to be valid, enforceable, irrevocable
and construed as broadly as possible. Pending the resolution of any
dispute between the parties, the Company shall continue prompt payment of
all amounts due the Designated Employee under this Agreement and prompt
provision of all benefits to which the Designated Employee is otherwise
entitled.
(ii) Costs of arbitration, including reasonable attorney fees and
costs and the reasonable fees and costs of any experts incurred by the
13
<PAGE> 14
Designated Employee, shall be borne and paid by the Company if the
Designated Employee prevails on any portion of his claims. Such fees and
costs shall be paid by the Company in advance of the final disposition of
such claims, as such fees are incurred, upon receipt of an undertaking by
the Designated Employee to repay such amounts if it is ultimately
determined that he did not prevail on any portion of his claims. Not later
than the occurrence of a Change of Control, the Company shall deposit not
less than $5 million in a grantor trust, as described in Internal Revenue
Code Section 671, which shall provide for distribution of amounts to
Designated Employees in fulfillment of the Company's obligations to pay
their fees and costs as provided in the preceding sentence. The funding of
such trust shall be maintained at not less than $5 million by further
deposits by the Company as such payments of fees and costs are made by the
trustee or trustees of the trust. The arbitrator shall make such interim
awards respecting the funding of the trust and payment of the fees and
costs as shall be necessary and appropriate to assure the prompt, regular
interim payment of fees and costs as provided in this Section 7(b)(ii).
Judgments upon any such interim awards may be entered in any court having
jurisdiction thereof. Such trust by its terms shall be irrevocable but
shall terminate upon the later of (x) the expiration of three years
following a Change of Control or (y) the disposition of all then pending
claims under the Plan by final arbitration award and final judgment, all
time for appeals having expired, in any judicial proceedings respecting
any such claims. Immediately after termination of the trust, any funds
remaining in the trust and accumulated interest thereon shall revert to
the Company.
(iii) Notwithstanding the foregoing provisions of this Section 7,
the Designated Employee and the Company agree that the Designated Employee
or the Company may seek and obtain otherwise available injunctive relief
in Court for any violation of obligations concerning confidential
information or trade secrets that cannot adequately be remedied at law or
in arbitration.
8. MITIGATION OF DAMAGES; EFFECT OF PLAN
(a) The Designated Employee shall not be required to mitigate
damages or the amount of any payment provided for under the Plan by
seeking other employment or otherwise, nor shall the amount of any payment
provided for under the Plan, including without limitation Section 5 of the
Plan, be reduced by any compensation earned by the Designated Employee as
a result of employment by another employer or by retirement benefits after
the Date of Termination, or otherwise except as expressly provided herein.
(b) Except as provided in Section 10, the provisions of the Plan,
and any payment provided for hereunder, shall not reduce any amounts
otherwise payable, or in any way diminish the Designated Employee's
14
<PAGE> 15
existing rights, or rights which would accrue solely as a result of the
passage of time, under any benefit plan, employment agreement or other
contract, plan or arrangement.
9. TERM; AMENDMENTS; NO EFFECT ON EMPLOYMENT PRIOR TO CHANGE OF CONTROL
(a) The Plan shall have an initial term of two years, which shall be
automatically extended by one year beginning on the first anniversary of
the date of adoption of the Plan and on each anniversary thereafter. The
Plan with respect to all Designated Employees or any particular Designated
Employee may be terminated or amended by the Board of Directors of the
Company or by its Compensation Committee or any other duly authorized
Committee thereof; provided that a termination or any amendment that
reduces the benefits to the Designated Employee provided hereunder or
otherwise adversely affects the rights of the Designated Employee, without
the Designated Employee's prior written consent: (i) may only be approved
after the completion of the initial two year term and prior to a Change of
Control, and (ii) may not be effected prior to the provision of 24 months'
advance notice thereof to the Designated Employee. Termination or
amendment of the Plan shall not affect any obligation of the Company under
the Plan which has accrued and is unpaid as of the effective date of the
termination or amendment. Notwithstanding the foregoing, the Company may
change the definition of "Change of Control" as provided in Section 2(d),
above, subject to the limitations therein stated.
(b) Nothing in the Plan or any agreement entered into pursuant to
the Plan shall confer upon the Designated Employee any right to continue
in the employ of the Company prior to (or, subject to the terms of the
Plan, following) a Change of Control of the Company or shall interfere
with or restrict in any way the rights of the Company, which are hereby
expressly reserved except as may otherwise be provided under any other
written agreement between the Designated Employee and the Company, to
discharge the Designated Employee at any time prior to (or, subject to the
terms of the Plan, following) the date of a Change of Control of the
Company for any reason whatsoever, with or without cause. The Designated
Employee and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Designated Employee
and the Company, the employment of the Designated Employee by the Company
is "at will," and if, prior to a Change Of Control, the Designated
Employee's employment with the Company terminates for any reason or for no
reason, then the Designated Employee shall have no further rights under
this Plan.
(c) The Company may withhold from any amounts payable under this
Plan such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
15
<PAGE> 16
(d) The Designated Employee's or the Company's failure to insist
upon strict compliance with any provision hereof or the failure to assert
any right the Designated Employee or the Company may have hereunder,
including, without limitation, the right of the Designated Employee to
terminate employment for Good Reason, as defined herein, shall not be
deemed to be a waiver of such provision or right or any other provision or
right under this Plan.
10. EFFECT OF OTHER AGREEMENTS
Notwithstanding anything to the contrary provided in the Plan, (i)
any amounts payable to a Designated Employee pursuant to Section 5 of the
Plan shall be reduced by any amounts actually paid to such Designated
Employee following a termination of employment either pursuant to
applicable law or under any contract between the Designated Employee and
the Company, in either case that provides for or requires the payment of
compensation or severance benefits following a termination of employment
and (ii) any benefits that may be provided to a Designated Employee for
three years or another period following a termination of employment
pursuant to Section 5 of the Plan shall be reduced to the extent that
substantially identical benefits are actually received by the Designated
Employee during such three year or other period under an existing
severance agreement or requirement. It is expressly understood, however,
that no amounts payable hereunder shall be reduced by amounts payable
under the Company's pension or deferred compensation plans or the SERP (as
defined in Section 4, above) or by amounts payable as accrued vacation or
because of the acceleration of the benefits under the Company's stock
option and restricted stock plans.
16
<PAGE> 17
EXHIBIT A
COMPUTER SCIENCES CORPORATION
SENIOR MANAGEMENT AND KEY EMPLOYEE
SEVERANCE AGREEMENT
This SENIOR MANAGEMENT AND KEY EMPLOYEE SEVERANCE AGREEMENT (this
"Agreement"), dated as of _______________ is made and entered into by and
between Computer Sciences Corporation, a Nevada corporation (the "Company"), and
_____________________ (the "Executive").
R E C I T A L S
This Agreement is being entered into in accordance with the Severance Plan
attached hereto as Annex 1 (the "Plan") in order to set forth the specific
severance compensation which the Company agrees that it will pay to the
Executive if the Executive's employment with the Company terminates under
certain circumstances described in the Plan.
A G R E E M E N T
NOW, THEREFORE, in consideration of the continued service of the Executive
as an employee of the Company, the mutual covenants and agreements contained in
this Agreement, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Provide Plan Benefits. The Plan (as it may hereafter be
amended or modified in accordance with the terms thereof) is hereby incorporated
into this Agreement in full and made a part hereof as though set forth in full
in this Agreement. The Executive is hereby designated a member of Group(s)
___________ under the Plan and shall be entitled to all of the rights and
benefits applicable to employees of the Company in such Group(s) under the Plan.
The Company agrees to be bound by the Plan and to provide to the Executive all
of the benefits provided to employees of the Company who are members of Group(s)
__________ under the Plan subject to the terms and conditions of the Plan. Terms
not otherwise defined in this Agreement shall have the meanings set forth in the
Plan.
2. Heirs and Successors.
(a) Successors of the Company. The Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession or assignment had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession
transaction shall be a
<PAGE> 18
breach of this Agreement and shall entitle the Executive to terminate his or her
employment with the Company within six months thereafter for Good Reason and to
receive the benefits provided under the Plan in the event of termination for
Good Reason following a Change of Control. As used in this Agreement, "Company"
shall mean the Company as defined above and any successor or assign to its
business and/or assets as aforesaid which executes and delivers the agreement
provided for in this Section 2 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
(b) Heirs of the Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees. If the Executive should die after the conditions to
payment of benefits set forth in Section 5 of the Plan have been met and any
amounts are still payable to him hereunder, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's beneficiary, successor, devisee, legatee or other designee or,
if there be no such designee, to the Executive's estate. Until a contrary
designation is made to the Company, the Executive hereby designates as his
beneficiary under this Agreement the person whose name appears below his
signature on page 3 of this Agreement.
3. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows: if to
the Company -- Computer Sciences Corporation, 2100 East Grand Avenue, El
Segundo, California 90245 Attention: Vice President, General Counsel and
Secretary; and if to the Designated Employee at the address specified at the end
of this Agreement. Notice may also be given at such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
4. Miscellaneous. No provisions of this Agreement or the Plan may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Designated Employee and the Company, except
as provided in Section 9(a) of the Plan. No waiver by any party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
5. Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
2
<PAGE> 19
6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
7. Gender. In this Agreement (unless the context requires otherwise), use
of' any masculine term shall include the feminine.
8. Rescission. The Company agrees that this Agreement and the right to
receive payments pursuant to the Plan and this Agreement may be rescinded at any
time by the Executive giving written notice to such effect to the Company in
accordance with Section 3 above.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPUTER SCIENCES
CORPORATION EXECUTIVE
By:
-------------------------- -----------------------------------------
(Signature)
-----------------------------------------
(Name)
-----------------------------------------
(Address for Notice)
-----------------------------------------
(Designated Beneficiary)
-----------------------------------------
(Address for Beneficiary)
3
<PAGE> 20
EXHIBIT B
COMPUTER SCIENCES CORPORATION
SENIOR MANAGEMENT AND KEY EMPLOYEE
SEVERANCE AGREEMENT
This SENIOR MANAGEMENT AND KEY EMPLOYEE SEVERANCE AGREEMENT (this
"Agreement"), dated as of _______________ is made and entered into by and
between Computer Sciences Corporation, a Nevada corporation (the "Company"), and
_____________________ (the "Executive").
R E C I T A L S
This Agreement is being entered into in accordance with the Severance Plan
attached hereto as Annex 1 (the "Plan") in order to set forth the specific
severance compensation which the Company agrees that it will pay to the
Executive if the Executive's employment with the Company terminates under
certain circumstances described in the Plan.
A G R E E M E N T
NOW, THEREFORE, in consideration of the continued service of the Executive
as an employee of the Company, the mutual covenants and agreements contained in
this Agreement, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Agreement to Provide Plan Benefits. The Plan (as it may hereafter be
amended or modified in accordance with the terms thereof) is hereby incorporated
into this Agreement in full and made a part hereof as though set forth in full
in this Agreement. The Executive is hereby designated a member of Group D under
the Plan and shall be entitled to all of the rights and benefits applicable to
employees of the Company in such Group under the Plan. The Company agrees to be
bound by the Plan and to provide to the Executive all of the benefits provided
to employees of the Company who are members of Group D under the Plan subject to
the terms and conditions of the Plan. Terms not otherwise defined in this
Agreement shall have the meanings set forth in the Plan.
2. Heirs and Successors.
(a) Successors of the Company. The Company will require any
successor or assign (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession or assignment had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession
transaction shall be a
<PAGE> 21
breach of this Agreement and shall entitle the Executive to terminate his or her
employment with the Company within six months thereafter for Good Reason and to
receive the benefits provided under the Plan in the event of termination for
Good Reason following a CA Control Event. As used in this Agreement, "Company"
shall mean the Company as defined above and any successor or assign to its
business and/or assets as aforesaid which executes and delivers the agreement
provided for in this Section 2 or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law.
(b) Heirs of the Executive. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees. If the Executive should die after the conditions to
payment of benefits set forth in Section 5 of the Plan have been met and any
amounts are still payable to him hereunder, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's beneficiary, successor, devisee, legatee or other designee or,
if there be no such designee, to the Executive's estate. Until a contrary
designation is made to the Company, the Executive hereby designates as his
beneficiary under this Agreement the person whose name appears below his
signature on page 3 of this Agreement.
3. Notice. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows: if to
the Company -- Computer Sciences Corporation, 2100 East Grand Avenue, El
Segundo, California 90245 Attention: Vice President, General Counsel and
Secretary; and if to the Designated Employee at the address specified at the end
of this Agreement. Notice may also be given at such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notices of change of address shall be effective only upon receipt.
4. Miscellaneous. No provisions of this Agreement or the Plan may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Designated Employee and the Company, except
as provided in Section 9(a) of the Plan. No waiver by any party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
5. Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
2
<PAGE> 22
6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
7. Gender. In this Agreement (unless the context requires otherwise), use
of' any masculine term shall include the feminine.
8. Rescission. The Company agrees that this Agreement and the right to
receive payments pursuant to the Plan and this Agreement may be rescinded at any
time by the Executive giving written notice to such effect to the Company in
accordance with Section 3 above.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPUTER SCIENCES
CORPORATION EXECUTIVE
By:
-------------------------- -----------------------------------------
(Signature)
-----------------------------------------
(Name)
-----------------------------------------
(Address for Notice)
-----------------------------------------
(Designated Beneficiary)
-----------------------------------------
(Address for Beneficiary)
3
<PAGE> 23
EXHIBIT C
<TABLE>
<CAPTION>
GROUP
-------------------
A B C D
- - - -
<S> <C> <C> <C> <C>
Multiple of compensation 3 2 3 2
under Sections 3 and 5
</TABLE>
<PAGE> 24
SPECIAL EXHIBIT TO
COMPUTER SCIENCES CORPORATION SEVERANCE PLAN FOR SENIOR
MANAGEMENT AND KEY EMPLOYEES
On February 2, 1998, the following employees were selected as Group A, Group B
and/or Group C Designated Employees under the Plan:
<TABLE>
<S> <C>
Groups A and C:
Van B. Honeycutt Chairman, President and Chief Executive Officer
Group B:
Edward P. Boykin Vice President
Milton E. Cooper Vice President and President, Systems Group
Gerard E. Dube President, Integrated Business Services
Hayward D. Fisk Vice President, General Counsel and Secretary
J. Douglas Gray Chief Executive Officer, CSC Index
Leon J. Level Vice President, Chief Financial Officer and
Treasurer
Ronald W. Mackintosh Vice President and President, European Group
Thomas R. Madison Jr. Vice President and President, Financial
Services Group
C. Bruce Plowman Vice President, Corporate and Marketing
Communications
Thomas C. Robinson President, Technology Management Group
James P. Saviano President, Consulting Group
Arthur H. Spiegel III President, Healthcare Group
Carl D. Thorne Vice President, Finance and Administration,
Technology Management Group
Paul T. Tucker Vice President, Corporate Development
W. Brinson Weeks Vice President, Office of the Chairman,
President and Chief Executive Officer
Thomas Williams Vice President and President, Chemical, Oil and
Gas Group
</TABLE>
On February 18, 1998, the Board of Directors authorized Van B. Honeycutt,
Chairman, President and Chief Executive Officer, to select up to 150 employees
as Class D Designated Employees under in the Plan. On February 25, 1998, 135
employees were selected as Class D Designated Employees under the Plan.
<PAGE> 1
EXHIBIT (c)(4)
RIGHTS AGREEMENT
dated as of February 18, 1998
by and between
COMPUTER SCIENCES CORPORATION
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
as Rights Agent
<PAGE> 2
TABLE OF CONTENTS
Page
----
Section 1. Certain Definitions 1
Section 2. Appointment of Rights Agent 7
Section 3. Issuance of Right Certificates 7
Section 4. Form of Right Certificates 9
Section 5. Countersignature and Registration 9
Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates 10
Section 7. Exercise of Rights 11
Section 8. Cancellation and Destruction of Right Certificates 13
Section 9. Reservation and Availability of Capital Stock 13
Section 10. Securities Record Date 14
Section 11. Adjustment of Exercise Price, Number of Shares Issuable
Upon Exercise of Rights or Number of Rights 14
Section 12. Certificate of Adjusted Exercise Price or Number of
Shares Issuable Upon Exercise of Rights 20
Section 13. Consolidation, Merger, or Sale or Transfer of Assets
or Earning Power 20
Section 14. Fractional Rights and Fractional Shares 23
Section 15. Rights of Action 24
Section 16. Agreement of Right Holders 24
Section 17. Right Holder and Right Certificate Holder Not Deemed
a Stockholder 25
Section 18. Concerning the Rights Agent 25
Section 19. Merger or Consolidation or Change of Name of Rights Agent 26
Section 20. Duties of Rights Agent 26
Section 21. Change of Rights Agent 28
Section 22. Issuance of New Right Certificates 29
<PAGE> 3
Page
----
Section 23. Redemption of Rights 29
Section 24. Exchange of Rights 30
Section 25. Notice of Certain Events 31
Section 26. Notices 32
Section 27. Supplements and Amendments 32
Section 28. Certain Covenants 33
Section 29. Successors 33
Section 30. Benefits of this Agreement 33
Section 31. Severability 33
Section 32. Governing Law 34
Section 33. Counterparts 34
Section 34. Descriptive Headings 34
Exhibit A - Form of Right Certificate A-1
ii
<PAGE> 4
RIGHTS AGREEMENT
This Rights Agreement ("Agreement") is made and entered into as of the 18th
day of February, 1998 by and between Computer Sciences Corporation, a Nevada
corporation (the "Company"), and ChaseMellon Shareholder Services, L.L.C. (the
"Rights Agent").
WHEREAS, the Board of Directors of the Company has authorized and declared
a dividend of one preferred stock purchase right (a "Right") for each Common
Share (as hereinafter defined) of the Company, which dividend is payable on
February 27, 1998 (the "Record Date") to the holders of record of Common Shares
as of the Close of Business (as hereinafter defined) on such date;
WHEREAS, the Board of Directors of the Company has further authorized and
directed the issuance of one (subject to adjustment of such number as provided
in this Agreement) Right for (A) each Common Share that shall be issued by the
Company at any time after the Record Date and prior to the earliest of the date
of the first Section 11(a)(ii) Event, the date of the first Section 13(a) Event,
the Redemption Date or the Expiration Date (as such terms are hereinafter
defined), and (B) each Common Share that shall be issued by the Company at any
time on or after the earlier of the date of the first Section 11(a)(ii) Event or
the date of the first Section 13(a) Event and prior to the earlier of the
Redemption Date or the Expiration Date pursuant to the exercise of conversion
rights, exchange rights, rights (other than Rights), warrants or options that
shall have been issued or granted prior to the earlier of the date of the first
Section 11(a)(ii) Event or the date of the first Section 13(a) Event, unless the
Board of Directors shall provide otherwise at the time of the issuance or grant
of such conversion rights, exchange rights, rights (other than Rights), warrants
or options; and
WHEREAS, in connection with the matters referred to herein, the Company
desires to appoint the Rights Agent to act on behalf of the Company for the
benefit of the holders of Rights, and the Rights Agent is willing so to act;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
agreements set forth herein, and for the benefit of the holders of Rights, the
parties hereto hereby agree as follows:
Section 1. Certain Definitions.
-------------------
For purposes of this Agreement, the following terms have the meanings indicated:
(a) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act, as in
effect on the date hereof.
(b) A Person shall be deemed the "Beneficial Owner" of and shall be
deemed to "Beneficially Own":
1
<PAGE> 5
(i) any securities that such Person or any of such Person's
Affiliates or Associates beneficially owns, directly or indirectly, for
purposes of Section 13(d) of the Exchange Act and Rule 13d-3 promulgated
under the Exchange Act, in each case as in effect on the date hereof;
(ii) any securities that such Person or any of such Person's
Affiliates or Associates has the right to acquire (whether such right is
exercisable immediately, or only after the passage of time, compliance with
regulatory requirements, the fulfillment of a condition, or otherwise)
pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise, provided that a Person shall
not be deemed the Beneficial Owner of, or to Beneficially Own, securities
tendered pursuant to a tender offer or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange;
(iii) any securities that such Person or any of such Person's
Affiliates or Associates has the right to vote, alone or in concert with
others, pursuant to any agreement, arrangement or understanding, provided
that a Person shall not be deemed the Beneficial Owner of, or to
Beneficially Own, any security if the agreement, arrangement or
understanding to vote such security (A) arises solely from a revocable
proxy given to such Person or any of such Person's Affiliates or Associates
in response to a public proxy solicitation made pursuant to and in
accordance with the applicable rules and regulations of the Exchange Act,
and (B) is not also then reportable on Schedule 13D under the Exchange Act
(or any comparable or successor report);
(iv) any securities that are Beneficially Owned, directly or
indirectly, by any other Person with which such Person or any of such
Person's Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting (other than
voting pursuant to a revocable proxy as described in the proviso to Section
1(b)(iii) hereof) or disposing of any securities of the Company; and
(v) on any day on or after the Distribution Date, all Rights that
prior to such date were represented by certificates for Common Shares that
such Person Beneficially Owns on such day.
Notwithstanding anything to the contrary in this Section 1(b), a Person
engaged in business as an underwriter of securities shall not be deemed to be
the Beneficial Owner of, or to Beneficially Own, any securities acquired through
such Person's participation in good faith in a firm commitment underwriting
until the expiration of 40 days after the date of such acquisition.
2
<PAGE> 6
(c) "Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which banking institutions in the States of New York or California
are authorized or obligated by law or executive order to close.
(d) "Close of Business" on any given date shall mean 5:00 o'clock
p.m., California time, on such date; provided, however, that if such date is not
a Business Day, it shall mean 5:00 o'clock p.m., California time, on the next
succeeding Business Day.
(e) "Closing Price" of a stock or other security on any day shall be
the last sale price, regular way, per share of such stock or unit of such other
security on such day or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if such stock or other security is not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which such stock or other security is listed or admitted
to trading or, if such stock or other security is not listed or admitted to
trading on any national securities exchange, the last quoted sale price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ") or such other system then
in use or, if on any such date such stock or other security is not quoted by any
such organization, the average of the closing bid and asked prices as furnished
by a professional market maker that makes a market in such stock or other
security and that is selected by the Board of Directors of the Company.
(f) "Common Share" shall mean one share of the common stock, par value
$1.00 per share, of the Company, unless used with reference to a Person other
than the Company, in which case it shall mean one share of the class of capital
stock (or equity interest) of such other Person having the greatest voting power
per share or, if such Person is a Subsidiary of another Person, of the Person
that ultimately controls such Person.
(g) "Common Share Equivalent" shall have the meaning ascribed to it in
Section 11(a)(iii) hereof.
(h) "Current Market Price" per share of a stock or unit of any other
security on any date shall mean the average of the daily Closing Prices of such
stock or other security for the 30 consecutive Trading Days through and
including the Trading Day immediately preceding the date in question; provided,
however, that if any event shall have caused the Closing Price on any Trading
Day during such 30-day period not to be fully comparable with the Closing Price
on the date in question (or, if no Closing Price is available on the date in
question, on the Trading Day immediately preceding the date in question), then
each such noncomparable Closing Price so used shall be appropriately adjusted by
the Board of Directors of the Company in order to make the Closing Price on each
Trading Day during the period used for the determination of the Current Market
Price fully comparable with the
3
<PAGE> 7
Closing Price on such date in question (or, if applicable, the immediately
preceding Trading Day). "Current Market Price" per share of any stock or unit of
such other security that is not publicly held or so listed or traded, and
"Current Market Price" of any other property, shall mean the fair value per
share of such stock or unit of such other security, or the fair value of such
other property, respectively, as determined in good faith by the Board of
Directors of the Company based upon such appraisals or valuation reports of such
independent experts as the Board of Directors shall in good faith determine
appropriate, which determination shall be described in a statement filed by the
Company with the Rights Agent. Notwithstanding the foregoing, for purposes of
Section 11 hereof "Current Market Price Per Share" as to Preferred Shares shall
be determined as set forth in Section 11(d).
(i) "Distribution Date" shall have the meaning ascribed to it in
Section 3 hereof.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Exchange Ratio" shall have the meaning ascribed to it in Section
24(a) hereof.
(l) "Exempt Person" shall mean the Company, any wholly-owned
Subsidiary of the Company, any employee benefit plan of the Company or of a
Subsidiary of the Company, and any Person holding Voting Shares for or pursuant
to the terms of any such employee benefit plan.
(m) "Exercise Price" shall have the meaning ascribed to it in Section
7(c) hereof.
(n) "Expiration Date" shall mean February 18, 2008.
(o) "Person" shall mean any individual, firm, partnership,
corporation, association, group (as such term is used in Rule 13d-5 promulgated
under the Exchange Act as in effect on the date hereof) or other entity, and
shall include any successor (by merger or otherwise) of such entity.
(p) "Preferred Share" shall mean one share of the Series A Junior
Participating Preferred Stock, par value $1.00 per share, of the Company, which
has the rights and preferences set forth in the Certificate of Designations
filed with the Secretary of State of the State of Nevada on January 13, 1989, as
amended and, to the extent that there is not a sufficient number of shares of
Series A Junior Participating Preferred Stock authorized to permit the full
exercise of the Rights, any other series of preferred stock, $1.00 par value of
the Company, designated for such purpose containing terms substantially similar
to the terms of the Series A Junior Participating Preferred Stock.
4
<PAGE> 8
(q) "Preferred Share Equivalents" shall have the meaning ascribed to
it in Section 11(b) hereof.
(r) "Record Date" shall have the meaning ascribed to it in the
recitals hereto.
(s) "Redemption Date" shall mean the date of the action of the Board
of Directors of the Company authorizing and directing the redemption of the
Rights pursuant to Section 23(a) hereof or the exchange of the Rights pursuant
to Section 24(a) hereof.
(t) "Redemption Price" shall have the meaning ascribed to it in
Section 23(a) hereof.
(u) "Right" shall have the meaning ascribed to it in the recitals
hereto.
(v) "Rights Agent" shall have the meaning ascribed to it in the
recitals hereto.
(w) "Section 11(a)(ii) Event" shall have the meaning ascribed to it
in Section 11(a)(ii) hereof.
(x) "Section 13(a) Event" shall have the meaning ascribed to it in
Section 13(a) hereof.
(y) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(z) "Subsidiary" of any Person shall mean any corporation or other
Person of which equity securities or equity interests representing a majority of
the voting power are owned, directly or indirectly, or which is effectively
controlled, by such Person.
(aa) "Surviving Person" shall have the meaning ascribed to it in
Section 13(a) hereof.
(bb) "Trading Day" shall mean, as to any stock or other security, a
day on which the principal national securities exchange on which such stock or
other security is listed or admitted to trading is open for the transaction of
business or, if such stock or other security is not listed or admitted to
trading on any national securities exchange, a Business Day.
(cc) "Unavailable Adjustment Shares" has the meaning ascribed to it
in Section 11(a)(iii) hereof.
(dd) "Voting Share" shall mean (i) a Common Share of the Company and
(ii) any other share of capital stock of the Company entitled to vote generally
in the election of directors or entitled to vote together with the
5
<PAGE> 9
Common Shares in respect of any merger, consolidation, sale of all or
substantially all of the Company's assets, liquidation, dissolution or winding
up. References in this Agreement to a percentage or portion of the outstanding
Voting Shares shall be deemed a reference to the percentage or portion of the
total votes entitled to be cast by the holders of the outstanding Voting Shares.
(ee) "10% Ownership Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or a 10% Stockholder containing the facts by virtue of which a Person
has become a 10% Stockholder or such earlier date as a majority of the directors
shall become aware of the existence of a 10% Stockholder.
(ff) "10% Stockholder" shall mean any Person that, together with all
Affiliates and Associates of such Person, hereafter becomes the Beneficial Owner
of such number of Voting Shares of the Company as constitutes a percentage of
the then outstanding Voting Shares that is equal to or greater than 10%;
provided, however, that the term "10% Stockholder" shall not include: (i) an
Exempt Person; (ii) any Person if such Person would not otherwise be a 10%
Stockholder but for a reduction in the number of outstanding Voting Shares
resulting from a stock repurchase program or other similar plan of the Company
or from a self-tender offer of the Company, which plan or tender offer commenced
on or after the date hereof, provided, however, that the term "10% Stockholder"
shall include such Person from and after the first date upon which (A) such
Person, since the date of the commencement of such plan or tender offer, shall
have acquired Beneficial Ownership of, in the aggregate, a number of Voting
Shares of the Company equal to 1% or more of the Voting Shares of the Company
then outstanding and (B) such Person, together with all Affiliates and
Associates of such Person, shall Beneficially Own 10% or more of the Voting
Shares of the Company then outstanding; or (iii) any Person if such Person is
the Beneficial Owner of 10% or more of the outstanding Voting Shares of the
Company as of the date of this Agreement, provided, however, that the term "10%
Stockholder" shall include such Person from and after the first date upon which
(A) such Person, since the date of this Agreement, shall have acquired, without
the prior approval of the Board of Directors of the Company, Beneficial
Ownership of, in the aggregate, a number of Voting Shares of the Company equal
to 1% or more of the Voting Shares of the Company then outstanding and (B) such
Person, together with all Affiliates and Associates of such Person, shall
Beneficially Own 10% or more of the Voting Shares of the Company then
outstanding. In calculating the percentage of the outstanding Voting Shares that
are Beneficially Owned by a Person for purposes of this subsection (ff), Voting
Shares that are Beneficially Owned by such Person shall be deemed outstanding,
and Voting Shares that are not Beneficially Owned by such Person and that are
subject to issuance upon the exercise or conversion of outstanding conversion
rights, exchange rights, rights (other than Rights), warrants or options shall
not be deemed outstanding. Notwithstanding the foregoing, if the Board of
Directors of the Company determines that a Person that would otherwise be a 10%
Stockholder pursuant to the foregoing provisions of this Section 1(ff) and
Section 1(b) hereof has become such inadvertently, and such Person (i) promptly
notifies the Board of Directors of such status and (ii) as promptly
6
<PAGE> 10
as practicable thereafter, either divests a sufficient number of Voting Shares
so that such Person would no longer be a 10% Stockholder, or causes any other
circumstance, such as the existence of an agreement respecting Voting Shares, to
be eliminated such that such Person would no longer be a 10% Stockholder as
defined pursuant to this Section 1(ff) and 1(b), then such Person shall not be
deemed to be a 10% Stockholder for any purposes of this Agreement. Any
determination made by the Board of Directors of the Company as to whether any
Person is or is not a 10% Stockholder shall be conclusive and binding upon all
holders of Rights.
Section 2. Appointment of Rights Agent.
---------------------------
The Company hereby appoints the Rights Agent to act as agent for the Company,
and the Rights Agent hereby accepts such appointment. The Company may from time
to time appoint such co-Rights Agents as it may deem necessary or desirable,
upon ten days' prior written notice to the Rights Agent. The Rights Agent shall
have no duty to supervise, and shall in no event be liable for, the acts or
omissions of any such co-Rights Agent.
Section 3. Issuance of Right Certificates.
------------------------------
(a) "Distribution Date" shall mean the date, after the date hereof,
that is the earliest of (i) the tenth Business Day (or such later day as shall
be designated by the Board of Directors of the Company) following the date of
the commencement of, or the first public announcement of the intent of any
Person, other than an Exempt Person, to commence a tender offer or exchange
offer, the consummation of which would cause any Person to become a 10%
Stockholder, (ii) the date of the first Section 11(a)(ii) Event or (iii) the
date of the first Section 13(a) Event; provided, however, that, notwithstanding
anything in this Section 3(a) to the contrary, clause (i) of this Section 3(a)
shall not apply with respect to the commencement of a tender offer by CAI
Computer Services Corp. on February 17, 1998.
(b) Until the Distribution Date, (i) the Rights shall be represented
by certificates for Common Shares (all of which certificates for Common Shares
shall be deemed to be Right Certificates) and not by separate Right
Certificates, (ii) the record holder of the Common Shares represented by each of
such certificates shall be the record holder of the Rights represented thereby
and (iii) the Rights shall be transferable only in connection with the transfer
of Common Shares. Until the earliest of the Distribution Date, the Redemption
Date or the Expiration Date, the surrender for transfer of such certificates for
Common Shares shall also constitute the surrender for transfer of the Rights
represented thereby.
(c) As soon as practicable after the Distribution Date, and after
notification by the Company, the Rights Agent shall send, at the Company's
expense, by first-class, postage-prepaid mail to each record holder of Common
Shares, as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, a Right Certificate
substantially in the form of Exhibit A hereto representing one Right for each
Common Share so held. From and after the Distribution Date, the Rights shall
7
<PAGE> 11
be represented solely by such Right Certificates and may only be transferred by
the transfer of such Right Certificates, and the holders of such Right
Certificates, as listed in the records of the Company or any transfer agent or
registrar for such Rights, shall be the record holders of such Rights.
(d) Certificates for Common Shares issued at any time after the Record
Date and prior to the earliest of the Distribution Date, the Redemption Date or
the Expiration Date, shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
"This certificate also represents Rights that entitle the holder
hereof to certain rights as set forth in a Rights Agreement dated as of
February 18, 1998 by and between the Corporation and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (as it may be amended from
time to time, the "Rights Agreement"), the terms and conditions of which
are hereby incorporated herein by reference and a copy of which is on file
at the principal executive offices of the Corporation.
Under certain circumstances specified in the Rights Agreement, such
Rights will be represented by separate certificates and will no longer be
represented by this certificate. Under certain circumstances specified in
the Rights Agreement, Rights beneficially owned by certain persons may
become null and void. The Corporation will mail to the record holder of
this certificate a copy of the Rights Agreement without charge promptly
following receipt of a written request therefor."
(e) Certificates for Common Shares issued at any time on or after the
Distribution Date and prior to the earlier of the Redemption Date or the
Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:
"This certificate does not represent any Right issued pursuant to the
terms of a Rights Agreement dated as of February 18, 1998 by and between the
Corporation and ChaseMellon Shareholder Services, L.L.C., as Rights Agent."
(f) In the event that at any time on or after the earlier of the date
of the first Section 11(a)(ii) Event or the date of the first Section 13(a)
Event and prior to the earlier of the Redemption Date or the Expiration Date,
the Company shall issue any Common Shares pursuant to the exercise of conversion
rights, exchange rights, rights (other than Rights), warrants or options that
shall have been issued or granted prior to the earlier of the date of the first
Section 11(a)(ii) Event or the date of the first Section 13(a) Event, then,
unless the Board of Directors of the Company shall have provided otherwise at
the time of the issuance or grant of such conversion rights, exchange rights,
rights (other than Rights), warrants or options, the Rights Agent shall, as soon
as practicable after the date of such event,
8
<PAGE> 12
send by first-class, postage-prepaid mail to the record holder of such Common
Shares, at the address of such holder as shown on the records of the Company, a
Right Certificate substantially in the form of Exhibit A hereto representing one
Right for each Common Share so issued.
(g) Notwithstanding the foregoing provisions of this Section 3, the
Rights Agent shall not send any Right Certificate to any 10% Stockholder or any
of its Affiliates or Associates or to any Person if the Rights held by such
Person are Beneficially Owned by a 10% Stockholder or any of its Affiliates or
Associates. Any determination made by the Board of Directors of the Company as
to whether any Common Shares are or were Beneficially Owned at any time by a 10%
Stockholder or an Affiliate or Associate of a 10% Stockholder shall be
conclusive and binding upon all holders of Rights.
Section 4. Form of Right Certificates.
--------------------------
The Right Certificates and the form of assignment, including certificate, and
the form of election to purchase, including certificate, printed on the reverse
thereof, when, as and if issued, shall be substantially the same as Exhibit A
hereto, and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange upon which the Rights or the securities of the Company issuable upon
exercise of the Rights may from time to time be listed, or to conform to usage.
Subject to Section 22 hereof, Right Certificates, whenever issued, that are
issued in respect of Common Shares that were issued and outstanding as of the
Close of Business on the Distribution Date, shall be dated as of the
Distribution Date.
Section 5. Countersignature and Registration.
---------------------------------
(a) The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President or any Vice President, either
manually or by facsimile signature, and may have affixed thereto the Company's
seal or a facsimile thereof attested by its Secretary or any Assistant
Secretary, either manually or by facsimile signature. The Right Certificates
shall be countersigned by an authorized signatory of the Rights Agent (which
need not be the same authorized signatory for all of the Right Certificates) and
shall not be valid for any purpose unless so countersigned. In case any officer
of the Company who shall have signed any of the Right Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Right Certificates may
nevertheless be countersigned by an authorized signatory of the Rights Agent and
issued and delivered by the Company with the same force and effect as though the
person who signed such Right Certificates had not ceased to be such officer of
the Company. Any Right Certificate may be signed on behalf of the Company by any
person who at the actual date of such execution shall be a proper officer of the
Company to sign such Right Certificate, even though such person was not such an
officer at the date of the execution of this Agreement.
9
<PAGE> 13
(b) Following the Distribution Date, the Rights Agent shall keep or
cause to be kept at its principal offices in Ridgefield Park, New Jersey, books
for registration and transfer of the Right Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of Right
Certificates, the number of Rights represented on its face by each Right
Certificate and the date of each Right Certificate.
Section 6. Transfer, Split Up, Combination and Exchange of Right
-----------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Right
--------------------------------------------------------
Certificates.
------------
(a) Subject to the provisions of Sections 6(c), 7(d) and 14 hereof, at
any time after the Close of Business on the Distribution Date, and so long as
the Rights represented thereby remain outstanding, any one or more Right
Certificates may be transferred, split up, combined or exchanged for one or more
Right Certificates representing the same aggregate number of Rights as the Right
Certificates surrendered. Any registered holder desiring to transfer, split up,
combine or exchange one or more Right Certificates shall make such request in
writing delivered to the Rights Agent, and shall surrender the Right
Certificates to be transferred, split up, combined or exchanged at the office of
the Rights Agent with the form of assignment, including certificate, on the
reverse side thereof completed and duly executed, with signature guaranteed and
such other and further documentation as the Rights Agent may reasonably request.
Thereupon, the Rights Agent shall countersign and deliver to the person entitled
thereto one or more Right Certificates, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them and, at the Company's request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
such Right Certificate, if mutilated, along with signature guarantees and such
other and further documentation as the Rights Agent may reasonably request, the
Company shall issue and deliver to the Rights Agent for delivery to the record
holder of such Right Certificate a new Right Certificate of like tenor in lieu
of such lost, stolen, destroyed or mutilated Right Certificate.
(c) Notwithstanding anything to the contrary in this Section 6, the
Rights Agent shall not countersign and deliver a Right Certificate to any Person
if such Right Certificate represents, or would represent when held by such
Person, Rights that had become or would become null and void pursuant to Section
7(d) hereof.
Section 7. Exercise of Rights.
------------------
(a) Until the Distribution Date, no Right may be exercised.
10
<PAGE> 14
(b) Subject to Section 7(d) and (g) hereof and the other provisions of
this Agreement, at any time after the Close of Business on the Distribution Date
and prior to the Close of Business on the earlier of the Redemption Date or the
Expiration Date, the registered holder of any Right Certificate may exercise the
Rights represented thereby in whole or in part upon surrender of such Right
Certificate, with the form of election to purchase, including certificate, on
the reverse side thereof completed and duly executed, to the Rights Agent at the
office of the Rights Agent in Ridgefield Park, New Jersey, along with a
signature guarantee and such other and further documentation as the Rights Agent
may reasonably request, together with payment of the Exercise Price for each
Right exercised. Upon the exercise of an exercisable Right and payment of the
Exercise Price in accordance with the provisions of this Agreement, the holder
of such Right shall be entitled to receive, subject to adjustment as provided
herein, one four-thousandth (1/4000th) of a Preferred Share (or, following the
occurrence of a Section 11(a)(ii) Event or a Section 13(a) Event, Common Shares,
other securities cash and/or other property in accordance with the provisions of
this Agreement).
(c) The Exercise Price for each one four-thousandth (1/4000th) of a
Preferred Share pursuant to the exercise of each Right shall initially be $500
(Five Hundred Dollars) and shall be payable in lawful money of the United States
of America in accordance with Section 7(f) hereof. The Exercise Price and the
number of Preferred Shares (or, following the occurrence of a Section 11(a)(ii)
Event or a Section 13(a) Event, Common Shares, cash and/or other property in
accordance with the provisions of this Agreement) to be acquired upon exercise
of a Right shall be subject to adjustment from time to time as provided in
Sections 7(e), 11 and 13 hereof and the other provisions of this Agreement.
(d) Notwithstanding anything in this Agreement to the contrary, from
and after the earlier of the date of the first Section 11(a)(ii) Event or the
date of the first Section 13(a) Event, any Rights that are or were Beneficially
Owned by (i) a 10% Stockholder or any Affiliate or Associate of a 10%
Stockholder, (ii) a transferee of a 10% Stockholder (or of any such Associate or
Affiliate) who becomes a transferee after the 10% Stockholder becomes such, or
(iii) a transferee of a 10% Stockholder (or of any such Associate or Affiliate)
who becomes a transferee prior to or concurrently with a 10% Stockholder
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the 10% Stockholder to holders of equity
interests in such 10% Stockholder or to any Person with whom the 10% Stockholder
has any continuing agreement, arrangement or understanding regarding the
transferred Rights, or (B) a transfer which the Board of Directors of the
Company has determined is part of a plan, arrangement or understanding which has
as a primary purpose or effect the avoidance of this Section 7(d), at any time
on or after the Distribution Date shall be null and void, and for all purposes
of this Agreement such Rights shall thereafter be deemed not to be outstanding,
and any holder of such Rights (whether or not such holder is a 10% Stockholder
or an Affiliate or Associate of a 10% Stockholder) shall thereafter have no
right to exercise such Rights.
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<PAGE> 15
(e) Prior to the Distribution Date, if the Board of Directors of the
Company shall have determined that such action adequately protects the interests
of the holders of Rights, the Company may, in its discretion, substitute for all
or any portion of the Preferred Shares that would otherwise be issuable (after
the Close of Business on the Distribution Date) upon the exercise of each Right
and payment of the Exercise Price, (i) cash, (ii) other equity securities of the
Company, (iii) debt securities of the Company, (iv) other property or (v) any
combination of the foregoing, in each case having an aggregate Current Market
Price equal to the aggregate Current Market Price of the Preferred Shares for
which substitution is made. Subject to Section 7(d) hereof, in the event that
the Company takes any action pursuant to this Section 7(e), such action shall
apply uniformly to all outstanding Rights.
(f) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase, including certificate, completed
and duly executed, with signature guaranteed, accompanied by payment of the
Exercise Price for each Right to be exercised and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof by certified check or cashier's
check payable to the order of the Company, the Rights Agent shall thereupon
promptly (i) requisition from the transfer agent of the Preferred Shares (or,
following the occurrence of a Section 11(a)(ii) Event or a Section 13(a) Event,
Common Shares, other securities, cash and/or other property in accordance with
the provisions of this Agreement), certificates for the number of one
four-thousandths (1/4000th) of a Preferred Share (or such other securities) to
be purchased, and the Company hereby irrevocably authorizes such transfer agent
to comply with all such requests, and/or, as provided in Section 14 hereof,
requisition from the depositary agent described therein depositary receipts
representing such number of one four-thousandths (1/4000th) of a Preferred Share
(or such other securities) as are to be purchased (in which case certificates
for the Preferred Shares (or such other securities) represented by such receipts
shall be deposited by the transfer agent with such depositary agent) and the
Company hereby directs such depositary agent to comply with such request, (ii)
when appropriate, requisition from the Company the amount of cash to be paid in
lieu of issuance of fractional Preferred Shares (or such other securities) in
accordance with Section 14 hereof, (iii) after receipt of such certificates,
depositary receipts or cash, cause the same to be delivered to or upon the order
of the registered holder of such Right Certificate, registered in such name or
names as may be designated by such holder and (iv) when appropriate, after
receipt thereof, deliver such cash to or upon the order of the registered holder
of such Right Certificate.
(g) Notwithstanding the foregoing provisions of this Section 7, the
exercisability of the Rights shall be suspended for such period as shall
reasonably be necessary for the Company to register under the Securities Act and
any applicable securities law of any jurisdiction the Preferred Shares to be
issued pursuant to the exercise of the Rights; provided, however, that nothing
contained in this Section 7 shall relieve the Company of its obligations under
Section 9(c) hereof.
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<PAGE> 16
(h) In case the registered holder of any Right Certificate shall
exercise less than all of the Rights represented thereby, a new Right
Certificate representing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent to the registered holder of such Right
Certificate or to such holder's duly authorized assigns, subject to the
provisions of Section 14 hereof.
Section 8. Cancellation and Destruction of Right Certificates.
--------------------------------------------------
All Right Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange shall, if surrendered to the Company or to any of
its agents, be delivered to the Rights Agent for cancellation or in canceled
form, or, if surrendered to the Rights Agent, shall be canceled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by this Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel and retire,
any other Right Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent shall deliver all canceled Right
Certificates to the Company.
Section 9. Reservation and Availability of Capital Stock.
---------------------------------------------
(a) Subject to Section 7(e) hereof, the Company shall cause to be
reserved and kept available out of its authorized and unissued equity securities
(or out of its authorized and issued equity securities held in its treasury),
the number of such equity securities that will from time to time be sufficient
to permit the exercise in full of all outstanding Rights.
(b) In the event that any securities issuable upon exercise of the
Rights are listed on any national securities exchange, the Company shall use its
best efforts, from and after such time as the Rights become exercisable, to
cause all such securities issued or reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.
(c) If necessary to permit the issuance of securities upon exercise of
the Rights, the Company shall use its best efforts, from and after the
Distribution Date, to register such securities under the Securities Act and any
applicable state securities laws and to keep such registration effective until
the earlier of the Redemption Date or the Expiration Date.
(d) The Company shall take all such action as may be necessary to
ensure that all securities delivered upon exercise of the Rights shall, at the
time of delivery of the certificates for such securities (subject to payment of
the Exercise Price), be duly and validly authorized and issued and fully paid
and nonassessable securities.
(e) The Company shall pay when due and payable any and all federal and
state transfer taxes and charges that may be payable in respect of the issuance
or delivery of the Right Certificates or of any securities upon the exercise of
Rights. The Company shall not, however, be required to pay any
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<PAGE> 17
transfer tax that may be payable in respect of any transfer or delivery of a
Right Certificate to a Person other than, or the issuance or delivery of a
certificate for securities in respect of a name other than that of, the
registered holder of the Right Certificate representing Rights surrendered for
exercise, or to issue or deliver any certificate for securities upon the
exercise of any Right until any such tax shall have been paid (any such tax
being payable by the holder of such Right Certificate at the time of surrender)
or until it has been established to the Company's satisfaction that no such tax
is due.
(f) With respect to the Common Shares and/or other securities issuable
pursuant to Section 11(a)(ii) and (iii) hereof, the foregoing covenants shall be
applicable only upon and following the occurrence of a Section 11(a)(ii) Event.
Section 10. Securities Record Date.
----------------------
Each person in whose name any certificate for securities of the Company is
issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the securities represented thereby on, and such
certificate shall be dated, the date upon which the Right Certificate
representing such Rights was duly surrendered and payment of the Exercise Price
(and any applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the securities transfer
books of the Company are closed, such person shall be deemed to have become the
record holder of such securities on, and such certificate shall be dated, the
next succeeding Business Day on which the securities transfer books of the
Company are open.
Section 11. Adjustment of Exercise Price, Number of Shares Issuable
-------------------------------------------------------
Upon Exercise of Rights or Number of Rights.
-------------------------------------------
The Exercise Price, the number and kind of securities that may be purchased upon
exercise of a Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event that the Company shall at any time after the
Close of Business on the Record Date and prior to the Close of Business on
the earlier of the Redemption Date or the Expiration Date (A) declare or
pay any dividend on the Preferred Shares payable in Preferred Shares or
Voting Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares
or (D) issue Preferred Shares or Voting Shares in a reclassification of the
Preferred Shares (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), then, and upon each such event, the Exercise Price in effect
on the date of such event and the number and kind of Preferred Shares or
other securities issuable upon the exercise of a Right on the date of such
event shall be proportionately adjusted so that the holder of any Right
exercised on or after such date shall be entitled to receive, upon the
exercise thereof and payment of the Exercise Price, the aggregate number
and kind of Preferred Shares or other securities or other property, as the
case may be, that, if such Right had been exercised immediately prior to
such date and at a time when such Right was exercisable and the
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<PAGE> 18
transfer books of the Company were open, such holder would have owned upon
such exercise and would have been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If an event occurs
that would require an adjustment under both this Section 11(a)(i) and
Section 11(a)(ii) hereof, the adjustment provided for in this Section
11(a)(i) shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event (a "Section 11(a)(ii) Event") that a 10%
Ownership Date shall have occurred and neither the Redemption Date nor the
Expiration Date shall have occurred, then, effective as of the 10%
Ownership Date, proper provision shall be made so that except as provided
in Section 7(d) hereof, each holder of a Right shall thereafter have the
right to receive, upon the exercise thereof in accordance with the terms of
this Agreement and payment of the then-current Exercise Price, in lieu of
the securities or other property otherwise purchasable upon such exercise,
such number of Common Shares of the Company as shall equal the result
obtained by multiplying the then current Exercise Price by the then number
of one four-thousandths (1/4000th) of a Preferred Share for which a Right
was exercisable (or, if the Distribution Date shall not have occurred prior
to the date of such Section 11(a)(ii) Event, the number of one
four-thousandths (1/4000th) of a Preferred Share for which a Right would
have been exercisable if the Distribution Date had occurred on the Business
Day immediately preceding the date of such Section 11(a)(ii) Event)
immediately prior to such Section 11(a)(ii) Event, and dividing that
product by 50% of the Current Market Price (determined pursuant to Section
11(d) hereof) of a Common Share on the date of occurrence of the relevant
Section 11(a)(ii) Event (such number of shares being hereinafter referred
to as the "Adjustment Shares"). Successive adjustments shall be made
pursuant to this paragraph each time a Section 11(a)(ii) Event occurs.
(iii) In the event that on the date of a Section 11(a)(ii) Event
the aggregate number of Common Shares that are authorized by the Company's
restated articles of incorporation but not outstanding or reserved for
issuance for purposes other than upon exercise of the Rights is less than
the aggregate number of Adjustment Shares thereafter issuable upon the
exercise in full of the Rights in accordance with Section 11(a)(ii) hereof
(the excess of such number of Adjustment Shares over and above such number
of Common Shares being hereinafter referred to as the "Unavailable
Adjustment Shares"), then, and upon each such event, the Company shall
substitute for the pro rata portion of the Unavailable Adjustment Shares
that would otherwise be issuable thereafter upon the exercise of each Right
and payment of the Exercise Price, (A) cash, (B) other equity securities of
the Company (including, without limitation, shares of preferred stock of
the Company or units of such shares having the same Current Market Price as
one Common Share (a "Common Share Equivalent")), (C) debt securities of the
Company, (D) other property or (E) any combination of the foregoing, in
each case having an aggregate Current Market Price equal to the aggregate
Current Market Price of the
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<PAGE> 19
Unavailable Adjustment Shares for which substitution is made. Subject to
Section 7(d) hereof, in the event that the Company takes any action
pursuant to this Section 11(a)(iii), such action shall apply uniformly to
all outstanding Rights.
(b) In the event that the Company shall, at any time after the Close
of Business on the Record Date and prior to the Close of Business on the earlier
of the Redemption Date or the Expiration Date, fix a record date prior to the
earlier of the Redemption Date or the Expiration Date for the issuance of
rights, options or warrants to all holders of Preferred Shares entitling them
initially to subscribe for or purchase Preferred Shares (or shares having the
same rights, privileges and preferences as the Preferred Shares ("Preferred
Share Equivalents")) or securities convertible into Preferred Shares or
Preferred Share Equivalents, at a price per Preferred Share or Preferred Share
Equivalent (or having a conversion price per share, if a security convertible
into Preferred Shares or Preferred Share Equivalents) less than the Current
Market Price per Preferred Share on such record date, then, and upon each such
event, the Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be equal to the sum of
the number of Preferred Shares outstanding on such record date plus the number
of Preferred Shares that the aggregate offering price of the total number of
Preferred Shares and/or Preferred Share Equivalents to be so offered (and/or the
aggregate initial conversion price of the convertible securities to be so
offered) would purchase at such Current Market Price, and the denominator of
which shall be equal to the number of Preferred Shares outstanding on such
record date plus the number of additional Preferred Shares and/or Preferred
Share Equivalents to be offered for subscription or purchase (or into which the
convertible securities to be so offered are initially convertible); provided,
however, that if such rights, options or warrants are not exercisable
immediately upon issuance but become exercisable only upon the occurrence of a
specified event or the passage of a specified period of time, then the
adjustment to the Exercise Price shall be made and become effective only upon
the occurrence of such event or such passage of time, and such adjustment shall
be made as if the record date for the issuance of such rights, options or
warrants had been the Business Day immediately preceding the date upon which
such rights, options or warrants became exercisable. Preferred Shares owned by
or held for the account of the Company shall not be deemed outstanding for the
purpose of any such computation. Such adjustment to the Exercise Price shall be
made successively whenever such a record date is fixed, and in the event that
such rights or warrants are not so issued, the Exercise Price shall be adjusted
to be the Exercise Price that would then be in effect if such record date had
not been fixed.
(c) In the event that the Company shall, at any time after the Close
of Business on the Record Date and prior to the Close of Business on the earlier
of the Redemption Date or the Expiration Date, fix a record date for the making
of a distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Company is the surviving corporation) of securities or assets (other than a
distribution of securities for which an adjustment is required under Section
11(a)(i) or (b) hereof or a regular quarterly cash dividend), then the
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<PAGE> 20
Exercise Price to be in effect after such record date shall be determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be equal to the excess of the
Current Market Price per Preferred Share on such record date over and above the
fair market value of the portion of the securities or assets to be so
distributed with respect to one Preferred Share, and the denominator of which
shall be equal to such Current Market Price per Preferred Share. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such a distribution is not so made, the Exercise Price shall
be adjusted to be the Exercise Price that would then be in effect if such record
date had not been fixed.
(d) For the purpose of any computation under this Section 11, if the
Preferred Shares are not publicly held or traded, the "Current Market Price" per
Preferred Share shall be conclusively deemed to be the Current Market Price per
Common Share multiplied by 4,000 (as such number may be appropriately adjusted
for such events as stock splits, stock dividends and recapitalizations with
respect to the Common Shares occurring after the date of this Agreement).
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Exercise
Price; provided, however, that any adjustments that by reason of this Section
11(e) are not required to be made shall be cumulated and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one-thousandth of a Common Share or other
share or one forty-millionth of a Preferred Share, as the case may be.
(f) If, as a result of an adjustment made pursuant to Section 11(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any securities of the Company other than Preferred Shares, the number of
such other securities so receivable upon exercise of any Right and the Exercise
Price thereof shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
Preferred Shares contained in this Section 11, and the other provisions of this
Agreement with respect to Preferred Shares shall apply on like terms to any such
other securities.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall represent the right to
purchase, at the adjusted Exercise Price, the number of one four-thousandths
(1/4000th) of a Preferred Share purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i) below, upon each adjustment of the Exercise Price as a result
of the calculations made in Sections 11(b) and (c) hereof, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
represent the right to purchase, at the adjusted Exercise Price,
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<PAGE> 21
that number of one four-thousandths (1/4000th) of a Preferred Share (calculated
to the nearest one forty-thousandth (1/40000th) of a Preferred Share) obtained
by multiplying (i) the number of one four-thousandths (1/4000th) of a Preferred
Share purchasable upon the exercise of one Right immediately prior to such
adjustment of the Exercise Price by (ii) the Exercise Price in effect
immediately prior to such adjustment, and dividing the product so obtained by
the Exercise Price in effect immediately after such adjustment.
(i) The Company may elect, on or after the date of any adjustment of
the Exercise Price, to adjust the number of Rights instead of making any
adjustment in the number of one four-thousandths (1/4000th) of a Preferred Share
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one four-thousandths (1/4000th) of a Preferred Share for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one four-thousandth (1/4000th) of a Right)
obtained by dividing the Exercise Price in effect immediately prior to the
adjustment of the Exercise Price by the Exercise Price in effect immediately
after such adjustment of the Exercise Price. The Company shall make a public
announcement of its election to adjust the number of Rights pursuant to this
Section 11(i), indicating the record date for the adjustment and, if known at
the time, the amount of the adjustment to be made. Such record date may be the
date on which the Exercise Price is adjusted or any day thereafter, but, if
separate Right Certificates have been issued, it shall be at least 10 days after
the date of such public announcement. If separate Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right Certificates
representing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment or, at the option of
the Company, cause to be distributed to such holders of record in substitution
and replacement for the Right Certificates held by such holders prior to the
date of such adjustment, and upon surrender thereof if required by the Company,
new Right Certificates representing all the Rights to which such holders shall
be entitled after such adjustment. Right Certificates to be so distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Exercise Price) and shall be
registered in the names of the holders of record of Right Certificates on the
record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Exercise Price or
the number of one four-thousandths (1/4000th)of a Preferred Share issuable upon
the exercise of one Right, the Right Certificates theretofore and thereafter
issued may continue to express the Exercise Price per one four-thousandth
(1/4000th) of a Preferred Share and the number of one four-thousandths
(1/4000th) of a Preferred Share issuable upon the exercise of one Right that
were expressed in the initial Right Certificates issued hereunder.
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<PAGE> 22
(k) Before taking any action that would cause an adjustment reducing
the Exercise Price below one four-thousandth (1/4000th) of the then par value,
if any, of the Preferred Shares issuable upon exercise of the Rights, the
Company shall take any corporate action that may, in the advice or opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable one four-thousandth (1/4000th) of a Preferred
Share at such adjusted Exercise Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, the issuance to the holder of any Right exercised after such record date
of the number of one four-thousandths (1/4000th) of a Preferred Share and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one four-thousandths (1/4000th) of a Preferred
Share and other capital stock or securities of the Company, if any, issuable
upon such exercise on the basis of the Exercise Price in effect prior to such
adjustment; provided, however, that the Company shall deliver to such holder a
due bill or other appropriate instrument representing such holder's right to
receive such additional shares upon the occurrence of the event requiring such
adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such further adjustments in the number of one
four-thousandths (1/4000th) of a Preferred Share that may be purchased upon
exercise of one Right, and such further adjustments in the Exercise Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any (i) consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of any Preferred Shares at less than the Current Market
Price thereof, (iii) issuance wholly for cash of Preferred Shares or securities
that by their terms are convertible into or exchangeable for Preferred Shares,
(iv) dividends on Preferred Shares payable in Preferred Shares or (v) issuance
of rights, options or warrants referred to Section 11(b) hereof, hereafter made
by the Company to holders of its Preferred Shares shall not be taxable to such
stockholders.
(n) In the event that the Company shall, at any time after the Close
of Business on the Record Date and prior to the Close of Business on the
earliest of the date of the first Section 11(a)(ii) Event, the date of the first
Section 13(a) Event, the Redemption Date or the Expiration Date, (i) pay any
dividend on the Common Shares payable in Common Shares, (ii) subdivide the
outstanding Common Shares, (iii) combine the outstanding Common Shares into a
smaller number of Common Shares or (iv) issue Common Shares in a
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, and upon each such event, the Exercise Price to
be in effect after such event shall be determined by multiplying the Exercise
Price in effect immediately prior to such event by a fraction, the numerator of
which shall be equal to the number of Common Shares outstanding immediately
prior to such event and the denominator of which shall
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<PAGE> 23
be equal to the number of Common Shares outstanding immediately after such
event. Successive adjustments shall be made pursuant to this Section 11(n) each
time such a dividend is paid or such a subdivision, combination or
reclassification is effected. If an event occurs that would require an
adjustment under both this Section 11(n) and Section 11(a)(ii) hereof, the
adjustment provided for in this Section 11(n) shall be in addition to, and shall
be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.
Section 12. Certificate of Adjusted Exercise Price or Number of
---------------------------------------------------
Shares Issuable Upon Exercise of Rights.
---------------------------------------
Whenever an adjustment is made as provided in Section 11 hereof, the Company
shall promptly (a) prepare a certificate setting forth such adjustment and a
brief statement of the facts giving rise to such adjustment, (b) file with the
Rights Agent and with each transfer agent for the securities issuable upon
exercise of the Rights a copy of such certificate and (c) mail a brief summary
thereof to each holder of Rights in accordance with Section 25 hereof.
Notwithstanding the foregoing sentence, the failure of the Company to make such
certification or to give such notice shall not affect the validity or the force
and effect of such adjustment. Any adjustment to be made pursuant to Sections 11
or 13 hereof shall be effective as of the date of the event giving rise to such
adjustment. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of such adjustment unless and until it shall have received such
certificate.
Section 13. Consolidation, Merger, or Sale or Transfer of Assets or
-------------------------------------------------------
Earning Power.
-------------
(a) In the event (a "Section 13(a) Event") that, at any time on or
after the 10% Ownership Date and prior to the earlier of the Redemption Date or
the Expiration Date, (1) the Company shall, directly or indirectly, consolidate
with or merge with and into any other Person and the Company shall not be the
continuing or surviving corporation in such consolidation or merger, (2) any
Person shall, directly or indirectly, consolidate with or merge with and into
the Company and the Company shall be the continuing or surviving corporation in
such consolidation or merger and, in connection with such consolidation or
merger, all or part of the Common Shares shall be changed into or exchanged for
stock or other securities of any Person or cash or any other property, or (3)
the Company and/or any one or more of its Subsidiaries shall, directly or
indirectly, sell or otherwise transfer, in one or more transactions (other than
transactions in the ordinary course of business), assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons other than the Company
or one or more of its wholly owned Subsidiaries (such Persons, together with the
Persons described in clauses (1) and (2) above shall be collectively referred to
in this Section 13 as the "Surviving Person"), then, and in each such case,
proper provision shall be made so that:
(i) except as provided in Section 7(d) hereof, each holder of a
Right shall thereafter have the right to receive, upon the exercise thereof
in accordance with the terms of this Agreement and payment of the
then-current Exercise Price, in lieu of the securities or other property
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<PAGE> 24
otherwise purchasable upon such exercise, such number of validly authorized
and issued, fully paid and nonassessable Common Shares of the Surviving
Person as shall be equal to a fraction, the numerator of which is the
product of the then-current Exercise Price multiplied by the number of one
four-thousandths (1/4000th) of a Preferred Share purchasable upon the
exercise of one Right immediately prior to the first Section 13(a) Event
(or, if the Distribution Date shall not have occurred prior to the date of
such Section 13(a) Event, the number of one four-thousandths (1/4000th) of
a Preferred Share that would have been so purchasable if the Distribution
Date had occurred on the Business Day immediately preceding the date of
such Section 13(a) Event, or, if a Section 11(a)(ii) Event has occurred
prior to such Section 13(a) Event, the product of the number of one
four-thousandths (1/4000th) of a Preferred Share purchasable upon the
exercise of a Right (or, if the Distribution Date shall not have occurred
prior to the date of such Section 11(a)(ii) Event, the number of one
four-thousandths (1/4000th) of a Preferred Share that would have been so
purchasable if the Distribution Date had occurred on the Business Day
immediately preceding the date of such Section 11(a)(ii) Event) immediately
prior to such Section 11(a)(ii) Event, multiplied by the Exercise Price in
effect immediately prior to such Section 11(a)(ii) Event), and the
denominator of which is 50% of the Current Market Price per Common Share of
the Surviving Person on the date of consummation of such Section 13(a)
Event;
(ii) the Surviving Person shall thereafter be liable for and
shall assume, by virtue of such consolidation, merger, sale or transfer,
all the obligations and duties of the Company pursuant to this Agreement;
(iii) the term, "Company," shall thereafter be deemed to refer to
the Surviving Person; and
(iv) the Surviving Person shall take such steps (including, but
not limited to, the reservation of a sufficient number of its Common Shares
in accordance with Section 9 hereof) in connection with such consummation
as may be necessary to ensure that the provisions hereof shall thereafter
be applicable to its Common Shares thereafter deliverable upon the exercise
of Rights.
(b) Notwithstanding the foregoing, if the Section 13(a) Event is the
sale or transfer in one or more transactions of assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole), but less than 100% thereof, then each Person
acquiring all or a portion thereof shall assume the obligations of the Company
as to a fraction of each of the Rights equal to the fraction of the assets of
the Company and its Subsidiaries (taken as a whole) acquired by such Person, and
the obligations of the Company as to the remaining fraction of each of the
Rights shall continue to be the obligations of the Company.
(c) The Company shall not consummate a Section 13(a) Event unless
prior thereto the Company and the Surviving Person shall have executed and
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<PAGE> 25
delivered to the Rights Agent a supplemental agreement confirming that such
Surviving Person shall, upon consummation of such Section 13(a) Event, assume
this Agreement in accordance with Section 13 hereof, that all rights of first
refusal or preemptive rights in respect of the issuance of Common Shares of such
Surviving Person upon exercise of outstanding Rights have been waived and that
such Section 13(a) Event shall not result in a default by such Surviving Person
under this Agreement, and further providing that, as soon as practicable after
the date of consummation of such Section 13(a) Event, such Surviving Person
shall:
(i) prepare and file a registration statement under the
Securities Act with respect to the Rights and the securities purchasable
upon exercise of the Rights on an appropriate form, use its best efforts to
cause such registration statement to become effective as soon as
practicable after such filing, use its best efforts to cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the Expiration Date,
and similarly comply with all applicable state securities laws;
(ii) use its best efforts to list (or continue the listing of)
the Rights and the Common Shares of the Surviving Person purchasable upon
exercise of the Rights on a national securities exchange, or use its best
efforts to cause the Rights and such Common Shares to meet the eligibility
requirements for quotation on NASDAQ; and
(iii) deliver to holders of the Rights historical financial
statements for such Surviving Person that comply in all respects with the
requirements for registration on Form 10 (or any successor form) under the
Exchange Act.
(d) In the event that at any time after the occurrence of a Section
11(a)(ii) Event some or all of the Rights shall not have been exercised pursuant
to Section 11 hereof prior to the date of a Section 13(a) Event, such Rights
shall thereafter be exercisable only in the manner described in Section 13(a)
hereof. In the event that a Section 11(a)(ii) Event occurs on or after the date
of a Section 13(a) Event, Rights shall not be exercisable pursuant to Section 11
hereof but shall instead be exercisable pursuant to, and only pursuant to, this
Section 13.
(e) The provisions of this Section 13 shall apply to each successive
merger, consolidation, sale or other transfer constituting a Section 13(a)
Event.
Section 14. Fractional Rights and Fractional Shares.
---------------------------------------
(a) The Company shall not be required to issue fractions of Rights or
to distribute Right Certificates that represent fractional Rights. If the
Company shall determine not to issue such fractional Rights, the Company shall
pay to the registered holders of the Right Certificates with respect to which
such fractional Rights would otherwise be issuable, at the time such fractional
Rights would otherwise have been issued as provided herein, an
22
<PAGE> 26
amount in cash equal to the same fraction of the Current Market Price of a whole
Right on the Business Day immediately prior to the date upon which such
fractional Rights would otherwise have been issuable.
(b) The Company shall not be required to issue fractions of Common
Shares or Preferred Shares (other than fractions that are integral multiples of
one four-thousandth (1/4000th) of a Preferred Share) upon exercise of Rights, or
to distribute certificates that represent fractional Common Shares or Preferred
Shares (other than fractions that are integral multiples of one four-thousandth
(1/4000th) of a Preferred Share). Fractions of Preferred Shares in integral
multiples of one four-thousandth (1/4000th) of a Preferred Share may, at the
election of the Company, be represented by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of Preferred Shares. If the Company shall
determine not to issue fractional Common Shares or Preferred Shares (or
depositary receipts in lieu of Preferred Shares), the Company shall pay to the
registered holders of Right Certificates with respect to which such fractional
Common Shares or Preferred Shares would otherwise be issuable, at the time such
Rights are exercised as provided herein, an amount in cash equal to the same
fraction of the Current Market Price of a whole Common Share or Preferred Share,
as the case may be. For purposes of this Section 14(b), the Current Market Price
of a whole Common Share or Preferred Share shall be the Closing Price per share
for the Trading Day immediately prior to the date of such exercise.
(c) The holder of a Right, by the acceptance of such Right, expressly
waives such holder's right to receive any fractional Rights or any fractional
Common Shares or Preferred Shares upon exercise of such Right, except as
permitted by this Section 14.
Section 15. Rights of Action.
----------------
All rights of action in respect of this Agreement, except the rights of action
given to the Rights Agent under Section 18 hereof, are vested in the respective
registered holders of the Right Certificates and certificates for Common Shares
representing Rights, and any registered holder of any Right Certificate or of
such certificate for Common Shares, without the consent of the Rights Agent or
of the holder of any other Right Certificate or any other certificate for Common
Shares may, in such holder's own behalf and for such holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, such holder's right to
exercise the Rights represented by such Right Certificate or by such certificate
for Common Shares in the manner provided in such Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance, and injunctive relief against actual
or threatened violations, of the obligations of any Person under this Agreement.
23
<PAGE> 27
Section 16. Agreement of Right Holders.
--------------------------
Every holder of a Right, by accepting the same, consents and agrees with the
Company and the Rights Agent and every other holder of a Right that:
(a) prior to the Distribution Date, the Rights shall be represented by
certificates for Common Shares registered in the name of the holders of such
Common Shares (which certificates for Common Shares shall also constitute Right
Certificates), and each such Right shall be transferable only in connection with
the transfer of such Common Shares;
(b) after the Distribution Date, the Right Certificates shall only be
transferable on the registry books of the Rights Agent if surrendered at the
principal stock transfer office of the Rights Agent, duly endorsed or
accompanied by a proper instrument of transfer along with a signature guarantee
and such other and further documentation as the Rights Agent may reasonably
request;
(c) the Company and the Rights Agent may deem and treat the person in
whose name the Right Certificate is registered as the absolute owner thereof and
of the Rights represented thereby (notwithstanding any notations of ownership or
writing on the Right Certificate by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent
shall be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligation.
Section 17. Right Holder and Right Certificate Holder Not Deemed a
------------------------------------------------------
Stockholder.
-----------
No holder, as such, of any Right or Right Certificate shall be entitled to vote,
receive dividends or be deemed for any purpose the holder of the securities of
the Company that may at any time be issuable upon the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Right
Certificate be construed to confer upon the holder of any Right or Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, to give or withhold consent to any
corporate action, to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, in each case until such Right or the
Rights represented by such Right Certificate shall have been exercised in
accordance with the provisions hereof.
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<PAGE> 28
Section 18. Concerning the Rights Agent.
---------------------------
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. Notwithstanding
anything in this Agreement to the contrary, in no event shall the Rights Agent
be liable for special, indirect or consequential loss or damage of any kind
whatsoever, even if the Rights Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for a Common Share or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
---------------------------------------------------------
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
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<PAGE> 29
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent.
----------------------
The Rights Agent undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, by all of which the Company and the
holders of Rights Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including without limitation, the identity of any 10% Shareholder and the
determination of Current Market Price) be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any adjustment required under the provisions of
Sections 7, 11, 13 or Section 23 hereof or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the
26
<PAGE> 30
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Rights Certificates after receipt of the
certificate described in Section 12 hereof setting forth any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificates or as to whether any Common Shares or Preferred Shares will, when
so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct; provided, however, reasonable care was exercised in the
selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the Company.
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<PAGE> 31
Section 21. Change of Rights Agent.
----------------------
The Rights Agent or any successor Rights Agent may resign and be discharged from
its duties under this Agreement upon thirty (30) days' notice in writing mailed
to the Company, and to each transfer agent of the Common Shares and Preferred
Shares by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. The Company may remove the Rights Agent or any
successor Rights Agent (with or without cause) upon thirty (30) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares and Preferred Shares, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then the incumbent Rights Agent or any registered holder of any Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Company or by such a court, shall be (a) a corporation organized and doing
business under the laws of the United States or of any other state of the United
States in good standing, which is authorized under such laws to exercise
corporate trust or stock transfer powers or (b) an affiliate of a corporation
described in clause (a) of this sentence. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares and the Preferred Shares, and a
mail a notice thereof in writing to the registered holders of the Rights
Certificates. Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
----------------------------------
Notwithstanding any of the provisions of this Agreement or of the Right
Certificates to the contrary, the Company may, at its option (subject to Section
4 hereof), issue new Right Certificates in such form as may be approved by the
Board of Directors in order to reflect any adjustment or change in the Exercise
Price and the number or kind or class of shares or other securities or property
purchasable upon exercise of the Rights in accordance with the provisions of
this Agreement.
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<PAGE> 32
Section 23. Redemption of Rights.
--------------------
(a) Until the earliest of (i) the date of the first Section 11(a)(ii)
Event, (ii) the date of the first Section 13(a) Event or (iii) the Expiration
Date, the Board of Directors of the Company may, at its option, authorize and
direct the redemption of all, but not less than all, of the then outstanding
Rights at a redemption price of $.001 per Right, as such redemption price shall
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (the "Redemption Price"), and the
Company shall so redeem the Rights; provided, however, that from and after the
date of the first Section 11(a)(ii) Event, the Rights shall not be redeemable.
(b) Immediately upon the action of the Board of Directors of the
Company authorizing and directing the redemption of the Rights pursuant to
subsection (a) of this Section 23, or at such time and date thereafter as it may
specify, and without any further action and without any notice, the right to
exercise Rights shall terminate and the only right thereafter of the holders of
Rights shall be to receive the Redemption Price. Within 10 Business Days after
the date of such action, the Company shall give notice of such redemption to the
holders of Rights by mailing such notice to all holders of Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, if
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Shares. Any notice that is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives such notice, but neither the
failure to give any such notice nor any defect therein shall affect the legality
or validity of such redemption. Each such notice of redemption shall state the
method by which the payment of the Redemption Price will be made. Neither the
Company nor any of its Affiliates or Associates may, directly or indirectly,
redeem, acquire or purchase for value any Rights in any manner other than that
specifically set forth in Section 24 hereof or in this Section 23, and other
than in connection with the purchase of Common Shares prior to the earlier of
the date of the first Section 11(a)(ii) Event or the date of the first Section
13(a) Event. (c) The Company may, at its option, pay the Redemption Price in
cash, Common Shares, Preferred Shares, other equity securities of the Company,
debt securities of the Company, other property or any combination of the
foregoing, in each case having an aggregate Current Market Price on the
Redemption Date equal to the Redemption Price.
Section 24. Exchange of Rights.
------------------
(a) At any time after the 10% Ownership Date and prior to the first
date thereafter upon which a 10% Stockholder, together with all Affiliates and
Associates of such 10% Stockholder, shall be the Beneficial Owner of 50% or more
of the Voting Shares then outstanding, the Board of Directors of the Company
may, at its option, authorize and direct the exchange of all, but not less than
all, of the then outstanding Rights for Common Shares at an exchange ratio (the
"Exchange Ratio") per Right, equal to that number of Common Shares which, as of
the date of the Board of Directors' action, has a Current Market Price equal to
the difference between the
29
<PAGE> 33
Exercise Price and the Current Market Price of the Common Shares that each
holder of a Right would otherwise have the right to receive upon the exercise of
a Right on such date.
(b) Immediately upon the action of the Board of Directors of the
Company authorizing and directing the exchange of the Rights pursuant to
subsection (a) of this Section 24, or at such time and date thereafter as it may
specify, and without any further action and without any notice, the right to
exercise Rights shall terminate and the only right thereafter of the holders of
Rights shall be to receive a number of Common Shares equal to the Exchange
Ratio. Within 10 Business Days after the date of such action, the Company shall
give notice of such exchange to the holders of Rights by mailing such notice to
all holders of Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, if prior to the Distribution Date, on the registry
books of the transfer agent for the Common Shares. Any notice that is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives such notice, but neither the failure to give any such notice nor any
defect therein shall affect the legality or validity of such exchange. Each such
notice of exchange shall state the method by which the Rights will be exchanged
for Common Shares. Neither the Company nor any of its Affiliates or Associates
may, directly or indirectly, redeem, acquire or purchase for value any Rights in
any manner other than (i) as specifically set forth in Section 23 hereof, (ii)
as specifically set forth in this Section 24 or (iii) in connection with the
purchase of Common Shares prior to the earlier of the date of the first Section
11(a)(ii) Event or the date of the first Section 13(a) Event.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute (i) cash, (ii) other equity securities of the Company
(including, but not limited to, Common Share Equivalents), (iii) debt securities
of the Company, (iv) other property or (v) any combination of the foregoing for
the Common Shares exchangeable for Rights, as appropriately adjusted. Subject to
Section 7(d) hereof, in the event that the Company takes any action pursuant to
this Section 24, such action shall apply uniformly to all outstanding Rights.
Section 25. Notice of Certain Events.
------------------------
(a) In the event that the Company shall propose (i) to declare or pay
any dividend payable on or make any distribution with respect to its Common
Shares or Preferred Shares (other than a regular quarterly cash dividend), (ii)
to offer to the holders of its Common Shares or Preferred Shares options, rights
or warrants to subscribe for or to purchase any additional shares thereof or
shares of stock of any class or any other securities, rights or options, (iii)
to effect any reclassification of its Common Shares or Preferred Shares (other
than a reclassification involving only the subdivision of outstanding shares),
(iv) to effect any consolidation or merger with or into, or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one or more transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to, any other Person or Persons, or (v) to effect the liquidation, dissolution
or winding up of the
30
<PAGE> 34
Company, then and in each such case, the Company shall give to each holder of a
Right Certificate and to the Rights Agent, in accordance with Section 26 hereof,
a notice of such proposed action, that shall specify the record date for the
purpose of such dividend or distribution, or the date upon which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution or winding up is to take place and the date of participation therein
by the holders of record of the Common Shares or Preferred Shares, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (i) or (ii) above at least 20 days prior to the record date
for determining holders of the Common Shares or Preferred Shares for purposes of
such action, and in the case of any such other action, at least 20 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Shares or Preferred Shares, whichever date
shall be the earlier. The failure to give the notice required by this Section 25
or any defect therein shall not affect the legality or validity of the action
taken by the Company or the vote upon any such action.
(b) Upon the occurrence of each Section 11(a)(ii) Event and each
Section 13(a) Event, the Company shall as soon as practicable thereafter give to
each holder of a Right Certificate and to the Rights Agent, in accordance with
Section 26 hereof, a notice of the occurrence of such event, specifying the
event and the consequences of the event to holders of Rights under Sections 11
and 13 hereof.
Section 26. Notices.
-------
Notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Right Certificate to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, California 90245
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Company or by the holder
of any Right Certificate to or on the Rights Agent shall be sufficiently given
or made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) to the principal stock transfer
office of the Rights Agent as follows:
ChaseMellon Shareholder Services, L.L.C.
400 South Hope Street
4th Floor
Los Angeles, California 90071
Attention: Department Manager
31
<PAGE> 35
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company or the transfer agent.
Section 27. Supplements and Amendments.
--------------------------
(a) The Board of Directors of the Company may, from time to time,
before and after the Distribution Date, without the approval of any holders of
Rights, supplement or amend any provision of this Agreement in any manner,
whether or not such supplement or amendment is adverse to any holder of Rights,
and direct the Rights Agent so to supplement or amend such provision, and the
Rights Agent shall so supplement or amend such provision; provided, however,
that from and after the earliest of (i) the date of the first Section 11(a)(ii)
Event, (ii) the date of the first Section 13(a) Event, (iii) the Redemption Date
or (iv) the Expiration Date, this Agreement shall not be supplemented or amended
in any manner that would materially and adversely affect any holder of
outstanding Rights other than a 10% Stockholder or a Surviving Person; and
provided further, however, that from and after the date of the first Section
11(a)(ii) Event, the Agreement shall not be supplemented or amended in any
manner.
(b) From and after the earlier of the date of the first Section
11(a)(ii) Event or the date of the first Section 13(a) Event and prior to the
earlier of the Redemption Date or the Expiration Date, the Company shall not
effect any amendment to the Certificate of Designations for the Preferred Shares
that would materially and adversely affect the rights, privileges or preferences
of the Preferred Shares without the prior approval of the holders of two-thirds
or more of the then outstanding Rights.
(c) Upon the delivery of a certificate from an appropriate officer of
the Company which states that the proposed supplement or amendment is in
compliance with the terms of this section, the Rights Agent shall execute such
supplement or amendment. Notwithstanding any other provision hereof, the Rights
Agent's consent must be obtained regarding any amendment or supplement pursuant
to this Section 27 which alters the Rights Agent's rights or duties.
Section 28. Certain Covenants.
-----------------
Subject to Section 27 hereof and the other provisions of this Agreement, from
and after the earlier of the date of the first Section 11(a)(ii) Event or the
date of the first Section 13(a) Event and prior to the earlier of the Redemption
Date or the Expiration Date, the Company shall not (a) issue or sell, or permit
any Subsidiary to issue or sell, to a 10% Stockholder or a Surviving Person, or
any Affiliate or Associate of a 10% Stockholder or a Surviving Person, or any
Person holding Voting Shares of the Company that are Beneficially Owned by a 10%
Stockholder or a Surviving Person, (i) any rights, options, warrants or
convertible securities on terms similar to, or that materially adversely affect
the value of, the Rights or (ii) Preferred Shares, Common Shares or shares of
any other class of capital stock, if such sale is
32
<PAGE> 36
intended to or would materially adversely affect the value of the Rights, or (b)
take any other action that is intended to or would materially adversely affect
the value of the Rights.
Section 29. Successors.
----------
All the covenants and provisions of this Agreement by or for the benefit of the
Company or the Rights Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
Section 30. Benefits of this Agreement.
--------------------------
Nothing in this Agreement shall be construed to give to any Person other than
the Company, the Rights Agent, the registered holders of the Right Certificates
(other than those representing Rights that have become null and void) and the
certificates for Common Shares representing Rights (other than those Rights that
have become null and void) any legal or equitable right, remedy or claim under
this Agreement, and this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent, such registered holders of Right Certificates
and such certificates for Common Shares representing Rights.
Section 31. Severability.
------------
If any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction or other authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
Section 32. Governing Law.
-------------
This Agreement and each Right Certificate issued hereunder shall be deemed to be
a contract made under the laws of the State of Nevada and for all purposes shall
be governed by and construed in accordance with the laws of such state
applicable to contracts made and performed entirely within such state.
Section 33. Counterparts.
------------
This Agreement may be executed in any number of counterparts and each such
counterpart shall for all purposes be deemed to be an original and all such
counterparts shall together constitute but one and the same instrument.
Section 34. Descriptive Headings.
--------------------
Descriptive headings of the several sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
33
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
COMPUTER SCIENCES CORPORATION
By: /s/Hayward D. Fisk
-------------------------------
Name: Hayward D. Fisk
Title: Vice President
CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.,
as Rights Agent
By: /s/Michael Dziecolowski
-------------------------------
Name: Michael Dziecolowski
Title: Assistant Vice President
34
<PAGE> 38
EXHIBIT A
FORM OF
RIGHT CERTIFICATE
Certificate No. R-___________ Rights
NOT EXERCISABLE AFTER FEBRUARY 18, 2008 OR EARLIER IF REDEEMED OR
EXCHANGED. THE RIGHTS ARE SUBJECT TO EARLIER EXPIRATION, REDEMPTION
AND EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY CERTAIN PERSONS OR ANY SUBSEQUENT HOLDER OF SUCH
RIGHTS MAY BECOME NULL AND VOID.
Right Certificate
COMPUTER SCIENCES CORPORATION
This certifies that ______________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms and conditions of a Rights Agreement
(the "Rights Agreement") dated as of February 18, 1998 by and between Computer
Sciences Corporation, a Nevada corporation (the "Company"), and ChaseMellon
Shareholder Services, L.L.C. (the "Rights Agent"), to purchase from the Company
at any time prior to the earlier of the Redemption Date (as such term is defined
in the Rights Agreement) or 5:00 o'clock p.m., California time, on February 18,
1998, at the office or agency of the Rights Agent at Ridgefield Park, New
Jersey, or at the office of its successor as Rights Agent, one four-thousandth
(1/4000th) of a fully paid and nonassessable share of Series A Junior
Participating Preferred Stock, par value $1.00 per share, of the Company (a
"Preferred Share") or, in certain circumstances, other securities or other
property, at a purchase price of $500 (Five Hundred Dollars) per one
four-thousandth (1/4000th) of a Preferred Share (the "Exercise Price"), upon
presentation and surrender of this Right Certificate with the Form of Election
to Purchase, including Certificate, on the reverse side hereof completed and
duly executed, with signature guaranteed.
The number of Rights represented by this Right Certificate and the Exercise
Price set forth above are the number of Rights and the Exercise Price as of
February 18, 1998, based upon the Preferred Shares as constituted on such date.
As provided in the Rights Agreement, the Exercise Price and the number of
Preferred Shares or other securities or other property that may be purchased
upon the exercise of the Rights represented by this Right Certificate are
subject to modification and adjustment upon the occurrence of certain events.
A-1
<PAGE> 39
The Rights Agreement contains a full description of the rights, limitations
of rights, obligations, duties and immunities of the Rights Agent, the Company
and the holders of Right Certificates. This Right Certificate is subject to all
the terms and conditions of the Rights Agreement, which terms and conditions are
hereby incorporated herein by reference and made a part hereof. Copies of the
Rights Agreement are on file at the principal executive offices of the Company
and the above-mentioned offices of the Rights Agent.
This Right Certificate, with or without other Right Certificates, upon
presentation and surrender at the above-mentioned offices of the Rights Agent,
with the Form of Assignment, including Certificate, on the reverse side hereof
completed and duly executed, with signature guaranteed, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
representing Rights entitling the holder thereof to purchase a like aggregate
number of Preferred Shares or, in certain circumstances, other securities or
other property, as the Rights represented by the Right Certificate or Right
Certificates surrendered shall have entitled such holder to purchase. If this
Right Certificate shall be exercised in part, the holder shall be entitled to
receive, upon the surrender hereof with the Form of Election to Purchase,
including Certificate, on the reverse side hereof completed and duly executed,
with signature guaranteed, another Right Certificate or Right Certificates for
the number of whole Rights not exercised. Subject to the provisions of the
Rights Agreement, the Rights represented by this Right Certificate may be
redeemed by the Company, at its option, at a redemption price of $.001 per Right
or, upon the occurrence of certain events, the Company, at its option, may
exchange such Rights for fully paid and nonassessable shares of Common Stock,
par value $1.00 per share, of the Company at an exchange ratio, per Right, of
that number of Common Shares (as defined in the Rights Agreement) which, as of
the date of the Board of Directors' action, has a Current Market Price (as
defined in the Rights Agreement) equal to the difference between the Exercise
Price and the Current Market Price of the Common Shares which each holder of a
Right would have a right to receive upon the exercise of a Right on such date.
No fractional securities shall be issued upon the exercise of any Right or
Rights represented hereby (other than fractions of Preferred Shares that are
integral multiples of one four-thousandth (1/4000th) of a Preferred Share, that
may, at the option of the Company, be represented by depository receipts), but
in lieu thereof, a cash payment shall be made, as provided in the Rights
Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or other securities of the Company that may at any time be issuable on
the exercise hereof, nor shall anything contained herein be construed to confer
upon the holder hereof, as such, any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action, or to receive notice of meetings or other actions
affecting stockholders (except as provided in the Rights
A-2
<PAGE> 40
Agreement), or to receive dividends or subscription rights, until the Right or
Rights represented by this Right Certificate shall have been exercised as
provided in the Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of _______________________, ____.
Attest: COMPUTER SCIENCES CORPORATION
By _________________________ By ________________________
Name: Name:
Title: Title:
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By _________________________ By ________________________
Name: Name:
Title: Title:
A-3
<PAGE> 41
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
any or all of the Rights represented by this Right Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
(Name, address and social security or other
identifying number of transferee)
___________________________________________ (_____________) of the Rights
represented by this Right Certificate, together with all right, title and
interest in and to said Rights, and hereby irrevocably constitutes and appoints
__________________ attorney to transfer said Rights on the books of Computer
Sciences Corporation with full power of substitution.
Dated:________________, ____ _________________________
(Signature)
Signature Guaranteed:
A-4
<PAGE> 42
Certificate
(to be completed, if true)
The undersigned hereby certifies that the Rights represented by this Right
Certificate are not Beneficially Owned by a 10% Stockholder or an Affiliate or
Associate of a 10% Stockholder (as such capitalized terms are defined in the
Rights Agreement).
Dated:________________, ____ _________________________
(Signature)
Signature Guaranteed:
A-5
<PAGE> 43
Form of Reverse Side of Right Certificate
(continued)
NOTICE
The signatures to the foregoing Assignment and the foregoing Certificate,
if applicable, must correspond to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States of America.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company may deem the Rights represented by this Right
Certificate to be Beneficially Owned by a 10% Stockholder or an Affiliate or
Associate of a 10% Stockholder (as such capitalized terms are defined in the
Rights Agreement), and not issue any Right Certificate or Right Certificates in
exchange for this Right Certificate.
A-6
<PAGE> 44
Form of Reverse Side of Right Certificate
(continued)
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder desires to exercise
any or all of the Rights represented by this Right Certificate)
To Computer Sciences Corporation:
The undersigned hereby irrevocably elects to exercise
_________________________ (_____________) of the Rights represented by this
Right Certificate to purchase the following:
(Check one of the following boxes)
[ ] the Preferred Shares or other securities or property issuable upon
the exercise of said number of Rights pursuant to Section 7(c) of the
Rights Agreement.
[ ] the shares of the Common Stock, par value $1.00 per share, of the
Company, or other securities or property issuable upon the exercise of
said number of Rights pursuant to Section 11(a)(ii) of the Rights
Agreement.
[ ] the securities issuable upon the exercise of said number of Rights
pursuant to Section 13(a) of the Rights Agreement.
The undersigned hereby requests that any such property and a certificate
for any such securities be issued in the name of and delivered to:
- --------------------------------------------------------------------------
(Name, address and social security or other
identifying number of issuee)
The undersigned hereby further requests that if said number of Rights shall
not be all the Rights represented by this Right Certificate, a new Right
Certificate for the remaining balance of such Rights be issued in the name of
and delivered to:
- --------------------------------------------------------------------------
(Name, address and social security or other
identifying number of issuee)
Dated:________________, ____ _________________________
(Signature)
Signature Guaranteed:
A-7
<PAGE> 45
Form of Reverse Side of Right Certificate
(continued)
Certificate
(to be completed, if true)
The undersigned hereby certifies that the Rights represented by this Right
Certificate are not Beneficially Owned by a 10% Stockholder or an Affiliate or
Associate of a 10% Stockholder (as such capitalized terms are defined in the
Rights Agreement).
Dated:________________, ____ _________________________
(Signature)
Signature Guaranteed:
NOTICE
The signatures to the foregoing Assignment and the foregoing Certificate,
if applicable, must correspond to the name as written upon the face of this
Right Certificate in every particular, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company may deem the Rights represented by this Right
Certificate to be Beneficially Owned by a 10% Stockholder or an Affiliate or
Associate of a 10% Stockholder (as such capitalized terms are defined in the
Rights Agreement), and not issue any property or certificate for securities upon
the exercise of this Right Certificate or issue any new Right Certificate for
any remaining balance of unexercised Rights represented by this Right
Certificate.
A-8
<PAGE> 1
EXHIBIT (c)(5)
COMPUTER SCIENCES CORPORATION
DEFERRED COMPENSATION PLAN
<PAGE> 2
COMPUTER SCIENCES CORPORATION
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS ..........................................................1
Section 1.1 - General.....................................................1
Section 1.2 - Account ....................................................1
Section 1.3 - Administrator ..............................................1
Section 1.4 - Board.......................................................2
Section 1.5 - Change in Control ..........................................2
Section 1.6 - Chief Executive Officer ....................................2
Section 1.7 - Code........................................................2
Section 1.8 - Committee ..................................................2
Section 1.9 - Company ....................................................2
Section 1.10- Deferred Compensation ......................................2
Section 1.11- Election Form ..............................................3
Section 1.12- Eligible Key Executive .....................................3
Section 1.13- Employee ...................................................3
Section 1.14- ERISA ......................................................3
Section 1.15- Exchange Act ...............................................3
Section 1.16- Hardship ...................................................3
Section 1.17- Key Executive ..............................................4
Section 1.18- Key Executive Plan .........................................4
Section 1.19- Nonemployee Director .......................................4
Section 1.20- Nonemployee Director Plan ..................................4
Section 1.21- Partial First Plan Year ....................................4
Section 1.22- Participant ................................................5
Section 1.23- Plan........................................................5
Section 1.24- Plan Year ..................................................5
Section 1.25- Predecessor Plan ...........................................5
Section 1.26- Retirement .................................................5
Section 1.27- Separation from Service ....................................5
Section 1.28- Qualified Compensation .....................................5
ARTICLE II - ELIGIBILITY..........................................................6
Section 2.1 - Requirements for Participation .............................6
Section 2.2 - Deferral Election Procedure ................................6
Section 2.3 - Content of Election Form ...................................6
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE III - PARTICIPANTS' DEFERRALS ............................................7
Section 3.1 - Deferral of Qualified Compensation .........................7
Section 3.2 - Deferral for Partial First Plan Year .......................7
ARTICLE IV - DEFERRED COMPENSATION ACCOUNTS ......................................7
Section 4.1 - Deferred Compensation Accounts .............................7
Section 4.2 - Crediting of Deferred Compensation .........................7
Section 4.3 - Crediting of Earnings ......................................8
Section 4.4 - Applicability of Account Values ............................8
Section 4.5 - Vesting of Deferred Compensation Accounts ..................8
Section 4.6 - Assignments, Etc. Prohibited ...............................8
ARTICLE V - DISTRIBUTIONS OF DEFERRED COMPENSATION ACCOUNTS ......................8
Section 5.1 - Distributions upon a Key Executive's Retirement and a
Nonemployee Director's Separation from Service ......8
Section 5.2 - Distributions upon a Key Executive's Pre-Retirement
Separation from Service .............................9
Section 5.3 - Distributions upon a Participant's Death ...................9
Section 5.4 - Optional Distributions .....................................10
Section 5.5 - Applicable Taxes ...........................................10
ARTICLE VI - WITHDRAWALS FROM DEFERRED COMPENSATION
ACCOUNTS ...................................................11
Section 6.1 - Hardship Withdrawals from Accounts .........................11
Section 6.2 - Withdrawals after a Change in Control ......................11
Section 6.3 - Voluntary Withdrawals ......................................11
Section 6.4 - Applicable Taxes ...........................................12
ARTICLE VII - ADMINISTRATIVE PROVISIONS ..........................................12
Section 7.1 - Administrator's Duties and Powers ..........................12
Section 7.2 - Limitations Upon Powers ....................................12
Section 7.3 - Final Effect of Administrator Action .......................13
Section 7.4 - Committee ..................................................13
Section 7.5 - Indemnification by the Company; Liability Insurance ........13
Section 7.6 - Recordkeeping ..............................................13
Section 7.7 - Statement to Participants ..................................14
Section 7.8 - Inspection of Records ......................................14
Section 7.9 - Identification of Fiduciaries ..............................14
Section 7.10- Procedure for Allocation of Fiduciary Responsibilities .....14
Section 7.11- Claims Procedure ...........................................14
Section 7.12- Conflicting Claims .........................................16
Section 7.13- Service of Process .........................................16
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII - MISCELLANEOUS PROVISIONS ..........................................16
Section 8.1 - Termination of the Plan ....................................16
Section 8.2 - Limitation on Rights of Participants .......................17
Section 8.3 - Consolidation or Merger; Adoption of Plan by
Other Companies .....................................17
Section 8.4 - Errors and Misstatements ...................................17
Section 8.5 - Payment on Behalf of Minor, Etc. ...........................18
Section 8.6 - Amendment of Plan ..........................................18
Section 8.7 - Funding ....................................................18
Section 8.8 - Governing Law ..............................................18
Section 8.9 - Pronouns and Plurality .....................................18
Section 8.10- Titles......................................................18
Section 8.11- References .................................................19
</TABLE>
iii
<PAGE> 5
COMPUTER SCIENCES CORPORATION
DEFERRED COMPENSATION PLAN
AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 2, 1998
Computer Sciences Corporation, a Nevada corporation, by resolution of
its Board of Directors dated August 14, 1995, has adopted the Computer Sciences
Corporation Deferred Compensation Plan (the "Plan"), which constitutes a
complete amendment and restatement of the Computer Sciences Corporation
Nonqualified Deferred Compensation Plan (the "Predecessor Plan"), effective as
of September 30, 1995, for the benefit of its Nonemployee Directors, as defined
below, and certain of its Key Executives, as defined below.
The Plan shall constitute two separate plans, one for the benefit of
Nonemployee Directors and one for the benefit of Key Executives. The plan for
Key Executives is a nonqualified deferred compensation plan which is unfunded
and is maintained primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees, within the
meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA, as defined below.
The plan for Nonemployee Directors is not subject to ERISA.
ARTICLE I
DEFINITIONS
Section 1.1 General
Whenever the following terms are used in the Plan with the first letter
capitalized, they shall have the meaning specified below unless the context
clearly indicates to the contrary.
Section 1.2 Account
"Account" of a Participant shall mean the Participant's individual
deferred compensation account established for his or her benefit under Article
IV hereof.
Section 1.3 Administrator
"Administrator" shall mean Computer Sciences Corporation, acting through
its Chief Executive Officer or his or her delegate, except that if Computer
Sciences Corporation appoints a Committee under Section 7.4, the term
"Administrator" shall mean the Committee as to those duties, powers and
responsibilities specifically conferred upon the Committee.
<PAGE> 6
Section 1.4 Board
"Board" shall mean the Board of Directors of Computer Sciences
Corporation. The Board may delegate any power or duty otherwise allocated to the
Administrator to any other person or persons, including a Committee appointed
under Section 7.4.
Section 1.5 Change in Control
"Change in Control" means, after September 30, 1995, (a) the acquisition
by any person, entity or group (as defined in Section 13(d)3 of the Exchange
Act), as beneficial owner, directly or indirectly, of securities of Computer
Sciences Corporation representing twenty percent (20%) or more of the combined
voting power of the then outstanding securities of Computer Sciences
Corporation, (b) a change during any period of two (2) consecutive years of a
majority of the Board as constituted as of the beginning of such period, unless
the election of each director who was not a director at the beginning of such
period was approved by vote of at least two-thirds of the directors then in
office who were directors at the beginning of such period, (c) a sale of
substantially all of the property and assets of Computer Sciences Corporation,
(d) a merger, consolidation, reorganization or other business combination to
which Computer Sciences Corporation is a party and the consummation of which
results in the outstanding voting securities of Computer Sciences Corporation
being exchanged for or converted into cash, property and/or securities not
issued by Computer Sciences Corporation, (e) a merger, consolidation,
reorganization or other business combination to which the Company is a party and
the consummation of which does not result in the outstanding voting securities
of the Company being exchanged for or converted into cash, property and/or
securities not issued by the Company, provided that the outstanding voting
securities of the Company immediately prior to such business combination (or, if
applicable, the securities of the Company into which such voting securities are
converted as a result of such business combination) represent less than 50% of
the voting power of the Company immediately following such business combination,
or (f) any other event constituting a change in control of Computer Sciences
Corporation for purposes of Schedule 14A of Regulation 14A under the Exchange
Act.
Section 1.6 Chief Executive Officer
"Chief Executive Officer" shall mean the Chief Executive Officer of
Computer Sciences Corporation.
Section 1.7 Code
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2
<PAGE> 7
Section 1.8 Committee
"Committee" shall mean the Committee, if any, appointed in accordance
with Section 7.4.
Section 1.9 Company
"Company" shall mean Computer Sciences Corporation and all of its
affiliates, and any entity which is a successor in interest to Computer Sciences
Corporation and which continues the Plan under Section 8.3(a).
Section 1.10 Deferred Compensation
"Deferred Compensation" of a Participant shall mean the amounts deferred
by such Participant under Article III of the Plan.
Section 1.11 Election Form
"Election Form" shall mean the form of election provided by the
Administrator to each Eligible Executive and Nonemployee Director pursuant to
Section 3.1.
Section 1.12 Eligible Key Executive
"Eligible Key Executive" shall mean any Key Executive who has been
designated as eligible to participate in the Plan with respect to any Plan Year
by the Chief Executive Officer.
Section 1.13 Employee
"Employee" shall mean any person who renders services to the Company in
the status of an employee as that term is defined in Code Section 3121(d),
including officers but not including directors who serve solely in that
capacity.
Section 1.14 ERISA
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
Section 1.15 Exchange Act
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
3
<PAGE> 8
Section 1.16 Hardship
(a) "Hardship" of a Participant, shall mean an unforeseeable emergency
which constitutes a severe financial hardship resulting from any one or more of
the following:
(i) sudden and unexpected illness or accident of the Participant
or of a dependent (as defined in Code Section 152(a)) of the
Participant;
(ii) loss of the Participant's property due to casualty; or
(iii) any other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the Participant's
control.
(b) Notwithstanding subsection(a) above, a financial need shall not
constitute a Hardship unless it is for at least $1,000.00 (or the entire
principal amount of the Participant's Accounts, if less).
(c) Whether a Participant has incurred a Hardship shall be determined by
the Administrator in its discretion on the basis of all relevant facts and
circumstances and in accordance with nondiscriminatory and objective standards,
uniformly interpreted and consistently applied.
Section 1.17 Key Executive
"Key Executive" shall mean any Employee of the Company who is an officer
or other key executive of the Company and who qualifies as a "highly compensated
employee or management employee" within the meaning of Title I of ERISA.
Section 1.18 Key Executive Plan
"Key Executive Plan" shall mean the portion of this Plan which is
maintained or the benefit of the Company's Key Executives.
Section 1.19 Nonemployee Director
"Nonemployee Director" shall mean a member of the Board who is not an
Employee.
Section 1.20 Nonemployee Director Plan
"Nonemployee Director Plan" shall mean the portion of this Plan which is
maintained for the benefit of the Company's Nonemployee Directors.
4
<PAGE> 9
Section 1.21 Partial First Plan Year
"Partial First Plan Year" shall mean that portion of the first Plan Year
of the Plan subject to its amendment and restatement effective as of September
30, 1995, which shall begin on September 30, 1995 and end on March 29, 1996.
Section 1.22 Participant
"Participant" shall mean any person who elects to participate in the
Plan as provided in Article II and who defers Qualified Compensation under the
Plan.
Section 1.23 Plan
"Plan" shall mean the Computer Sciences Corporation Deferred
Compensation Plan.
Section 1.24 Plan Year
"Plan Year" shall mean the fiscal year of the Company.
Section 1.25 Predecessor Plan
"Predecessor Plan" shall mean the Computer Sciences Corporation
Nonqualified Deferred Compensation Plan as in effect and maintained by the
Company for the benefit of its Nonemployee Directors prior to the amendment and
restatement of the Plan effective as of September 30, 1995.
Section 1.26 Retirement
"Retirement" shall mean, with respect to a Key Executive, a Separation
from Service of such Key Executive (a) on or after attainment of age sixty-two
(62) or (b) prior to attainment of age sixty-two (62) if the Chief Executive
Officer shall designate such Separation from Service as Retirement for purposes
of the Plan.
Section 1.27 Separation from Service
(a) "Separation from Service" of a Key Executive shall mean the
termination of his or her employment with the Company by reason of resignation,
discharge, death or Retirement. A leave of absence or sick leave authorized by
the Company in accordance with established policies, a vacation period or a
military leave shall not constitute a Separation from Service; provided,
however, that failure to return to work upon expiration of any leave of absence,
sick leave, military leave or vacation shall be considered a resignation
effective as of the date of expiration of such leave of absence, sick leave,
military leave or vacation.
(b) "Separation from Service" of a Nonemployee Director shall mean the
Nonemployee Director's ceasing to serve as a member of the Board for any reason.
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Section 1.28 Qualified Compensation
(a) "Qualified Compensation" of a Key Executive shall mean the Key
Executive's annual bonus which may be payable to the Key Executive under the
Computer Sciences Corporation Annual Incentive Plan or such other bonus or
incentive compensation plan of the Company which may be designated from time to
time by the Administrator.
(b) "Qualified Compensation" of a Nonemployee Director shall mean the
retainer, consulting fees, committee fees and meeting fees which are payable to
the Nonemployee Director by the Company.
ARTICLE II
ELIGIBILITY
Section 2.1 Requirements for Participation
Any Eligible Key Executive and any Nonemployee Director shall be
eligible to be a Participant in the Plan.
Section 2.2 Deferral Election Procedure
For each Plan Year, the Administrator shall provide each Eligible Key
Executive and each Nonemployee Director with an Election Form on which such
person may elect to defer his or her Qualified Compensation under Article III.
Each such person who elects to defer Qualified Compensation under Article III
shall complete and sign the Election Form and return it to the Administrator.
Section 2.3 Content of Election Form
Each Participant who elects to defer Qualified Compensation under the
Plan shall set forth on the Election Form specified by the Administrator:
(a) the amount of Qualified Compensation to be deferred under Article
III and the Participant's authorization to the Company to reduce his or her
Qualified Compensation by the amount of the deferred compensation,
(b) the length of time with respect to which the Participant elects to
defer the Deferred Compensation,
(c) the method under which the Participant's Deferred Compensation shall
be payable, and
(d) such other information, acknowledgments or agreements as may be
required by the Administrator.
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ARTICLE III
PARTICIPANTS' DEFERRALS
Section 3.1 Deferral of Qualified Compensation
(a) Each Eligible Key Executive and Nonemployee Director may elect to
defer into his or her Account all or any portion of the Qualified Compensation
which would otherwise be payable to him or her for any Plan Year in which he or
she has not incurred a Separation from Service as of the first day of the Plan
Year in question. Such election shall be made by the Eligible Key Executive or
Nonemployee Director completing and delivering to the Administrator his or her
Election Form for such Plan Year no later than the last day of the next
preceding Plan Year, except (i) with respect to the Partial First Plan Year, in
which case such election shall be made not later than September 29, 1995, and
(ii) with respect to a person who first becomes an Employee or Nonemployee
Director during a Plan Year, which person may make such election within 30 days
after first becoming an Employee or Nonemployee Director, respectively.
(b) Any such election made by a Participant to defer Qualified
Compensation shall be irrevocable and shall not be amendable by the Participant,
except:
(i) as set forth in Sections 6.2 and 6.3 hereof; or
(ii) in the event of a Hardship, a Participant may terminate the
Participant's deferral election for the Plan Year in which the Hardship
occurs with respect to all Qualified Compensation which has not yet been
deferred.
Section 3.2 Deferral for Partial First Plan Year
For the Partial First Plan Year, Participants may defer any or all of
the Qualified Compensation which is earned by them after September 29, 1995 and
before March 30, 1996. Deferral elections previously made by Nonemployee
Directors for the 1996 Plan Year shall only remain effective with respect to
Qualified Compensation earned prior to September 30, 1995.
ARTICLE IV
DEFERRED COMPENSATION ACCOUNTS
Section 4.1 Deferred Compensation Accounts
The Administrator shall establish and maintain for each Participant an
Account to which shall be credited the amounts allocated thereto under this
Article IV and from which shall be debited the Participant's distributions and
withdrawals under Articles V and VI.
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Section 4.2 Crediting of Deferred Compensation
Each Participant's Account shall be credited with an amount which is
equal to the amount of the Participant's Qualified Compensation which such
Participant has elected to defer under Article III at the time such Qualified
Compensation would otherwise have been paid to the Participant.
Section 4.3 Crediting of Earnings
Beginning on September 30, 1995 and subject to amendment by the Board,
for each Plan Year earnings shall be credited to each Participant's Account
(including the Accounts of Nonemployee Directors under the Predecessor Plan), at
a rate equal to 120% of the 120-month rolling average interest payable on
10-year United States Treasury Notes as of December 31 of the preceding Plan
Year, compounded annually. Earnings shall be credited on such valuation dates as
the Administrator shall determine.
Section 4.4 Applicability of Account Values
The value of each Participant's Account as determined as of a given date
under this Article, plus any amounts subsequently allocated thereto under this
Article and less any amounts distributed or withdrawn under Articles V or VI
shall remain the value thereof for all purposes of the Plan until the Account is
revalued hereunder.
Section 4.5 Vesting of Deferred Compensation Accounts
Subject to the possible reductions provided for in Section 6.2 and 6.3
with respect to certain Participant withdrawals, each Participant's interest in
his or her Account shall be 100% vested and non-forfeitable at all times.
Section 4.6 Assignments, Etc. Prohibited
No part of any Participant's Account shall be liable for the debts,
contracts or engagements of the Participant, or the Participant's beneficiaries
or successors in interest, or be taken in execution by levy, attachment or
garnishment or by any other legal or equitable proceeding, nor shall any such
person have any rights to alienate, anticipate, commute, pledge, encumber or
assign any benefits or payments hereunder in any manner whatsoever except to
designate a beneficiary as provided in Section 5.3.
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<PAGE> 13
ARTICLE V
DISTRIBUTIONS OF DEFERRED COMPENSATION ACCOUNTS
Section 5.1 Distributions upon a Key Executive's Retirement and a Nonemployee
Director's Separation from Service
(a) The Account of a Key Executive who incurs a Separation from Service
upon his or her Retirement, and the Account of a Nonemployee Director who incurs
a Separation from Service, in each case other than on account of death, shall be
paid to the Participant as specified in any election made by the Participant
pursuant to Section 5.4 hereof. Any remaining balance of the Participant's
Account shall be paid to the Participant, as specified by the Participant in an
election made pursuant to this Section 5.1, in a lump-sum distribution or in
approximately equal annual installments over 5, 10 or 15 years. Payment(s) shall
commence within thirty (30) days following the date of such Separation from
Service.
(b) At the time a Participant first elects to defer Qualified
Compensation under the Plan, he or she shall make an election pursuant to this
Section 5.1. Such election shall remain in effect and shall apply to the
Participant's total Account, as the same may increase or decrease from time to
time. An election pursuant to this Section 5.1 may be superseded by a subsequent
election, which subsequent election shall then apply to the Participant's total
Account, as the same may increase or decrease from time to time. Notwithstanding
the foregoing, no subsequent election pursuant to this Section 5.1 shall be
effective unless it is made at least 13 months prior to the Participant's
Separation from Service.
Section 5.2 Distributions upon a Key Executive's Pre-Retirement Separation from
Service
The Account of a Key Executive who incurs a Separation from Service
prior to his or her Retirement and other than on account of his or her death
shall be paid to the Participant in a lump-sum distribution within thirty (30)
days following the date of such Separation from Service, notwithstanding any
election to the contrary made by the Participant pursuant to Section 5.4 hereof.
Section 5.3 Distributions upon a Participant's Death
(a) Notwithstanding anything to the contrary in the Plan, the remaining
balance of the Account of a Participant who dies (i) shall be paid to the
persons and entities designated by the Participant as his or her beneficiaries
for such purpose and (ii) shall be paid in the manner set forth in this Section
5.3. With respect to a Participant who does not incur a Separation from Service
prior to his or her death, such balance shall be paid, as specified by the
Participant in an election made pursuant to this Section 5.3, in a lump-sum
distribution or in approximately equal annual installments over 5, 10 or 15
years. With respect to a Participant who does incur a Separation from Service
prior to his or her death, such balance shall be paid, as specified by the
Participant in an election made pursuant to this Section 5.3, in a
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<PAGE> 14
lump-sum distribution or in approximately equal annual installments over the
remaining term of the 5, 10 or 15-year payment period elected pursuant to
Section 5.1 hereof. Payment(s) shall commence within thirty (30) days following
the date of death.
(b) At the time a Participant first elects to defer Qualified
Compensation under the Plan, he or she shall make an election pursuant to this
Section 5.3. Such election shall remain in effect and shall apply to the
Participant's total Account, as the same may increase or decrease from time to
time. An election pursuant to this Section 5.3 may be superseded by a subsequent
election, which subsequent election shall then apply to the Participant's total
Account, as the same may increase or decrease from time to time. Notwithstanding
the foregoing, no subsequent election pursuant to this Section 5.3 shall be
effective unless it is made at least 13 months prior to the Participant's
Separation from Service.
Section 5.4 Optional Distributions
(a) At the time a Participant elects to defer Qualified Compensation for
any Plan Year, he or she may also elect, pursuant to this Section 5.4, to
receive a special, lump-sum distribution of any or all of the amount deferred
for such Plan Year on a date specified by the Participant in such election,
which date must be at least 24 months after the date of such election. Any such
special distribution shall be made within five (5) business days after the date
therefor specified by the Participant, unless the Participant shall have died on
or prior to such date, in which case no such special distribution shall be made.
(b) An election pursuant to this Section 5.4 may be superseded by one
subsequent election; provided, however, that such subsequent election shall not
be effective unless: (i) it is irrevocable; (ii) it is made at least 13 months
prior to the Participant's Separation from Service and at least 24 months prior
to the date upon which the special distribution will be made; and (iii) the date
of the special distribution specified in the subsequent election is earlier than
the date specified in the initial election.
(c) Notwithstanding the foregoing, an election pursuant to this Section
5.4 with respect to the Partial First Plan Year may be superseded by two
subsequent elections; provided, however, that: (i) the first such subsequent
election shall not be effective unless it is made prior to March 30, 1996 and at
least 13 months prior to the Participant's Separation from Service and at least
24 months prior to the date upon which the special distribution will be made;
and (ii) the second such subsequent election satisfies all the requirements set
forth in paragraph (b)(i), (ii) and (iii) of this Section 5.4.
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Section 5.5 Applicable Taxes
All distributions under the Plan shall be subject to withholding for all
amounts which the Company is required to withhold under federal, state or local
tax law.
ARTICLE VI
WITHDRAWALS FROM DEFERRED COMPENSATION ACCOUNTS
Section 6.1 Hardship Withdrawals from Accounts
A Participant may make a withdrawal from the Participant's Account on
account of the Participant's Hardship, only to the extent that the Hardship is
not otherwise relievable:
(a) through reimbursement or compensation by insurance or
otherwise,
(b) by liquidation of the Participant's assets (to the extent
that such liquidation does not itself cause a Hardship), or
(c) by cessation of deferrals under the Plan.
Section 6.2 Withdrawals after a Change in Control
At any time within three years after the occurrence of a Change in
Control, a Key Executive may elect to withdraw all or any part of the Key
Executive's Account by delivering a written election to such effect to the
Administrator, provided, however, that if a Key Executive makes such an
election, (i) the Key Executive shall forfeit, and the Key Executive's Account
shall be debited with, an amount equal to 5% of the amount of the withdrawal
distribution, (ii) the Key Executive's deferral election for the Plan Year in
which the withdrawal distribution occurs shall be terminated with respect to any
Qualified Compensation which has not yet been deferred and (iii) the Key
Executive shall not be permitted to defer Qualified Compensation under the Plan
for the two Plan Years immediately following the Plan Year of the withdrawal
distribution.
Section 6.3 Voluntary Withdrawals
At any time, a Participant may elect to withdraw all or any part of the
Participant's Account by delivering a written election to such effect to the
Administrator, provided, however, that if a Participant makes such an election,
(i) the Participant shall forfeit, and the Participant's Account shall be
debited with, an amount equal to 10% of the amount of the withdrawal
distribution, (ii) the Participant's deferral election for the Plan Year in
which the withdrawal distribution occurs shall be terminated with respect to any
Qualified Compensation which has not yet been deferred and (iii) the Participant
shall not be permitted to defer
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Qualified Compensation under the Plan for the two Plan Years immediately
following the year of the withdrawal distribution.
Section 6.4 Applicable Taxes
All withdrawals under the Plan shall be subject to withholding for all
amounts which the Company is required to withhold under federal, state or local
tax law.
ARTICLE VII
ADMINISTRATIVE PROVISIONS
Section 7.1 Administrator's Duties and Powers
The Administrator shall conduct the general administration of the Plan
in accordance with the Plan and shall have all the necessary power, authority
and discretion to carry out that function. Among its necessary powers and duties
are the following:
(a) To delegate all or part of its function as Administrator to others
and to revoke any such delegation.
(b) To determine questions of eligibility of Participants and their
entitlement to benefits, subject to the provisions of Section 7.11.
(c) To select and engage attorneys, accountants, actuaries, trustees,
appraisers, brokers, consultants, administrators, physicians, or other persons
to render service or advice with regard to any responsibility the Administrator
or the Board has under the Plan, or otherwise, to designate such persons to
carry out fiduciary responsibilities under the Plan, and (together with the
Committee, the Company, the Board and the officers and Employees of the Company)
to rely upon the advice, opinions or valuations of any such persons, to the
extent permitted by law, being fully protected in acting or relying thereon in
good faith.
(d) To interpret the Plan and any relevant facts for purpose of the
administration and application of the Plan, in a manner not inconsistent with
the Plan or applicable law and to amend or revoke any such interpretation.
(e) To conduct claims procedures as provided in Section 7.11.
Section 7.2 Limitations Upon Powers
The Plan shall be uniformly and consistently administered, interpreted
and applied with regard to all Participants in similar circumstances. The Plan
shall be administered, interpreted and applied fairly and equitably and in
accordance with the specified purposes of the Plan.
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Section 7.3 Final Effect of Administrator Action
Except as provided in Section 7.11, all actions taken and all
determinations made by the Administrator in good faith shall be final and
binding upon all Participants, the Company and any person interested in the
Plan.
Section 7.4 Committee
(a) The Administrator may, but need not, appoint a Committee consisting
of two or more members to hold office during the pleasure of the Administrator.
The Committee shall have such powers and duties as are delegated to it by the
Administrator. Committee members shall not receive payment for their services as
such.
(b) Appointment of Committee members shall be effective upon filing of
written acceptance of appointment with the Administrator.
(c) A Committee member may resign at any time by delivering written
notice to the Administrator.
(d) Vacancies in the Committee shall be filled by the Administrator.
(e) The Committee shall act by a majority of its members in office;
provided, however, that the Committee may appoint one of its members or a
delegate to act on behalf of the Committee on matters arising in the ordinary
course of administration of the Plan or on specific matters.
Section 7.5 Indemnification by the Company; Liability Insurance
The Company shall pay or reimburse any of the Company's officers,
directors, Committee members or Employees who are fiduciaries with respect to
the Plan for all expenses incurred by such persons in, and shall indemnify and
hold them harmless from, all claims, liability and costs (including reasonable
attorneys' fees) arising out of the good faith performance of their duties under
the Plan. The Company may obtain and provide for any such person, at the
Company's expense, liability insurance against liabilities imposed on such
person by law.
Section 7.6 Recordkeeping
(a) The Administrator shall maintain suitable records of each
Participant's Account which, among other things, shall show separately deferrals
and the earnings credited thereon, as well as distributions and withdrawals
therefrom and records of its deliberations and decisions.
(b) The Administrator shall appoint a secretary, and at its discretion,
an assistant secretary, to keep the record of proceedings, to transmit its
decisions, instructions, consents or directions to any interested party, to
execute and file, on
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behalf of the Administrator, such documents, reports or other matters as may be
necessary or appropriate under ERISA and to perform ministerial acts.
(c) The Administrator shall not be required to maintain any records or
accounts which duplicate any records or accounts maintained by the Company.
Section 7.7 Statement to Participants
By March 15 of each year, the Administrator shall furnish to each
Participant a statement setting forth the value of the Participant's Account as
of the preceding December 31 and such other information as the Administrator
shall deem advisable to furnish.
Section 7.8 Inspection of Records
Copies of the Plan and records of a Participant's Account shall be open
to inspection by the Participant or the Participant's duly authorized
representatives at the office of the Administrator at any reasonable business
hour.
Section 7.9 Identification of Fiduciaries
The Administrator shall be the named fiduciary of the Plan and, as
permitted or required by law, shall have exclusive authority and discretion to
operate and administer the Plan.
Section 7.10 Procedure for Allocation of Fiduciary Responsibilities
(a) Fiduciary responsibilities under the Plan are allocated as follows:
(i) The sole duties, responsibilities and powers allocated to the
Board, any Committee and any fiduciary shall be those expressly provided
in the relevant Sections of the Plan.
(ii) All fiduciary duties, responsibilities, and powers not
allocated to the Board, any Committee or any fiduciary, are hereby
allocated to the Administrator, subject to delegation.
(b) Fiduciary duties, responsibilities and powers under the Plan may be
reallocated among fiduciaries by amending the Plan in the manner prescribed in
Section 8.6, followed by the fiduciaries' acceptance of, or operation under,
such amended Plan.
Section 7.11 Claims Procedure
(a) No distributions under this Plan to a Participant, former
Participant or Participant's beneficiary shall be made except upon a claim filed
in writing with the Committee, if in existence, or otherwise to a claims
official designated by the Administrator.
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(b) If the Committee or claims official wholly or partially denies the
claim, it or he shall, within a reasonable period of time after receipt of the
claim, provide the claimant with written notice of such denial, setting forth,
in a manner calculated to be understood by the claimant:
(i) the specific reason or reasons for such denial;
(ii) specific reference to pertinent Plan provisions on which the
denial is based;
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of
why such material or information is necessary; and
(iv) an explanation of the Plan's claims review procedure.
(c) The Administrator shall provide each claimant with a reasonable
opportunity to appeal a denial of a claim to the Chief Executive Officer or his
or her authorized delegate for a full and fair review. The claimant or his or
her duly authorized representative:
(i) may request a review upon written application to the Chief
Executive Officer or his authorized delegate (which shall be filed with
the Committee or claims official);
(ii) may review pertinent documents; and
(iii) may submit issues and comments in writing.
(d) The Chief Executive Officer or his authorized delegate may establish
such time limits within which a claimant may request review of a denied claim as
are reasonable in relation to the nature of the benefit which is the subject of
the claim and to other attendant circumstances but which shall be not less than
sixty days after receipt by the claimant of written notice of denial of his or
her claim.
(e) The decision by the Chief Executive Officer or his delegate upon
review of a claim shall be made not later than sixty days after receipt by the
Chief Executive Officer or his authorized delegate of the request for review,
unless special circumstances require an extension of time for processing, in
which case a decision shall be rendered as soon as possible, but not later than
one hundred twenty days after receipt of such request for review.
(f) The decision on review shall be in writing and shall include
specific reasons for the decision written in a manner calculated to be
understood by the claimant with specific references to the pertinent Plan
provisions on which the decision is based.
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<PAGE> 20
(g) To the extent permitted by law, the decision of the Committee or
claims official, if no appeal is filed, or the decision of the Chief Executive
Officer or his delegate on review, when warranted on the record and reasonably
based on the law and the provisions of the Plan, shall be final and binding on
all parties.
Section 7.12 Conflicting Claims
If the Administrator is confronted with conflicting claims concerning a
Participant's Account, the Administrator may interplead the claimants in an
action at law, or in an arbitration conducted in accordance with the rules of
the American Arbitration Association, as the Administrator shall elect in its
sole discretion, and in either case, the attorneys' fees, expenses and costs
reasonably incurred by the Administrator in such proceeding shall be paid from
the Participant's Account.
Section 7.13 Service of Process
The Secretary of Computer Sciences Corporation is hereby designated as
agent of the Plan for the service of legal process.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1 Termination of the Plan
(a) While the Plan is intended as a permanent program, the Board shall
have the right at any time to declare the Plan terminated completely as to the
Company or as to any group, division or other operational unit thereof or as to
any affiliate thereof.
(b) Discharge or layoff of any Employees without such a declaration
shall not result in a termination of the Plan.
(c) In the event of any termination, the Board, in its sole and absolute
discretion may elect to:
(i) maintain Participants' Accounts, payment of which shall be
made in accordance with Articles V and VI; or
(ii) liquidate the portion of the Plan attributable to each
Participant as to whom the Plan is terminated and distribute each such
Participant's Account in a lump sum or pursuant to any method which is
at least as rapid as the distribution method elected by the Participant
under Section 5.4.
Section 8.2 Limitation on Rights of Participants
The Plan is strictly a voluntary undertaking on the part of the Company
and shall not constitute a contract between the Company and any Employee or any
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<PAGE> 21
Nonemployee Director, or consideration for, or an inducement or condition of,
the employment of an Employee or service of a Nonemployee Director. Nothing
contained in the Plan shall give any Employee or Nonemployee Director the right
to be retained in the service of a Company or to interfere with or restrict the
right of the Company, which is hereby expressly reserved, to discharge or retire
any Employee or Nonemployee Director, except as otherwise provided by a written
employment agreement between the Company and the Employee or Nonemployee
Director, at any time without notice and with or without cause. Inclusion under
the Plan will not give any Employee or Nonemployee Director any right or claim
to any benefit hereunder except to the extent such right has specifically become
fixed under the terms of the Plan. The doctrine of substantial performance shall
have no application to Employees, Nonemployee Directors, Participants or any
other persons entitled to payments under the Plan.
Section 8.3 Consolidation or Merger; Adoption of Plan by Other Companies
(a) In the event of the consolidation or merger of the Company with or
into any other entity, or the sale by the Company of substantially all of its
assets, the resulting successor may continue the Plan by adopting it in a
resolution of its Board of Directors. If within 90 days from the effective date
of such consolidation, merger or sale of assets, such successor corporation does
not adopt the Plan, the Plan shall be terminated in accordance with Section 8.1.
(b) There shall be no merger or consolidation with, or transfer of the
liabilities of the Plan to, any other plan unless each Participant in the Plan
would have, if the combined or successor plans were terminated immediately after
the merger, consolidation, or transfer, an account which is equal to or greater
than his or her corresponding Account under the Plan had the Plan been
terminated immediately before the merger, consolidation or transfer.
Section 8.4 Errors and Misstatements
In the event of any misstatement or omission of fact by a Participant to
the Administrator or any clerical error resulting in payment of benefits in an
incorrect amount, the Administrator shall promptly cause the amount of future
payments to be corrected upon discovery of the facts and shall cause the Company
to pay the Participant or any other person entitled to payment under the Plan
any underpayment in cash in a lump sum, or to recoup any overpayment from future
payments to the Participant or any other person entitled to payment under the
Plan in such amounts as the Administrator shall direct, or to proceed against
the Participant or any other person entitled to payment under the Plan for
recovery of any such overpayment.
Section 8.5 Payment on Behalf of Minor, Etc.
In the event any amount becomes payable under the Plan to a minor or a
person who, in the sole judgment of the Administrator, is considered by reason
of physical or mental condition to be unable to give a valid receipt therefor,
the
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Administrator may direct that such payment be made to any person found by
the Administrator in its sole judgment, to have assumed the care of such minor
or other person. Any payment made pursuant to such determination shall
constitute a full release and discharge of the Company, the Board, the
Administrator, the Committee and their officers, directors and employees.
Section 8.6 Amendment of Plan
The Plan may be wholly or partially amended by the Board from time to time, in
its sole and absolute discretion, including prospective amendments which apply
to amounts held in a Participant's Account as of the effective date of such
amendment and including retroactive amendments necessary to conform to the
provisions and requirements of ERISA or the Code or regulations pursuant
thereto; provided, however, that no amendment shall decrease the amount of any
Participant's Account as of the effective date of such amendment.
Notwithstanding the foregoing, Section 8.7 shall not be amended in any respect
on or after a Change in Control.
Section 8.7 Funding
(a) Subject to Section 8.7(b), all benefits payable under the Plan will
be paid from the general assets of the Company and no Participant or beneficiary
shall have any claim against any specific assets of the Company.
(b) Not later than the occurrence of a Change in Control, the Company
shall cause to be transferred to a grantor trust described in Section 671 of the
Code, assets equal in value to all accrued obligations under the Plan as of one
day following a Change in Control, in respect of both active employees of the
Company and retirees as of that date. Such trust by its terms shall, among other
things, be irrevocable. The value of liabilities and assets transferred to the
trust shall be determined by one or more nationally recognized firms qualified
to provide actuarial services as described in Section 4 of the Computer Sciences
Corporation Severance Plan for Senior Management and Key Employees. The
establishment and funding of such trust shall not affect the obligation of the
Company to provide benefits payments under the terms of the Plan to the extent
such benefits are not paid from the trust.
Section 8.8 Governing Law
The Plan shall be construed, administered and governed in all respects
under and by the laws of the State of California, except to the extent such laws
may be preempted by ERISA.
Section 8.9 Pronouns and Plurality
The masculine pronoun shall include the feminine pronoun, and the
singular the plural where the context so indicates.
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Section 8.10 Titles
Titles are provided herein for convenience only and are not to serve as
a basis for interpretation or construction of the Plan.
Section 8.11 References
Unless the context clearly indicates to the contrary, a reference to a
statute, regulation or document shall be construed as referring to any
subsequently enacted, adopted or executed statute, regulation or document.
19
<PAGE> 1
EXHIBIT (c)(6)
BYLAWS
OF
COMPUTER SCIENCES CORPORATION
As amended February 18, 1998
<PAGE> 2
BYLAWS
OF
COMPUTER SCIENCES CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office.
----------------
The principal office of the corporation in the State of Nevada shall be in the
City of Reno, County of Washoe.
Section 2. Other Offices.
-------------
The corporation may also have offices in such other places, both within and
without the State of Nevada, as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Annual Meetings.
------------------------
Annual meetings of the stockholders shall be held at the office of the
corporation in the City of El Segundo, State of California or at such other
place, within or without the State of California, as shall be designated by the
Board of Directors.
Section 2. Date of Annual Meetings; Election of Directors.
----------------------------------------------
Annual meetings of the stockholders shall be held at such time and date as the
Board of Directors shall determine. At each such annual meeting, the
stockholders of the corporation shall elect a Board of Directors and transact
such other business as has properly been brought before the meeting in
accordance with Section 12 of this Article II.
Section 3. Special Meetings.
----------------
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, by the Articles of Incorporation or by these
Bylaws, may be called by the Chairman of the Board, the Board of Directors, or
by the president and not otherwise, except as provided in the following
sentence. In the event the corporation shall have failed to hold its annual
meeting of stockholders for a period of 18 months from the last preceding annual
meeting at which directors were elected or if such annual meeting shall have
been held but directors shall not have been elected at such annual meeting, a
special meeting of the stockholders shall be called by the president or
secretary at the request in writing of a majority of the Board of Directors or
at the request in writing of stockholders owning a majority in amount of the
entire capital stock of the corporation issued and outstanding and entitled to
vote. Such request from stockholders shall be directed to the Chairman of the
Board, the president, the vice president or the secretary.
<PAGE> 3
To be in proper written form, a stockholder's notice must set forth (i) the name
and record address of such stockholder, (ii) the class or series and number of
shares of capital stock of the corporation which are owned beneficially or of
record by such stockholder, (iii) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the election of directors and any
material interest of such stockholder in such election and (iv) a representation
that such stockholder intends to appear in person or by proxy at such special
meeting to vote on the election of directors at such meeting. The business
transacted at such special meeting shall be confined to the election of
directors.
Section 4. Notices of Meetings.
-------------------
Notices of meetings of the stockholders shall be in writing and signed by the
president, a vice president, the secretary, an assistant secretary, or by such
other person or persons as the directors shall designate. Such notice shall
state the purpose or purposes for which the meeting is called and the time when,
and the place where, it is to be held. A copy of such notice shall be either
delivered personally or shall be mailed, postage prepaid, to each stockholder of
record entitled to vote at such meeting not less than ten (10) nor more than
sixty (60) days before such meeting. If mailed, it shall be directed to the
stockholder at his address as it appears upon the records of the corporation and
upon such mailing of any such notice, the service thereof shall be complete, and
the time of the notice shall begin to run from the date upon which such notice
is deposited in the mail for transmission to such stockholder. If no such
address appears on the books of the corporation and a stockholder has given no
address for the purpose of notice, then notice shall be deemed to have been
given to such stockholder if it is published at least once in a newspaper of
general circulation in the county in which the principal executive office of the
corporation is located. An affidavit of the mailing or publication of any such
notice shall be prima facie evidence of the giving of such notice.
Personal delivery of any such notice to any officer of a corporation
or association, or to any member of a partnership shall constitute delivery of
such notice to such corporation, association or partnership. If any notice
addressed to the stockholder at the address of such stockholder appearing on the
books of the corporation is returned to the corporation by the United States
Postal Service marked to indicate that it is unable to deliver the notice to the
stockholder at such address, all future notices shall be deemed to have been
duly given to such stockholder, without further mailing, if the same shall be
available for the stockholder upon written demand of the stockholder at the
principal executive office of the corporation for a period of one year from the
date of the giving of the notice to all other stockholders.
Section 5. Quorum.
------
The holders of a majority of the stock issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business,
except as otherwise provided by the statutes of Nevada or by the Articles of
Incorporation. Regardless of whether or not a quorum is present or
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<PAGE> 4
represented at any annual or special meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present in
person or represented by proxy, provided that when any stockholders' meeting is
adjourned for more than forty-five (45) days, or if after adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote at the meeting. At
such adjourned meeting at which a quorum shall be present or represented by
proxy, any business may be transacted which might have been transacted at the
meeting as originally noticed.
Section 6. Vote Required.
-------------
When a quorum is present or represented at any meeting, the holders of a
majority of the stock present in person or represented by proxy and voting shall
decide any question brought before such meeting, unless the question is one upon
which, by express provision of the statutes of Nevada, the Articles of
Incorporation or these Bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question. The
stockholders present at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Section 7. Cumulative Voting.
-----------------
Except as otherwise provided in the Articles of Incorporation, every stockholder
of record of the corporation shall be entitled at each meeting of the
stockholders to one vote for each share of stock standing in his name on the
books of the corporation. At all elections of directors of this corporation,
each holder of shares of capital stock possessing voting power shall be entitled
to as many votes as shall equal the number of his shares of stock multiplied by
the number of directors to be elected, and he may cast all of such votes for a
single director or may distribute them among the number to be voted for or any
two or more of them, as he may see fit. The stockholders of this corporation and
any proxyholders for such stockholders are entitled to exercise the right to
cumulative voting at any meeting held for the election of directors if: (a) not
less than forty-eight (48) hours before the time fixed for holding such meeting,
if notice of the meeting has been given at least ten (10) days prior to the date
of the meeting, and otherwise not less than twenty-four (24) hours before such
time, a stockholder of this corporation has given notice in writing to the
president or secretary of the corporation that he desires that the voting at
such election of directors shall be cumulative; and (b) at such meeting, prior
to the commencement of voting for the election of directors, an announcement of
the giving of such notice has been made by the chairman or the secretary of the
meeting or by or on behalf of the stockholder giving such notice. Notice to
stockholders of the requirements of the preceding sentence shall be contained in
the notice calling such meeting or in the proxy material accompanying such
notice.
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<PAGE> 5
Section 8. Conduct of Meetings.
-------------------
Subject to the requirements of the statutes of Nevada, and the express
provisions of the Articles of Incorporation and these Bylaws, all annual and
special meetings of stockholders shall be conducted in accordance with such
rules and procedures as the Board of Directors may determine and, as to matters
not governed by such rules and procedures, as the chairman of such meeting shall
determine. The chairman of any annual or special meeting of stockholders shall
be designated by the Board of Directors and, in the absence of any such
designation, shall be the president of the corporation.
Section 9. Proxies.
-------
At any meeting of the stockholders, any stockholder may be represented and vote
by a proxy or proxies appointed by an instrument in writing. In the event that
such instrument in writing shall designate two or more persons to act as
proxies, a majority of such persons present at the meeting, or, if only one
shall be present, then that one shall have and may exercise all of the powers
conferred by such written instrument upon all of the persons so designated
unless the instrument shall otherwise provide. No such proxy shall be valid
after the expiration of six (6) months from the date of its execution, unless
coupled with an interest, or unless the person executing it specifies therein
the length of time for which it is to continue in force, which in no case shall
exceed seven (7) years from the date of its execution. Subject to the above, any
proxy duly executed is not revoked and continues in full force and effect until
(i) an instrument revoking it or duly executed proxy bearing a later date is
filed with the secretary of the corporation or, (ii) the person executing the
proxy attends such meeting and votes the shares subject to the proxy, or (iii)
written notice of the death or incapacity of the maker of such proxy is received
by the corporation before the vote pursuant thereto is counted.
Section 10. Action by Written Consent.
-------------------------
Any action, except election of directors, which may be taken by a vote of the
stockholders at a meeting, may be taken without a meeting and without notice if
authorized by the written consent of stockholders holding at least ninety
percent (90%) of the voting power.
Section 11. Inspectors of Election.
----------------------
In advance of any meeting of stockholders, the Board of Directors may appoint
inspectors of election to act at such meeting and any adjournment thereof. If
inspectors of election are not so appointed, or if any persons so appointed fail
to appear or refuse to act, then, unless other persons are appointed by the
Board of Directors prior to the meeting, the chairman of any such meeting may,
and on the request of any stockholder or a stockholder proxy shall, appoint
inspectors of election (or persons to replace those who fail to appear or refuse
to act) at the meeting. The number of inspectors shall not exceed three.
The duties of such inspectors shall include: (a) determining the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, and the authenticity,
validity and effect of proxies; (b) receiving votes, ballots or consents; (c)
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<PAGE> 6
hearing and determining all challenges and questions in any way arising in
connection with the right to vote; (d) counting and tabulating all votes or
consents and determining the result; and (e) taking such other action as may be
proper to conduct the election or vote with fairness to all stockholders. In the
determination of the validity and effect of proxies, the dates contained on the
forms of proxy shall presumptively determine the order of execution of the
proxies, regardless of the postmark dates on the envelopes in which they are
mailed. The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all. Any report or certificate made by the inspectors of election is prima facie
evidence of the facts stated therein.
Section 12. Action at Meetings of Stockholders.
----------------------------------
No business may be transacted at an annual meeting of stockholders, other than
business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the annual meeting by or at the direction of
the Board of Directors or (c) otherwise properly brought before the annual
meeting by any stockholder of the Corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this Section 12 and on
the record date for the determination of stockholders entitled to vote at such
annual meeting and (ii) who complies with the notice procedures set forth in
this Section 12.
In addition to any other applicable requirements, for business
properly to be brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Chairman of the Board, if any, the President, or the Secretary of the
Corporation.
To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation not less than
one hundred twenty (120) days nor more than one hundred fifty (150) days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the 5:00 o'clock, p.m., Los Angeles, California time on
the tenth (10th) day following the day on which such notice of the date of the
annual meeting was mailed or such public disclosure of the date of the annual
meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice must set forth as
to each matter such stockholder proposes to bring before the annual meeting (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and record address of such stockholder, (iii) the class
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<PAGE> 7
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 12, provided, however, that, once business
has been brought properly before the annual meeting in accordance with such
procedures, nothing in this Section 12 shall be deemed to preclude discussion by
any stockholder of any such business. If the Chairman of an annual meeting
determines that business was not brought properly before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not brought properly before the meeting and such
business shall not be transacted.
ARTICLE III
DIRECTORS
Section 1. Number of Directors.
-------------------
The exact number of directors that shall constitute the authorized number of
members of the Board shall be nine (9), all of whom shall be at least 18 years
of age. The authorized number of directors may from time to time be increased to
not more than fifteen (15) or decreased to not less than three (3) by resolution
of the directors of the corporation amending this section of the Bylaws in
compliance with Article VIII, Section 2 of these Bylaws. Except as provided in
Section 2 of this Article III, each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies.
---------
Vacancies, including those caused by (i) the death, removal, or resignation of
directors, (ii) the failure of stockholders to elect directors at any annual
meeting, and (iii) an increase in the number of directors, may be filled by a
majority of the remaining directors though less than a quorum. When one or more
directors shall give notice of his or their resignation to the Board, effective
at a future date, the acceptance of such resignation shall not be necessary to
make it effective. The Board shall have power to fill such vacancy or vacancies
to take effect when such resignation or resignations shall become effective,
each director so appointed to hold office during the remainder of the term of
office of the resigning director or directors. No director or directors of this
corporation shall be removed from office except upon the affirmative vote of
stockholders owning a fraction of the total number of outstanding shares of the
Company's voting stock equal to (a) one (1) minus (b) the ratio of (x) one (1)
divided by (y) the sum of one (1) plus the authorized number of directors.
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Section 3. Authority.
---------
The business of the corporation shall be managed and all corporate powers shall
be exercised by or under the direction of the Board of Directors.
Section 4. Meetings.
--------
The Board of Directors of the corporation may hold meetings, both regular and
special, at such place, either within or without the State of Nevada, which has
been designated by resolution of the Board of Directors. In the absence of such
designation, meetings shall be held at the office of the corporation in the City
of El Segundo, State of California.
Section 5. First Meeting.
-------------
The first meeting of the newly elected Board of Directors shall be held
immediately following the annual meeting of the stockholders and no notice of
such meeting to the newly elected directors shall be necessary in order legally
to constitute a meeting, provided a quorum shall be present.
Section 6. Regular Meetings.
----------------
Regular meetings of the Board of Directors may be held without notice at such
time and place as shall from time to time be determined by the Board.
Section 7. Special Meetings.
----------------
Special meetings of the Board of Directors may be called by the Chairman of the
Board, or the president and shall be called by the president or secretary at the
written request of two directors. Notice of the time and place of special
meetings shall be given within 30 days to each director (a) personally or by
telephone, telegraph, facsimile or electronic means, in each case at least
twenty four (24) hours prior to the holding of the meeting, or (b) by mail,
charges prepaid, addressed to him at his address as it is shown upon the records
of the corporation (or, if it is not so shown on such records and is not readily
ascertainable, at the place at which the meetings of the directors are regularly
held) at least three (3) days prior to the holding of the meeting. Notice by
mail shall be deemed to have been given at the time a written notice is
deposited in the United States mails, postage prepaid. Any other written notice
shall be deemed to have been given at the time it is personally delivered to the
recipient or is delivered to a common carrier for transmission, or actually
transmitted by the person giving the notice by electronic means, to the
recipient. Oral notice shall be deemed to have been given at the time it is
communicated, in person or by telephone or wireless, to the recipient or to a
person at the office of the recipient who the person giving the notice has
reason to believe will promptly communicate it to the recipient. Any notice,
waiver of notice or consent to holding a meeting shall state the time, date and
place of the meeting but need not specify the purpose of the meeting.
Section 8. Quorum.
------
Presence in person of a majority of the Board of Directors, at a meeting duly
assembled, shall be necessary to constitute a quorum for the transaction of
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business and the act of a majority of the directors present and voting at any
meeting, at which a quorum is then present, shall be the act of the Board of
Directors, except as may be otherwise specifically provided by the statutes of
Nevada or by the Articles of Incorporation. A meeting at which a quorum is
initially present shall not continue to transact business in the absence of a
quorum.
Section 9. Action by Written Consent.
-------------------------
Unless otherwise restricted by the Articles of Incorporation or by these Bylaws,
any action required or permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting if a written consent thereto is signed
by all members of the Board. Such written consent shall be filed with the
minutes of proceedings of the Board of Directors.
Section 10. Telephonic Meetings.
-------------------
Unless otherwise restricted by the Articles of Incorporation or these Bylaws,
members of the Board of Directors or of any committee designated by the Board of
Directors may participate in a meeting of the Board or committee by means of a
conference telephone network or a similar communications method by which all
persons participating in the meeting can hear each other. Participation in a
meeting pursuant to the preceding sentence constitutes presence in person at
such meeting.
Section 11. Adjournment.
-----------
A majority of the directors present at any meeting, whether or not a quorum is
present, may adjourn any directors' meeting to another time, date and place. If
any meeting is adjourned for more than twenty-four (24) hours, notice of any
adjournment to another time, date and place shall be given, prior to the time of
the adjourned meeting, to the directors who were not present at the time of
adjournment. If any meeting is adjourned for less than twenty-four (24) hours,
notice of any adjournment shall be given to absent directors, prior to the time
of the adjourned meeting, unless the time, date and place is fixed at the
meeting adjourned.
Section 12. Committees.
----------
The Board of Directors may, by resolution passed by a majority of the whole
Board, designate one or more committees of the Board of Directors. Such
committee or committees shall have such name or names, shall have such duties
and shall exercise such powers as may be determined from time to time by the
Board of Directors.
Section 13. Committee Minutes.
-----------------
The committees shall keep regular minutes of their proceedings and report the
same to the Board of Directors.
Section 14. Compensation of Directors.
-------------------------
The directors shall receive such compensation for their services as directors,
and such additional compensation for their services as members of any committees
of the Board of Directors, as may be authorized by the Board of Directors.
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Section 15. Mandatory Retirement of Directors.
---------------------------------
Notwithstanding anything to the contrary in these Bylaws, a director shall not
serve beyond, and shall automatically retire at, the close of the first meeting
of the Board of Directors held during the month in which such director shall
become age 70; provided, however, that any person who was a director on December
6, 1996 and who was age 65 or older on such date may serve until, but shall
automatically retire at, the close of the first meeting of the Board of
Directors held during the month in which such director shall become age 72. If
no meeting of the Board of Directors is held during such month, the director
shall automatically retire as of the last day of such month.
ARTICLE IV
OFFICERS
Section 1. Principal Officers.
------------------
The officers of the corporation shall be elected by the Board of Directors and
shall be a president, a secretary and a treasurer. A resident agent for the
corporation in the State of Nevada shall be designated by the Board of
Directors. Any person may hold two or more offices.
Section 2. Other Officers.
--------------
The Board of Directors may also elect one or more vice presidents, assistant
secretaries and assistant treasurers, and such other officers and agents, as it
shall deem necessary.
Section 3. Qualification and Removal.
-------------------------
The officers of the corporation mentioned in Section 1 of this Article IV shall
hold office until their successors are elected and qualify. Any such officer and
any other officer elected by the Board of Directors may be removed at any time
by the affirmative vote of a majority of the Board of Directors.
Section 4. Resignation.
-----------
Any officer may resign at any time by giving written notice to the corporation,
without prejudice, however, to the rights, if any, of the corporation under any
contract to which such officer is a party. Any such resignation shall take
effect at the date of the receipt of such notice or at any later time specified
therein; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. Powers and Duties; Execution of Contracts.
-----------------------------------------
Officers of this corporation shall have such powers and duties as may be
determined by the Board of Directors. Unless otherwise specified by the Board of
Directors, the president shall be the chief executive officer of the
corporation. Contracts and other instruments in the normal course of business
may be executed on behalf of the corporation by the president or any vice
president of the corporation, or any other person authorized by resolution of
the Board of Directors.
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ARTICLE V
STOCK AND STOCKHOLDERS
Section 1. Issuance.
--------
Every stockholder shall be issued a certificate representing the number of
shares owned by him in the corporation. If the corporation shall be authorized
to issue more than one class of stock or more than one series of any class, the
certificate shall contain a statement setting forth the office or agency of the
corporation from which stockholders may obtain a copy of a statement or summary
of the designations, preferences and relative or other special rights of the
various classes of stock or series thereof and the qualifications, limitations
or restrictions of such rights. The corporation shall furnish to its
stockholders, upon request and without charge, a copy of such statement or
summary.
Section 2. Facsimile Signatures.
--------------------
Whenever any certificate is countersigned or otherwise authenticated by a
transfer agent or transfer clerk, and by a registrar, then a facsimile of the
signatures of the officers of the corporation may be printed or lithographed
upon such certificate in lieu of the actual signatures. In case any officer or
officers who shall have signed, or whose facsimile signature or signatures shall
have been used on, any such certificate or certificates shall cease to be such
officer or officers of the corporation, before such certificates shall have been
delivered by the corporation, such certificates may nevertheless be issued as
though the person or persons who signed such certificates, had not ceased to be
an officer of the corporation.
Section 3. Lost Certificates.
-----------------
The Board of Directors may direct a new stock certificate to be issued in place
of any certificate alleged to have been lost or destroyed, and may require the
making of an affidavit of that fact by the person claiming the stock certificate
to be lost or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent, require
the owner of the lost or destroyed certificate to give the corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost or destroyed.
Section 4. Transfer of Stock.
-----------------
Upon surrender to the corporation or the transfer agent of the corporation of a
certificate for shares duly endorsed for transfer, it shall be the duty of the
corporation to issue a new certificate, cancel the old certificate and record
the transaction upon its books.
Section 5. Record Date.
-----------
The directors may fix a date not more than sixty (60) days prior to the holding
of any meeting as the date as of which stockholders entitled to notice of and to
vote at such meeting shall be determined; and only stockholders of record on
such day shall be entitled to notice or to vote at such meeting. If no record
date is fixed by the Board of Directors (a) the record date for determining
stockholders entitled to notice of or to vote at a meeting of
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stockholders shall be the sixtieth (60th) day preceding the day on which the
meeting is held; (b) the record date for determining stockholders entitled to
give consent to corporate action in writing without a meeting, when no prior
action by the Board has been taken, shall be the day on which the first written
consent is given; and (c) the record date for determining stockholders for any
other purpose shall be the day on which the Board of Directors adopts the
resolution relating thereto, or the sixtieth (60th) day prior to the date of
such action, whichever is later. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting unless the Board of Directors fixes a new record date
for the adjourned meeting, but the Board of Directors shall fix a new record
date if the meeting is adjourned for more than forty-five (45) days from the
date set for the original meeting.
Section 6. Registered Stock.
----------------
The corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends, and to vote
as such owner and shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by the statutes of Nevada.
Section 7. Dividends.
---------
In the event a dividend is declared, the stock transfer books will not be closed
but a record date will be fixed by the Board of Directors and only shareholders
of record on that date shall be entitled to the dividend.
ARTICLE VI
INDEMNIFICATION
Section 1. Indemnity of Directors, Officers and Agents.
-------------------------------------------
The corporation shall indemnify and hold harmless any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was or has agreed to
become a director or officer of the corporation or is serving at the request of
the corporation as a director or officer of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise or by reason of
actions alleged to have been taken or omitted in such capacity or in any other
capacity while serving as a director or officer. The indemnification of
directors and officers by the corporation shall be to the fullest extent
authorized or permitted by applicable law, as such law exists or may hereafter
be amended (but only to the extent that such amendment permits the corporation
to provide broader indemnification rights than permitted prior to the
amendment). The indemnification of directors and officers shall be against all
loss, liability and expense (including attorneys fees, costs, damages,
judgments, fines, amounts paid in settlement and ERISA excise taxes or
penalties) actually and reasonably incurred by or on behalf of a director or
officer in connection with such action, suit or proceeding,
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including any appeals; provided, however, that with respect to any action, suit
or proceeding initiated by a director or officer, the corporation shall
indemnify such director or officer only if the action, suit or proceeding was
authorized by the board of directors of the corporation, except with respect to
a suit for the enforcement of rights to indemnification or advancement of
expenses in accordance with Section 3 hereof.
Section 2. Expenses
--------
The expenses of directors and officers incurred as a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative shall be paid by the corporation as they are
incurred and in advance of the final disposition of the action, suit or
proceeding; provided, however, that if applicable law so requires, the advance
payment of expenses shall be made only upon receipt by the corporation of an
undertaking by or on behalf of the director or officer to repay all amounts as
advanced in the event that it is ultimately determined by a final decision,
order or decree of a court of competent jurisdiction that the director or
officer is not entitled to be indemnified for such expenses under this Article
VI.
Section 3. Enforcement
-----------
Any director or officer may enforce his or her rights to indemnification or
advance payments for expenses in a suit brought against the corporation if his
or her request for indemnification or advance payments for expenses is wholly or
partially refused by the corporation or if there is no determination with
respect to such request within 60 days from receipt by the corporation of a
written notice from the director or officer for such a determination. If a
director or officer is successful in establishing in a suit his or her
entitlement to receive or recover an advancement of expenses or a right to
indemnification, in whole or in part, he or she shall also be indemnified by the
corporation for costs and expenses incurred in such suit. It shall be a defense
to any such suit (other than a suit brought to enforce a claim for the
advancement of expenses under Section 2 of this Article VI where the required
undertaking, if any, has been received by the corporation) that the claimant has
not met the standard of conduct set forth in the Nevada General Corporation Law.
Neither the failure of the corporation to have made a determination prior to the
commencement of such suit that indemnification of the director or officer is
proper in the circumstances because the director or officer has met the
applicable standard of conduct nor a determination by the corporation that the
director or officer has not met such applicable standard of conduct shall be a
defense to the suit or create a presumption that the director or officer has not
met the applicable standard of conduct. In a suit brought by a director or
officer to enforce a right under this Section 3 or by the corporation to recover
an advancement of expenses pursuant to the terms of an undertaking, the burden
of proving that a director or officer is not entitled to be indemnified or is
not entitled to an advancement of expenses under this Section 3 or otherwise,
shall be on the corporation.
Section 4. Non-exclusivity
---------------
The right to indemnification and to the payment of expenses as they are incurred
and in advance of the final disposition of the action, suit or proceeding shall
not be exclusive of any other right to which a person may be
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entitled under these articles of incorporation or any bylaw, agreement, statute,
vote of stockholders or disinterested directors or otherwise. The right to
indemnification under Section 1 hereof shall continue for a person who has
ceased to be a director or officer and shall inure to the benefit of his or her
heirs, next of kin, executors, administrators and legal representatives.
Section 5. Settlement
----------
The corporation shall not be obligated to reimburse the amount of any settlement
unless it has agreed to such settlement. If any person shall unreasonably fail
to enter into a settlement of any action, suit or proceeding within the scope of
Section 1 hereof, offered or assented to by the opposing party or parties and
which is acceptable to the corporation, then, notwithstanding any other
provision of this Article VI, the indemnification obligation of the corporation
in connection with such action, suit or proceeding shall be limited to the total
of the amount at which settlement could have been made and the expenses incurred
by such person prior to the time the settlement could reasonably have been
effected.
Section 6. Purchase of Insurance.
---------------------
The corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.
Section 7. Conditions
----------
The corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the corporation or to any director, officer, employee
or agent of any of its subsidiaries to the fullest extent of the provisions of
this Article VI subject to the imposition of any conditions or limitations as
the Board of Directors may deem necessary or appropriate.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Exercise of Rights.
------------------
All rights incident to any and all shares of another corporation or corporations
standing in the name of this corporation may be exercised by such officer, agent
or proxyholder as the Board of Directors may designate. In the absence of such
designation, such rights may be exercised by the Chairman of the Board or the
president of this corporation, or by any other person authorized to do so by the
Chairman of the Board or the president of this corporation. Except as provided
below, shares of this corporation owned by any subsidiary of this corporation
shall not be entitled to vote on any matter. Shares of this corporation held by
this corporation in a fiduciary
13
<PAGE> 15
capacity and shares of this corporation held in a fiduciary capacity by any
subsidiary of this corporation, shall not be entitled to vote on any matter,
except to the extent that the settler or beneficial owner possesses and
exercises a right to vote or to give this corporation or such subsidiary binding
instructions as to how to vote such shares.
Solely for purposes of Section 1 of this Article VII, a "subsidiary"
of this corporation shall mean a corporation, shares of which possessing more
than fifty percent (50%) of the power to vote for the election of directors at
the time determination of such voting power is made, are owned directly, or
indirectly through one or more subsidiaries, by this corporation.
Section 2. Interpretation.
--------------
Unless the context of a Section of these Bylaws otherwise requires, the terms
used in these Bylaws shall have the meanings provided in, and these Bylaws shall
be construed in accordance with the Nevada statutes relating to private
corporations, as found in Chapter 78 of the Nevada Revised Statutes or any
subsequent statute.
ARTICLE VIII
AMENDMENTS
Section 1. Stockholder Amendments.
----------------------
Bylaws may be adopted, amended or repealed by the affirmative vote of more than
eighty percent (80%) of the outstanding voting shares of this corporation.
Section 2. Amendments by Board of Directors.
--------------------------------
Subject to the right of stockholders as provided in Section 1 of this Article
VIII, Bylaws may be adopted, amended or repealed by the Board of Directors.
ARTICLE IX
"ACQUISITION OF CONTROLLING INTEREST" PROVISIONS OF
THE NEVADA GENERAL CORPORATION LAW SHALL NOT APPLY
On and after February 16, 1998, the provisions of Section 78.378 to
78.3793, inclusive, of the Nevada Revised Statutes shall not apply to the
corporation.
14
<PAGE> 1
EXHIBIT (c)(15)
================================================================================
COMPUTER SCIENCES CORPORATION
AND
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
AMENDED AND RESTATED RIGHTS AGREEMENT
DATED AS OF DECEMBER 21, 1988
AMENDED AND RESTATED AS OF FEBRUARY 18, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
l Certain Definitions................................................................1
2 Appointment of Rights Agent........................................................6
3 Issue of Rights Certificates.......................................................6
4 Form of Rights Certificates........................................................8
5 Countersignature and Registration..................................................9
6 Transfer, Split Up, Combination and Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights Certificates......................9
7 Exercise of Rights; Purchase Price; Expiration Date of Rights....................10
8 Cancellation and Destruction of Rights Certificates..............................12
9 Reservation and Availability of Stock ...........................................13
10 Preferred Stock Record Date......................................................14
11 Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights.............................................................15
12 Certificate of Adjusted Purchase Price or Number of Shares.......................24
13 Consolidation, Merger or Sale or Transfer of Assets or Earning Power.............24
14 Fractional Rights and Fractional Shares..........................................28
15 Rights of Action.................................................................29
16 Agreement of Rights Holders......................................................30
17 Rights Certificate Holder Not Deemed a Stockholder...............................30
18 Concerning the Rights Agent......................................................31
19 Merger or Consolidation or Change of Name of Rights Agent........................31
20 Duties of Rights Agent...........................................................32
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
21 Change of Rights Agent...........................................................34
22 Issuance of New Rights Certificates..............................................35
23 Redemption and Termination.......................................................35
24 Notice of Certain Events.........................................................36
25 Notices..........................................................................37
26 Supplements and Amendments.......................................................37
27 Successors.......................................................................38
28 Determination and Actions by the Board of Directors, etc.........................38
29 Benefits of this Agreement.......................................................39
30 Severability.....................................................................39
31 Governing Law....................................................................39
32 Counterparts.....................................................................39
33 Descriptive Headings.............................................................40
</TABLE>
Exhibit A -- Form of Certificate of Amendment of Certificate of Designations
Exhibit B -- Form of Rights Certificate
Exhibit C -- Form of Summary of Rights
ii
<PAGE> 4
AMENDED AND RESTATED RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of December 21, 1988, amended and restated as
of February 18, 1998 (the "Agreement"), between COMPUTER SCIENCES CORPORATION, a
Nevada corporation (the "Company"), and CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
(the "Rights Agent").
W I T N E S S E T H
WHEREAS, on December 21, 1988 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one preferred stock purchase right (a "Right") for each share of
common stock, $1.00 par value, of the Company (the "Common Stock") outstanding
at the close of business on January 3, 1989 (the "Record Date"), and authorized
the issuance of one Right for each share of Common Stock issued between the
Record Date (whether originally issued or delivered from the Company's treasury)
and the Distribution Date (as hereinafter defined), each Right initially
representing the right to purchase one four-thousandth (l/4000th) of a share of
Series A Junior Participating Preferred Stock of the Company having the rights,
powers and preferences set forth in the form of Certificate of Amendment of
Certificate of Designations attached hereto as Exhibit A, upon the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
20% or more of the shares of Common Stock then outstanding; provided, however
that (i) the term "Acquiring Person" shall not include the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan, (ii) a
person who becomes the Beneficial Owner of at least twenty percent (20%) of such
outstanding shares of Common Stock as the result of a stock repurchase plan or
self-tender offer of the Company shall not be deemed an Acquiring Person, and
the Stock Acquisition Date shall not be deemed to occur, until such Person,
together with all Affiliates and Associates of such Person, thereafter becomes
the Beneficial Owner of, in the aggregate, a number of additional shares of
Common Stock equal to one percent (1%) or more of the then outstanding shares
(and, at that time, owns at least twenty percent (20%) of such outstanding
shares), and (iii) the term "Acquiring
<PAGE> 5
Person shall not include a person who becomes the Beneficial Owner of at least
twenty percent (20%) of such outstanding shares of Common Stock as the result of
an acquisition of shares of Common Stock pursuant to a tender offer or an
exchange offer for all outstanding shares of Common Stock at a price and on
terms determined by at least a majority of the members of the Board of Directors
who are not officers of the Company and who are not representatives, nominees,
Affiliates or Associates of an Acquiring Person, after receiving advice from one
or more investment banking firms, to be (a) at a price which is fair to
stockholders of the Company (taking into account all factors which such members
of the Board deem relevant including, without limitation, prices which could
reasonably be achieved if the Company or its assets were sold on an orderly
basis designed to realize maximum value) and (b) otherwise in the best interests
of the Company and its stockholders.
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act)".
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not
in writing) or upon the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," (A) securities tendered pursuant to a tender or
exchange offer made by such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or
exchange, or (B) securities issuable upon exercise of Rights at any time
prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a
Triggering Event which Rights were acquired by such Person or any of
such Person's Affiliates or Associates prior to the Distribution Date or
pursuant to Section 3(a)) or Section 22 hereof (the "Original Rights")
or pursuant to Section ll(i) hereof in connection with an adjustment
made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of
or has
2
<PAGE> 6
"beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not
in writing; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under this
subparagraph (ii) as a result of an agreement, arrangement or
understanding to vote such security if such agreement, arrangement or
understanding: (A) arises solely from a revocable proxy given in
response to a public proxy or consent solicitation made pursuant to, and
in accordance with, the applicable provisions of the General Rules and
Regulations under the Exchange Act, and (B) is not also then reportable
by such Person on Schedule 13D under the Exchange Act (or any comparable
or successor report); or
(iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) with which such
Person (or any of such Person's Affiliates or Associates) has any
agreement, arrangement or understanding (whether or not in writing), for
the purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in the proviso to subparagraph (ii) of this
paragraph (d)) or disposing of any voting securities of the Company;
provided, however, that nothing in this paragraph (d) shall cause a
person engaged in business as an underwriter of securities to be the
"Beneficial Owner" of, or to "beneficially own," any securities acquired
through such person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in the State of California are authorized or
obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00 P.M.,
California time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., California time, on the next succeeding
Business Day.
(g) "Common Stock" shall mean the common stock, $1.00 par value, of the
Company, except that "Common Stock" when used with reference to any Person other
than the Company shall mean the capital stock (or units of beneficial interest
which represent the right to participate in profits, losses, deductions and
credits) of such Person with the greatest voting power, or the equity securities
or other equity interest having power to control or direct the management, of
such Person.
(h) "Continuing Director" shall mean (i) any member of the Board of
Directors of the Company, while such Person is a member of the Board, who is not
3
<PAGE> 7
an Acquiring Person or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate, and
who was a member of the Board prior to the date of this Agreement, or (ii) any
Person who subsequently becomes a member of the Board, while such Person is a
member of the Board, who is not an Acquiring Person or an Affiliate or Associate
of an Acquiring Person or a representative of an Acquiring Person or of any such
Affiliate or Associate, if such Person's nomination for election or election to
the Board is recommended or approved by a majority of the Continuing Directors.
(i) "Current market price" shall have the meaning set forth in Section
ll(d) hereof.
(j) "Current Value" shall have the meaning set forth in Section
ll(a)(iii) hereof.
(k) "Distribution Date" shall have the meaning set forth in Section 3(a)
hereof.
(l) "Equivalent Preferred Stock" shall have the meaning set forth in
Section ll(b) hereof.
(m) "Exchange Act" shall have the meaning set forth in Section l(c)
hereof.
(n) "Expiration Date" shall have the meaning set forth in Section 7(a)
hereof.
(o) "Final Expiration Date" shall have the meaning set forth in Section
7(a) hereof.
(p) "Person" shall mean any individual, firm, corporation, partnership,
association, trust or other entity.
(q) "Preferred Stock" shall mean shares of Series A Junior Participating
Preferred Stock, $1.00 par value, of the Company and, to the extent that there
is not a sufficient number of shares of Series A Junior Participating Preferred
Stock authorized to permit the full exercise of the Rights, any other series of
Preferred Stock, $1.00 par value, of the Company designated for such purpose
containing terms substantially similar to the terms of the Series A Junior
Participating Preferred Stock.
(r) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(s) "Purchase Price" shall have the meaning set forth in Section 4(a)
hereof.
4
<PAGE> 8
(t) "Record Date" shall have the meaning set forth in the WHEREAS clause
at the beginning of this Agreement.
(u) "Redemption Price" shall have the meaning set forth in Section 23(a)
hereof.
(v) "Rights" shall have the meaning set forth in the WHEREAS clause at
the beginning of this Agreement.
(w) "Rights Certificates" shall have the meaning set forth in Section
3(a) hereof.
(x) "Section ll(a)(ii) Event" shall mean any event described in Section
ll(a)(ii) hereof.
(y) "Section ll(a)(ii) Trigger Date" shall have the meaning set forth in
Section ll(a)(iii) hereof.
(z) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(aa) "Spread" shall have the meaning set forth in Section ll(a)(iii)
hereof.
(bb) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such or
such earlier date as a majority of the directors shall become aware of the
existence of an Acquiring Person.
(cc) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or which is otherwise controlled by such Person.
(dd) "Substitution Period" shall have the meaning set forth in Section
ll(a)(iii) hereof.
(ee) "Trading Day" shall have the meaning set forth in Section ll(d)
hereof.
(ff) "Triggering Event" shall mean any Section ll(a)(ii) Event or any
Section 13 Event.
Any determination required by the definitions contained in this Section
1 shall be made by the Board of Directors of the Company in its good faith
judgment,
5
<PAGE> 9
which determination shall be binding on the Rights Agent and the holders of the
Rights.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall, prior to the Distribution Date, also
be the holders of the Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the close of business on the tenth business
day after the Stock Acquisition Date or, if the tenth business day after the
Stock Acquisition Date occurs before the Record Date, the close of business on
the Record Date), or (ii) the close of business on the tenth business day after
the date that a tender or exchange offer by any Person (other than the Company,
any Subsidiary of the Company, any employee benefit plan of the Company or of
any Subsidiary of the Company, or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan) is
first published or sent or given within the meaning of Rule 14d-2(a) of the
General Rules and Regulations under the Exchange Act, if upon consummation
thereof, such Person would be the Beneficial Owner of 30% or more of the shares
of Common Stock then outstanding (irrespective of whether any shares are
actually purchased pursuant to any such offer) (the earlier of (i) or (ii) being
herein referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company);provided, however,
that, notwithstanding anything to the contrary in the foregoing definition of
the "Distribution Date," clause (ii) of the definition does not apply to the
tender offer commenced by CAI Computer Services Corp. on February 17, 1998.. As
soon as practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
ll(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the
6
<PAGE> 10
necessary and appropriate rounding adjustments (in accordance with Section 14(a)
hereof) so that Rights certificates representing only whole numbers of Rights
are distributed and cash is paid in lieu of any fractional Rights. As of and
after the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights, in substantially the form attached
hereto as Exhibit C (the "Summary of Rights"), by first-class, postage prepaid
mail, to each record holder of the Common Stock as of the close of business on
the Record Date, at the address of such holder shown on the records of the
Company. With respect to certificates for the Common Stock outstanding as of the
Record Date, until the Distribution Date, the Rights will be evidenced by such
certificates for the Common Stock and the registered holders of the Common Stock
shall also be the registered holders of the associated Rights. Until the earlier
of the Distribution Date or the Expiration Date, the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date. Certificates representing such shares
of Common Stock shall also be deemed to be certificates for Rights, and shall
bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain rights as set forth in the Rights Agreement between Computer
Sciences Corporation (the "Company") and American Transtech (the "Rights
Agent") dated as of December 21, 1988 (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by
this certificate. The Rights Agent will mail to the holder of this
certificate a copy of the Rights Agreement, as in effect on the date of
mailing, without charge promptly after receipt of a written request
therefor. Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any person who is, was or becomes an
Acquiring Person or any Affiliate or Associate thereof (as such terms
are defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become null and
void."
With respect to such certificates containing the foregoing legend, until
the earlier of the Distribution Date or the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such
7
<PAGE> 11
certificates alone and registered holders of Common Stock shall also be the
registered holders of the associated Rights, and the transfer of any of such
certificates shall also constitute the transfer of the Rights associated with
the Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof) shall each be substantially
in the form set forth in Exhibit B hereto and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of four-thousandths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (such exercise price
per one four-thousandth of a share, the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each Right and the Purchase
Price thereof shall be subject to adjustment as provided herein.
(b) Notwithstanding any other provision of this Agreement, any Rights
Certificate issued pursuant to Section 3(a) or Section 22 hereof that represents
Rights beneficially owned by any Person known to be: (i) an Acquiring Person or
any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (iii) a transferee of an
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from the Acquiring Person to holders of equity interests in such
Acquiring Person or to any Person with whom such Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect avoidance of Section 7(e) hereof, and any Rights
Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall contain (to the extent feasible) the following legend:
8
<PAGE> 12
"The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring Person (as such terms are
defined in the Rights Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the
circumstances specified in Section 7(e) of such Agreement."
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof which shall be attested by the Secretary or an
Assistant Secretary of the Company, either manually or by facsimile signature.
The Rights Certificates shall be manually countersigned by the Rights Agent and
shall not be valid for any purpose unless so countersigned. In case any officer
of the Company who shall have signed any of the Rights Certificates shall cease
to be such officer of the Company before countersignature by the Rights Agent
and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause
to be kept, at its principal office or offices designated as the appropriate
place for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the Date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and Section
14 hereof, at any time after the close of business on the Distribution Date, and
at or prior to the close of business on the Expiration Date, any Rights
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Rights Certificate or Certificates, entitling the registered holder
to purchase a like number
9
<PAGE> 13
of four-thousandths of a share of Preferred Stock (or, following a Triggering
Event, Common Stock, other securities, cash or other assets, as the case may be)
as the Rights Certificate or Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged at the principal office or offices of the Rights
Agent designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Rights Certificate until the registered holder shall have
completed and signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and
Section 14 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section ll(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase
Price with respect to the total number of four-thousandths of a share of
Preferred Stock (or Common Stock or other securities, cash or other assets, as
the case may be) as to which such surrendered Rights are then
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<PAGE> 14
exercisable, at or prior to the earlier of (i) the close of business on December
21, 1998 (the "Final Expiration Date"), or (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the earlier of (i) and (ii) being
herein referred to as the ("Expiration Date").
(b) The Purchase Price for each one four-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $235.00,
and shall be subject to adjustment from time to time as provided in Sections 11
and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one four-thousandth of a share of Preferred Stock (or Common Stock or
other securities, cash or other assets, as the case may be) to be purchased as
set forth below and an amount equal to any applicable transfer tax, the Rights
Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preferred Stock (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of four-thousandths of a share of Preferred
Stock to be purchased and the Company hereby authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit the total number of shares of Preferred Stock issuable upon exercise of
the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of four-thousandths of a
share of Preferred Stock as are to be purchased (in which case certificates for
the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
an amount of cash, if any, to be paid in lieu of fractional shares in accordance
with Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) after receipt thereof, deliver such cash, if
any, to or upon the order of the registered holder of such Rights Certificate.
The payment of the Purchase Price (as such amount may be reduced pursuant to
Section ll(a)(iii) hereof) may be made in cash or by certified bank check or
money order payable to the order of the Company. In the event that the Company
is obligated to issue other securities (including Common Stock) of the Company,
pay cash and/or distribute other property pursuant to Section ll(a) hereof, the
Company will make all arrangements necessary so that such other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when appropriate.
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<PAGE> 15
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section ll(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or other Person as a result of its failure to make any
determinations with respect to an Acquiring Person or its Affiliates, Associates
or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate continued in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in
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<PAGE> 16
lieu thereof except as expressly permitted by any of the provisions of this
Agreement. The Company shall deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and retire, any other Rights
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof. The Rights Agent shall deliver all cancelled Rights
Certificates to the Company, or shall, at the written request of the Company,
destroy such cancelled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Stock.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Section ll(a)(ii) Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Section ll(a)(ii) Event,
Common Stock and, or other securities) that, as provided in this Agreement
including Section ll(a)(iii) hereof, will be sufficient to permit the exercise
in full of all outstanding Rights, provided, however, that the Company shall not
be required to reserve and keep available shares of Preferred Stock, Common
Stock or other securities sufficient to permit the exercise in full of all
outstanding Rights pursuant to the adjustments set forth in Section ll(a)(ii),
Section ll(a)(iii) or Section 13 hereof unless, and only to the extent that, the
Rights become exercisable pursuant to such adjustments.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Section ll(a)(ii) Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of Rights may be listed on any
national securities exchange, the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.
(c) If necessary to permit the offer and issuance of Preferred Stock
(and, following the occurrence of a Section ll(a)(ii) Event, Common Stock and/or
other securities) issuable and deliverable upon the exercise of Rights, the
Company shall use its best efforts to (i) file, as soon as practicable following
the earliest date after the first occurrence of a Section ll(a)(ii) Event on
which the consideration to be delivered by the Company upon exercise of the
Rights has been determined in accordance with Section ll(a)(iii) hereof, or as
soon as is required by law following the Distribution Date, as the case may be,
a registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until
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<PAGE> 17
the earlier of (A) the date as of which the Rights are no longer exercisable for
such securities, and (B) the date of the expiration of the Rights. The Company
will also use reasonable efforts to take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time not to exceed ninety (90) days
after the date set forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained or an exemption therefrom shall
have been obtained or be available and until a registration statement (if
required) has been declared effective.
(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all four-thousandths of a share of Preferred
Stock (and, following the occurrence of a Section ll(a)(ii) Event, Common Stock
and/or other securities) delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and non
assessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates and
of any certificates for a number of four-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of four-thousandths of a share of Preferred Stock (or Common Stock and/or
other securities, as the case may be) in respect of a name other than that of,
the registered holder of the Rights Certificates evidencing Rights surrendered
for exercise or to issue or deliver any certificates for a number of
four-thousandths of shares of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for a number of four-thousandths of a share of Preferred Stock (or
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<PAGE> 18
Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock payable
in shares of Preferred Stock, (B) subdivide the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into a smaller number
of shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation and the Company's
capital stock is not converted into securities or property (including
cash) of another Person), except as otherwise provided in this Section
ll(a) and Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of
shares of Preferred Stock or other capital stock issuable on such date,
shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive, upon payment of
the Purchase Price then in effect, the aggregate number and kind of
shares of Preferred Stock or such capital stock which, if such Right had
been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Company were open, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or
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reclassification. If an event occurs which would require an adjustment
under both this Section ll(a)(i) and Section ll(a)(ii) hereof, the
adjustment provided for in this Section ll(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to
Section ll(a)(ii) hereof.
(ii) In the event ("Section ll(a)(ii) Event") that the Stock
Acquisition Date shall have occurred, then promptly following the close
of business on the tenth business day after such Section ll(a)(ii) Event
(or, if the tenth business day after such Section ll(a)(ii) Event occurs
before the Record Date, the close of business on the Record Date),
proper provision shall be made so that each holder of a Right (except as
provided below and in Section 7(e) hereof) shall thereafter have the
right to receive, upon exercise thereof, in lieu of a number of
four-thousandths of a share of Preferred Stock, one share of Common
Stock (as constituted on the date of this Agreement) of the Company for
each Right which was exercisable immediately prior to the occurrence of
such Section ll(a)(ii) Event (such number of shares, the "Adjustment
Shares") at an adjusted Purchase Price (the "Section 11 Price") equal to
the product obtained by multiplying the Adjustment Shares by 10% of the
current market price (as determined pursuant to Section ll(d) hereof)
per share of the Common Stock on the date of the occurrence of Such
Section ll(a)(ii) Event; and, following the occurrence of such Section
ll(a)(ii) Event, the Section 11 Price shall be the "Purchase Price" for
all purposes of this Agreement provided that the Purchase Price and the
number of Adjustment Shares shall be further adjusted as provided in
this Agreement to reflect any events occurring after the date of such
first occurrence; and provided, further, that if the transaction that
would otherwise give rise to the foregoing adjustment is also subject to
the provisions of Section 13 hereof, then only the provisions of Section
13 hereof shall apply and no adjustment shall be made pursuant to this
Section ll(a)(ii).
(iii) In the event that the number of shares of Common Stock
which are authorized by the Company's articles of incorporation but not
outstanding or reserved for issuance for purposes other than upon
exercise of the Rights is not sufficient to permit the exercise in full
of the Rights in accordance with the foregoing subparagraph (ii) of this
Section ll(a) and the Rights shall become so exercisable, to the extent
permitted by applicable law and any agreements in effect on the date
hereof to which the Company is a party, the Company shall: (A) determine
the excess of (1) the value of the Adjustment Shares issuable upon the
exercise of a Right (the "Current Value") over (2) the Purchase Price
(such excess, the "Spread"), and (B) with respect to each Right, make
adequate provision to substitute for the Adjustment Shares, upon payment
of the applicable Purchase Price, (l) cash, (2) a reduction in the
Purchase Price, (3) Common Stock or shares or units of shares of
Preferred Stock or other equity securities of the Company, (4) debt
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<PAGE> 20
securities of the Company, (5) other assets, or (6) any combination of
the foregoing, having an aggregate value equal to the Current Value,
where such aggregate value has been determined by the Board of Directors
of the Company based upon the advice of a nationally recognized
investment banking firm selected by the Board of Directors of the
Company; provided, however, if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty
(30) days following the later of (x) the first occurrence of a Section
ll(a)(ii) Event and (y) the date on which the Company's right of
redemption pursuant to Section 23(a) expires (the later of (x) and (y)
being referred to herein as the "Section ll(a)(ii) Trigger Date"), then
the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price,
shares of Common Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the
Spread. If the Board of Directors of the Company shall determine in good
faith that it is likely that sufficient additional shares of Common
Stock could be authorized for issuance upon exercise in full of the
Rights, the thirty (30) day period set forth above may be extended to
the extent necessary, but not more than ninety (90) days after the
Section ll(a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares
(such period, as it may be extended, the "Substitution Period"). To the
extent that the Company determines that some action need be taken
pursuant to the first and/or second sentences of this Section
ll(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding
Rights, and (y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek any authorization
of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine
the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the
Rights has been temporarily suspended, as well as a public announcement
at such time as the suspension is no longer in effect. For purposes of
this Section ll(a)(iii), the value of the Common Stock shall be the
current market price (as determined pursuant to Section ll(d) hereof)
per share of the Common Stock on the Section ll(a)(ii) Trigger Date and
the value of the Series A Junior Participating Preferred Stock shall be
deemed to be the fair value on such day as determined in good faith by
the Board of Directors. The Board of Directors may, but shall not be
required to, establish procedures to allocate the right to receive
Common Stock upon the exercise of Rights pursuant to this Section
ll(a)(iii).
(b) In case the Company shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Stock entitling them to subscribe for or purchase (for a period expiring within
forty-five
17
<PAGE> 21
(45) calendar days after such record date) Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("Equivalent Preferred Stock")) or securities convertible into Preferred
Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or
per share of Equivalent Preferred Stock (or having a conversion price per share,
if a security convertible into Preferred Stock or Equivalent Preferred Stock)
less than the current market price (as determined pursuant to Section ll(d)
hereof) per share of Preferred Stock on such record date, the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of Preferred
Stock (and/or Equivalent Preferred Stock so to be offered and/or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price, and the denominator of which shall be the
number of shares of Preferred Stock outstanding on such record date, plus the
number of additional shares of Preferred Stock and/or Equivalent Preferred Stock
to be offered for subscription or purchase (or into which the convertible
securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the Purchase Price shall
be adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular quarterly
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section ll(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined pursuant to
Section ll(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or
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<PAGE> 22
evidences of indebtedness so to be distributed or of such subscription rights or
warrants applicable to a share of Preferred Stock and the denominator of which
shall be such current market price (as determined pursuant to Section ll(d)
hereof) per share of Preferred Stock. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d)(i) For the purpose of any computation hereunder, other than
computations made pursuant to Section ll(a)(iii) hereof, the "current
market price" per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Common
Stock for the thirty (30) consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date, and for purposes of
computations made pursuant to Section ll(a) (iii) hereof, the "current
market price" per share of Common Stock on any date shall be deemed to
be the average of the daily closing prices per share of such Common
Stock for the ten (10) consecutive Trading Days immediately following
such date; provided, however, that in the event that the current market
price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in shares of such
Common Stock or securities convertible into shares of such Common Stock
(other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of
the requisite thirty (30) Trading Day or ten (10) Trading Day period, as
set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market
price" shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case
as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on the New York
Stock Exchange or the Pacific Stock Exchange or, if the shares of Common
Stock are not listed or admitted to trading on the New York Stock
Exchange or the Pacific Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares
of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national
securities exchange the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotation System ("NASDAQ") or such other system then in
use, or, if on any such date the
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<PAGE> 23
shares of Common Stock are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected
by the Board of Directors of the Company. If on any such date no market
maker is making a market in the Common Stock, the fair value of such
shares on such date as determined in good faith by the Board of
Directors of the Company shall be used. The term "Trading Day" shall
mean a day on which the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading is open for
the transaction of business or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed
or traded, "current market price" per share shall mean the fair value
per share as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "current
market price" per share of Preferred Stock shall be determined in the
same manner as set forth above for the Common Stock in clause (i) of
this Section ll(d) (other than the last sentence thereof). If the
current market price per share of Preferred Stock cannot be determined
in the manner provided above or if the Preferred Stock is not publicly
held or listed or traded in a manner described in clause (i) of this
Section ll(d), the "current market price" per share of Preferred Stock
shall be conclusively deemed to be an amount equal to 4,000 (as such
number may be appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the current
market price per share of the Common Stock. If neither the Common Stock
nor the Preferred Stock is publicly held or so listed or traded,
"current market price" per share of the Preferred Stock shall mean the
fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the "current market price"
of one four-thousandth of a share of Preferred Stock shall be equal to
the "current market price" of one share of Preferred Stock divided by
4,000.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section ll(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest one-thousandth of a share of Common Stock
or other share or one
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<PAGE> 24
forty-millionth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section ll(e), an adjustment required
by this Section 11 shall be made no later than the earlier of (i) three (3)
years from the date of the transaction which mandates such adjustments, or (ii)
the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section ll(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections ll(a), (b),
(c), (e), (g), (h), (i), (j), (k), and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of four-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
section ll(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections ll(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of four-thousandths of a
share of Preferred Stock (calculated to the nearest one forty-thousandth)
obtained by (i) multiplying (x) the number of four-thousandths of a share
covered by a Right immediately prior to this adjustment, by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price, and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of four-thousandths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of four-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one forty-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the
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<PAGE> 25
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificates have
been issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section ll(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights Certificates so to be distributed shall be issued executed
and countersigned in the manner provided for herein (and may bear, at the option
of the Company, the adjusted Purchase Price) and shall be registered in the
names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of four-thousandths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one four-thousandth of a
share and the number of four-thousandths of a share which were expressed in the
initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of
four-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of four-thousandths of a share of
Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of four-thousandths of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the number of four-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of
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<PAGE> 26
the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section ll(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section ll(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section ll(o) hereof), if (x) at the time of or immediately after
such consolidation, merger, sale or transfer there are any rights, warrants or
other instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger, sale or transfer, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date (i) declare a dividend on the
outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock
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<PAGE> 27
into a smaller number of shares, the Purchase Price per Right immediately
following such event shall be equal to the product of the Purchase Price per
Right immediately prior to such event multiplied by a fraction, the numerator
which shall be the total number of Rights outstanding immediately prior to such
event and the denominator of which shall be the total number of Rights
outstanding immediately following such event.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 25 hereof. Notwithstanding the
foregoing sentence, the failure of the Company to give such notice shall not
affect the validity of or the force or effect of or the requirement for such
adjustment. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained. Any adjustment to be made
pursuant to Sections 11 and 13 of this Agreement shall be effective as of the
date of the event giving rise to such adjustment.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event ("Section 13(a) Event") that, following the Stock
Acquisition Date, directly or indirectly, (x) the Company shall consolidate
with, or merge with and into, any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section ll(o) hereof), and the
Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the Company
in a transaction which complies with Section ll(o) hereof) shall consolidate
with, or merge with or into, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger, and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any Person or Persons
(other than the Company or any Subsidiary of the Company in one or more
transactions each of which complies with Section ll(o) hereof), then, and in
each such case, proper provisions shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon
24
<PAGE> 28
the exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, such number of validly authorized and issued, fully
paid, non-assessable and freely tradable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall be equal
to the result obtained by (1) multiplying the then current Purchase Price by the
number of four-thousandths of a share of Preferred Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13 Event (or,
if a Section ll(a)(ii) Event has occurred prior to the first occurrence of a
Section 13 event, multiplying the number of such four-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section ll(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and (2) dividing that product
(which, following the first occurrence of a Section 13 Event, shall be referred
to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the current market price (determined pursuant to Section
ll(d)(i) hereof) per share of the Common Stock of such Principal Party on the
date of consummation of such Section 13 Event (or the fair market value on such
date of other securities or property of the Principal Party, as provided for
herein); provided that the Purchase Price and the number of shares of common
stock of such Principal Party issuable upon exercise of each Right shall be
further adjusted as provided in this Agreement to reflect any events occurring
after the date of the first occurrence of a Section 13 event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
provided, however, that upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all assets, recapitalization,
reclassification of shares, reorganization or other extraordinary transaction in
respect of such Principal Party, each holder of a Right shall thereupon be
entitled to receive, upon exercise of a Right and payment of the Purchase Price,
such cash, shares, rights, warrants and other property which such holder would
have been entitled to receive had he, at the time of such transaction, owned the
shares of Common Stock of the Principal Party purchasable upon the exercise of a
Right, and such Principal Party shall take such steps (including, but not
limited to, reservation of shares of stock) as may be necessary to permit the
subsequent exercise of the Rights in accordance with the terms hereof for such
cash, shares, rights, warrants and other property; and (v) the provisions of
Section ll(a)(ii) hereof shall be of no effect following the first occurrence of
any
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Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or (y)
of the first sentence of Section 13(a): (A) the Person that is the
issuer of any securities into which shares of Common Stock of the
Company are converted in such merger or consolidation, or, if there is
more than one such issuer, the issuer whose Common Stock has the
greatest market value or (B) if no securities are so issued, (x) the
Person that is the other party to such merger or consolidation and
survives said merger or consolidation, or, if there is more than one
such Person, the Person whose Common Stock has the greatest market value
or (y) if the Person that is the other party to the merger or
consolidation does not survive the merger or consolidation, the Person
that does survive the merger or consolidation (including the Company if
it survives); and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions receives the
same portion of the assets or earning power so transferred or if the
Person receiving the greatest portion of the assets or earning power
cannot be determined, whichever of such Persons as is the issuer of
Common Stock having the greatest market value of shares outstanding;
provided, however, that in any such case, (1) if the Common Stock of
such Person is not at such time and has not been continuously over the
preceding twelve (12) month period registered under Section 12 of the
Exchange Act, and such Person is a direct or indirect subsidiary of
another Person the Common Stock of which is and has been so registered,
"Principal Party" shall refer to such other Person; and (2) if such
Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such persons
is the issuer of the Common Stock having the greatest aggregate market
value.
(c) If, for any reason, the Rights cannot be exercised for the Common
Stock of such Principal Party, then a holder of Rights will have the right to
exchange each Right for cash from such Principal Party in an amount equal to
twice the Purchase Price as calculated above. If, for any reason, the foregoing
formulation cannot be applied to determine the cash amount to which the holder
of Rights is entitled, then the Continuing Directors on the Board of Directors
of the Company shall determine such amount reasonably and in good faith.
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<PAGE> 30
(d) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a), (b) and (c) of this Section
13 and further providing that, as soon as practicable after the date of any
consolidation, merger, sale or transfer mentioned in paragraph (a) of this
Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Act, with
respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to
cause such registration statement to (A) become effective as soon as
practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date and similarly comply with applicable state securities
laws;
(ii) will deliver to holders of the Rights historical financial
statements of the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form 10
(or any successor form) under the Exchange Act;
(iii) use its best efforts, if the Common Stock of the Principal
Party shall become listed on a national securities exchange, to list (or
continue the listing of) the Rights and the securities purchasable upon
exercise of the Rights on such securities exchange and, if the Common
Stock of the Principal Party shall not be listed on a national
securities exchange, to cause the Rights and the securities purchasable
upon exercise of the Rights to be reported by NASDAQ or such other
system then in use; and
(iv) obtain waivers of any rights of first refusal or preemptive
rights in respect of the shares of Common Stock of the Principal Party
subject to purchase upon exercise of outstanding Rights.
The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of a Section
ll(a)(ii) Event, the Rights which have not theretofore been exercised shall
thereafter become exercisable in the manner described in Section 13(a).
(e) Notwithstanding anything in this Agreement to the contrary, Section
13 shall not be applicable to a transaction described in subparagraphs (x) and
(y) of Section 13(a) if (i) such transaction is consummated with a Person or
Persons who
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<PAGE> 31
acquired shares of Common Stock pursuant to a tender offer or exchange offer for
all outstanding shares of Common Stock which complies with the provisions of
Section ll(a)(ii)(A) hereof (or a wholly owned subsidiary of any such Person or
Persons), (ii) the price per share of Common Stock offered in such transaction
is not less than the price per share of Common Stock paid to all holders of
shares of Common Stock whose shares were purchased pursuant to such tender offer
or exchange offer, and (iii) the form of consideration being offered to the
remaining holders of shares of Common Stock pursuant to such transaction is the
same as the form of consideration paid pursuant to such tender offer or exchange
offer. Upon consummation of any such transaction contemplated by this Section
13(e), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section ll(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or Pacific Stock Exchange or, if the Rights are not listed or admitted
to trading on the New York Stock Exchange or Pacific Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading, or if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Company. If on any such date no such market maker is making a market in the
Rights the fair value of the Rights on such date as determined in good faith by
the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
four-
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<PAGE> 32
thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one four-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one four-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one four-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one four-thousandth of a share of Preferred Stock shall be one four-thousandth
of the current market value of a share of Preferred Stock (as determined
pursuant to Section ll(d)(ii) hereof) on the Trading Day immediately prior to
the date of such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be
the closing price of one share of Common Stock (as determined pursuant to
Section ll(d)(i) hereof) for the Trading Day immediately prior to the date of
such exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this
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<PAGE> 33
Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agents) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
Performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purposes the holder of the number of
four-thousandths of a share of Preferred Stock or any other securities of the
Company which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights
Certificate be construed to confer upon the holder of any Rights Certificate, as
such, any of the rights of a stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate
30
<PAGE> 34
action, or to receive notice of meetings or other actions affecting stockholders
(except as provided in Section 24 hereof), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. Notwithstanding
anything in this Agreement to the contrary, in no event shall the Rights Agent
be liable for special, indirect or consequential loss or damage of any kind
whatsoever, even if the Rights Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action.
(b) The Rights Agent shall be protected and shall incur no liability for
or in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any Rights Certificate or
certificate for Common Stock or for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or stock transfer business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency
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<PAGE> 35
created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force Provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of the
statements
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<PAGE> 36
of fact or recitals contained in this Agreement or in the Rights Certificates or
be required to verify the same (except as to its countersignature on such Rights
Certificates), but all such statements and recitals are and shall be deemed to
have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt of the certificate described in
Section 12 hereof setting forth any such adjustment); nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock or Preferred Stock to
be issued pursuant to this Agreement or any Rights Certificates or as to whether
any shares of Common Stock or Preferred Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its
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<PAGE> 37
attorneys or agents, and the Rights Agent shall not be answerable or accountable
for any act, default, neglect or misconduct of any such attorneys or agents or
for any loss to the Company resulting from any such act, default, neglect or
misconduct; provided, however, reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent
(with or without cause) upon thirty (30) days' notice in writing, mailed to the
Rights Agent or successor Rights Agent, as the case may be, and to each transfer
agent of the Common Stock and Preferred Stock, by registered or certified mail,
and to the holders of the Rights Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the incumbent Rights
Agent or any registered holder of any Rights Certificate may apply to any court
of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be (a) a corporation organized and doing business under the laws of the
United States or of any other state of the United States in good standing, which
is authorized under such laws to exercise corporate trust or stock transfer
powers or (b) an affiliate of a corporation described in clause (a) of this
sentence. After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Rights Agent
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<PAGE> 38
without further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, or upon the
exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board of Directors of the Company, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the close of business on the earliest of (i) the tenth business
day after the date of the first Section ll(a)(ii) Event, (ii) the date of the
first Section 13(a) event, or (iii) the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $0.01 per
Right, as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"). The
Company may, at its option, pay the Redemption Price in cash, shares of Common
Stock (based on the "current market price", as defined in Section ll(d)(i)
hereof, of the Common Stock at the time of redemption) or
35
<PAGE> 39
any other form of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price for each Right so held, without any interest thereon. Promptly after the
action of the Board of Directors ordering the redemption of the Rights, the
Company shall give notice of such redemption to the Rights Agent and the holders
of the then outstanding Rights by mailing such notice to all such holders at
each holder's last address as it appears upon the registry books of the Rights
Agent or, prior to the Distribution Date, on the registry books of the Transfer
Agent for the Common Stock. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made. The failure to give notice required by this
Section 23(b) or any defect therein shall not affect the legality or validity of
the action taken by the Company.
Section 24. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section ll(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section ll(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so
36
<PAGE> 40
given in the case of any action covered by clause (i) or (ii) above at least ten
(10) days prior to the record date for determining holders of the shares of
Preferred Stock for purposes of such action, and in the case of any such other
action, at least ten (10) days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the shares of
Preferred Stock whichever shall be the earlier. The failure to give notice
required by this Section 24 or any defect therein shall not affect the legality
or validity of the action taken by the Company or the vote upon any such action.
(b) In case any of the events set forth in Section ll(a)(ii) hereof
shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section ll(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
Section 25. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, California 90245
Attention: Hayward D. Fisk, Vice President,
General Counsel and Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, New Jersey 07660
Attention: Reorganization Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid,
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<PAGE> 41
addressed to such holder at the address of such holder as shown on the registry
books of the Transfer Agent.
Section 26. Supplements and Amendments Prior to the close of business on
the earliest of (i) the tenth business day after the date of the First Section
ll(a)(ii) Event, (ii) the date of the first Section 13(a) Event, or (iii) the
Final Expiration Date and, in each case subject to extension by the Board of
Directors by amendment hereof, and subject to the penultimate sentence of this
Section 26, the Company may, in its sole and absolute discretion and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement without the approval of any holders of certificates representing
shares of Common Stock. Thereafter, subject to the penultimate sentence of this
Section 26, the Company may and the Rights Agent shall, if the Company so
directs, supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order (i) to cure any ambiguity, (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions herein, or (iii) to change or supplement any provision
hereunder in any manner which the Company may deem necessary or desirable and
which shall not adversely affect the interests of the holders of Rights
Certificates (other than an Acquiring Person or an Affiliate or Associate of any
such Person); provided, this Agreement may not be supplemented or amended to
lengthen, pursuant to clauses (i) or (ii) of this sentence, (A) a time period
relating to when the Rights may be redeemed or this Agreement amended at the
sole and absolute discretion of the Company at such time as the Rights are not
then redeemable, or (B) any other time period unless such lengthening is for the
purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than any Acquiring Person and its
Associates or Affiliates). Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 26, the Rights Agent
shall execute such supplement or amendment. Notwithstanding anything contained
in this Agreement to the contrary, no supplement or amendment shall be made
which changes the Redemption Price or the Final Expiration Date. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
Section 27. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 28. Determination and Actions by the Board of Directors. etc.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with
the last sentence
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<PAGE> 42
of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange
Act. The Board of Directors of the Company (or, as set forth herein, certain
specified members thereof) shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors of the Company or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including, but not limited to, a
determination to redeem or not redeem the Rights, or to amend this Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board of Directors of the Company in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject any member of
the Board of Directors to any liability to the holders of the Rights or to any
other Person.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth business day following the date of such determination by the Board of
Directors of the Company.
Section 31. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Nevada and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be
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<PAGE> 43
performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
40
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: COMPUTER SCIENCES CORPORATION
By: /s/Hayward D. Fisk By: /s/Van B. Honeycutt
------------------------------ ---------------------------------
Hayward D. Fisk Van B. Honeycutt
Secretary President
[ Seal ]
Attest: CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By: /s/James E. Hagan By: /s/Barry S. Rosenthal
----------------------------- ---------------------------------
James E. Hagan Barry S. Rosenthal
Team Leader Officer
[ Seal ]
41
<PAGE> 45
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
$1.00 PAR VALUE
OF
COMPUTER SCIENCES CORPORATION
Pursuant to Section 78.195 of the General Corporation
Law of the State of Nevada
We, Hayward D. Fisk, Vice President, and Stephen E. Johnson, Assistant
Secretary, of COMPUTER SCIENCES CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of Nevada, in accordance
with the provisions of Section 78.195 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Restated Articles of Incorporation of the Corporation: (i) the Board on
December 21, 1988 adopted a resolution creating a series of Preferred Stock, par
value $1.00 per share, designated as Series A Junior Participating Preferred
Stock, and caused to be filed with the Nevada Secretary of State on January 13,
1989 a Certificate of Designations with respect thereto; and (ii) the Board on
October 30, 1995 amended and restated such resolution in its entirety and caused
to be filed with the Nevada Secretary of State on November 3, 1995 a Certificate
of Amendment of Certificate of Designations with respect to the Series A Junior
Participating Preferred Stock; and
That on June 17, 1996, prior to the issuance of any shares of Series A
Junior Participating Preferred Stock, the Board of Directors, pursuant to the
authority conferred upon the Board by the Restated Articles of Incorporation,
again amended and restated such resolution in its entirety, effective as of
August 1, 1996, as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of its Restated
Articles of Incorporation, a series of Preferred Stock of the Corporation be,
and it hereby is, created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
or restrictions thereof, are as follows:
<PAGE> 46
Section 1. Designation and Amount. The shares of such series shall be
designated as Series A Junior Participating Preferred Stock, par value $1.00 per
share (the "Series A Preferred Stock"), and the number of shares constituting
such series shall be Two Hundred Thousand (200,000).
Section 2. Dividends and Distributions.
(a) The holders of shares of Series A Preferred Stock, in preference to
the holders of shares of Common Stock, $1.00 per share, of the Corporation (the
"Common Stock") and of any other junior stock of the Corporation that may be
outstanding, shall be entitled to receive, when, as and if declared by the Board
of Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the fifteenth day of January, April, July and October in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00
per share ($4.00 per annum), or (ii) subject to the provision for adjustment
hereinafter set forth, 4,000 times the aggregate per share amount of all cash
dividends, and 4,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock, or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event that the
Corporation shall at any time declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then and
in each such event, the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under clause (ii) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event, and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the
Series A Preferred Stock as provided in paragraph (a) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided, however,
that in the event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per
share ($4.00 per annum)
2
<PAGE> 47
on the Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall not bear interest. Each share of
Preferred Stock shall rank on a parity with each other share of Preferred Stock,
regardless of series, with respect to the payment of dividends at the
respectively designated rates. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 60 days
prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(a) Each share of Series A Preferred Stock shall entitle the holder
thereof to 1 vote with the right to cumulate votes in certain instances in the
manner set forth in the Restated Articles of Incorporation of the Corporation on
all matters submitted to a vote of the stockholders of the Corporation. In the
event that the Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then and in
each such event, the number of votes per share to which holders of shares of
Series A Preferred Stock are entitled shall be increased, in the case of a
subdivision, or in the case of such a dividend, or reduced, in the case of a
combination, in the same proportion as the subdivision, increase by dividend, or
combination of the Common Stock.
(b) Except as otherwise provided in the Restated Articles of
Incorporation of the Corporation or herein or by law, the holders of shares of
Series A Preferred
3
<PAGE> 48
Stock and the holders of shares of Common Stock shall vote together as one class
on all matters submitted to a vote of stockholders of the Corporation.
(c) In addition, the holders of shares of Series A Preferred Stock shall
have the following special voting rights:
In the event that at any time dividends on Series A Preferred Stock,
whenever accrued and whether or not consecutive, shall not have been paid or
declared and a sum sufficient for the payment thereof set aside, in an amount
equivalent to six quarterly dividends on all shares of Series A Preferred Stock
at the time outstanding, then and in each such event, the holders of shares of
Series A Preferred Stock and each other series of preferred stock now or
hereafter issued that shall be accorded such class voting right by the Board of
Directors and that shall have the right to elect two directors as the result of
a prior or subsequent default in payment of dividends on such series (each such
other series being hereinafter called "Other Series of Preferred Stock"), voting
separately as a class without regard to series, shall be entitled to elect two
directors at the next annual meeting of stockholders of the Corporation, in
addition to the directors to be elected by the holders of all shares of the
Corporation entitled to vote for the election of directors, and the holders of
all shares (including the Series A Preferred Stock) otherwise entitled to vote
for directors, voting separately as a class, shall be entitled to elect the
remaining members of the Board of Directors, provided that the Series A
Preferred Stock and each Other Series of Preferred Stock, voting as a class,
shall not have the right to elect more than two directors. Such special voting
right of the holders of shares of Series A Preferred Stock may be exercised
until all dividends in default on the Series A Preferred Stock shall have been
paid in full or declared and funds sufficient therefor set aside, and when so
paid or provided for, such special voting right of the holders of shares of
Series A Preferred Stock shall cease, but subject always to the same provisions
for the vesting of such special voting rights in the event of any such future
dividend default or defaults. At any time after such special voting rights shall
have so vested in the holders of shares of Series A Preferred Stock, the
Secretary of the Corporation may, and upon the written request of the holders of
record of 10% or more in number of the shares of Series A Preferred Stock and
each Other Series of Preferred Stock then outstanding addressed to the Secretary
at the principal executive office of the Corporation shall, call a special
meeting of the holders of shares of Preferred Stock so entitled to vote, for the
election of the directors to be elected by them as herein provided, to be held
within 60 days after such call and at the place and upon the notice provided by
law and in the Bylaws for the holding of meetings of stockholders; provided,
however, that the Secretary shall not be required to call such special meeting
in the case of any such request received less than 90 days before the date fixed
for any annual meeting of stockholders, and if in such case such special meeting
is not called or held, the holders of shares of Preferred Stock so entitled to
vote shall be entitled to exercise the special voting rights provided in this
paragraph
4
<PAGE> 49
at such annual meeting. If any such special meeting required to be called as
above provided shall not be called by the Secretary within 30 days after receipt
of any such request, then the holders of record of 10% or more in number of the
shares of Series A Preferred Stock and each Other Series of Preferred Stock then
outstanding may designate in writing one of their number to call such meeting,
and the person so designated may, at the expense of the Corporation, call such
meeting to be held at the place and upon the notice given by such person, and
for that purpose shall have access to the stock books of the Corporation. No
such special meeting and no adjournment thereof shall be held on a date later
than 60 days before the annual meeting of stockholders. If, at any meeting so
called or at any annual meeting held while the holders of shares of Series A
Preferred Stock have the special voting rights provided for in this paragraph,
the holders of not less than 40% of the shares of Series A Preferred Stock and
each Other Series of Preferred Stock then outstanding are present in person or
by proxy, which percentage shall be sufficient to constitute a quorum for the
election of additional directors as herein provided, the then authorized number
of directors of the Corporation shall be increased by two, as of the time of
such special meeting or the time of the first such annual meeting held while
such holders have special voting rights and such quorum is present, and the
holders of shares of Series A Preferred Stock and each Other Series of Preferred
Stock, voting as a class, shall be entitled to elect the additional directors so
provided for. If the directors of the Corporation are then divided into classes
under provisions of the Restated Articles of Incorporation of the Corporation or
the Bylaws, the two additional directors shall be members of those respective
classes of directors in which a vacancy is created as a result of such increase
in the authorized number of directors. If the foregoing expansion of the size of
the Board of Directors shall not be valid under applicable law, then the holders
of shares of Series A Preferred Stock and of each Other Series of Preferred
Stock, voting as a class, shall be entitled, at the meeting of stockholders at
which they would otherwise have voted, to elect directors to fill any then
existing vacancies on the Board of Directors, and shall additionally be
entitled, at such meeting and each subsequent meeting of stockholders at which
directors are elected, to elect all of the directors then being elected until by
such class vote two members of the Board of Directors have been so elected. Upon
the election at such meeting by the holders of shares of Series A Preferred
Stock and each Other Series of Preferred Stock, voting as a class, of the
directors they are entitled so to elect, the persons so elected, together with
such persons as may be directors or as may have been elected as directors by the
holders of all shares (including Series A Preferred Stock) otherwise entitled to
vote for directors, shall constitute the duly elected directors of the
Corporation. The additional directors so elected by holders of shares of Series
A Preferred Stock and each Other Series of Preferred Stock, voting as a class,
shall serve until the next annual meeting or until their respective successors
shall be elected and qualified, or if any such director is a member of a class
of directors under provisions dividing the directors into classes, each such
director shall serve until the annual meeting at which the term of office of
such director's class shall
5
<PAGE> 50
expire or until such director's successor shall be elected and shall qualify,
and at each subsequent meeting of stockholders at which the directorship of any
director elected by the vote of holders of shares of Series A Preferred Stock
and each other Series of Preferred Stock under the special voting rights set
forth in this paragraph is up for election, said special class voting rights
shall apply in the reelection of such director or in the election of such
director's successor; provided, however, that whenever the holders of shares of
Series A Preferred Stock and each Other Series of Preferred Stock shall be
divested of the special rights to elect two directors as above provided, the
terms of office of all persons elected as directors by the holders of shares of
Series A Preferred Stock and each Other Series of Preferred Stock, voting as a
class, or elected to fill any vacancies resulting from the death, resignation,
or removal of directors so elected by the holders of shares of Series A
Preferred Stock and each Other Series of Preferred Stock, shall forthwith
terminate (and, if applicable, the number of directors shall be reduced
accordingly). If, at any time after a special meeting of stockholders or an
annual meeting of stockholders at which the holders of shares of Series A
Preferred Stock and each Other Series of Preferred Stock, voting as a class,
have elected directors as provided above, and while the holders of shares of
Series A Preferred Stock and each Other Series of Preferred Stock shall be
entitled so to elect two directors, the number of directors who have been
elected by the holders of shares of Series A Preferred Stock and each Other
Series of Preferred Stock (or who by reason of one or more resignations, deaths
or removals have succeeded any directors so elected) shall by reason of
resignation, death or removal be less than two but at least one, the vacancy in
the directors so elected by the holders of shares of the Series A Preferred
Stock and each Other Series of Preferred Stock may be filled by the remaining
director elected by such holders, and in the event that such election shall not
occur within 30 days after such vacancy arises, or in the event that there shall
not be incumbent at least one director so elected by such holders, the Secretary
of the Corporation may, and upon the written request of the holders of record of
10% or more in number of the shares of Series A Preferred Stock and each Other
Series of Preferred Stock then outstanding addressed to the Secretary at the
principal office of the Corporation shall, call a special meeting of the holders
of shares of Series A Preferred Stock and each Other Series of Preferred Stock
so entitled to vote, for an election to fill such vacancy or vacancies, to be
held within 60 days after such call and at the place and upon the notice
provided by law and in the Bylaws for the holding of meetings of stockholders;
provided, however, that the Secretary shall not be required to call such special
meeting in the case of any such request received less than 90 days before the
date fixed for any annual meeting of stockholders, and if in such case such
special meeting is not called, the holders of shares of Preferred Stock so
entitled to vote shall be entitled to fill such vacancy or vacancies at such
annual meeting. If any such special meeting required to be called as above
provided shall not be called by the Secretary within 30 days after receipt of
any such request, then the holders of record of 10% or more in number of the
shares of Series A Preferred Stock and each Other Series of Preferred Stock then
6
<PAGE> 51
outstanding may designate in writing one of their number to call such meeting,
and the person so designated may, at the expense of the Corporation, call such
meeting to be held at the place and upon the notice above provided, and for that
purpose shall have access to the stock books of the Corporation; no such special
meeting and no adjournment thereof shall be held on a date later than 60 days
before the annual meeting of stockholders.
(d) Nothing herein shall prevent the directors or stockholders from
taking any action to increase the number of authorized shares of Series A
Preferred Stock, or increasing the number of authorized shares of Preferred
Stock of the same class as the Series A Preferred Stock or the number of
authorized shares of Common Stock, or changing the par value of the Common Stock
or Preferred Stock, or issuing options, warrants or rights to any class of stock
of the Corporation as authorized by the Restated Articles of Incorporation of
the Corporation, as it may hereafter be amended.
(e) Except as set forth herein, holders of shares of Series A Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote as set forth in the
Restated Articles of Incorporation of the Corporation or herein or by law) for
taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever any dividends or other distributions payable on the Series
A Preferred Stock as provided in Section 2 hereof are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Preferred Stock outstanding shall have been paid
in full, the Corporation shall not, directly or indirectly:
(i) declare or pay dividends on, or make any other distributions
with respect to, any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series
A Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions
with respect to any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on shares of the
Series A Preferred Stock and all such parity stock on which dividends
are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (both as to dividends and upon
liquidation, dissolution or winding up) the Series A Preferred Stock,
provided that the
7
<PAGE> 52
Corporation may at any time redeem, purchase or otherwise acquire shares
of any such junior stock in exchange for shares of any stock of the
Corporation ranking junior (both as to dividends and upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. Such
shares may not be reissued as part of any series of preferred stock including
Series A Preferred Stock).
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made to:
(a) the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received the greater of (i) $40.00 per share ($.01
per one four-thousandth of a share), plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, or (ii) an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 4,000 times the aggregate amount
to be distributed per share to holders of shares of Common Stock (the "Series A
Liquidation Preference"); or
(b) the holders of shares of Preferred Stock regardless of series,
except distributions made ratably on the Series A Preferred Stock and all other
Preferred Stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up.
8
<PAGE> 53
In the event that the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then and in each such event, the amount to which holders
of shares of Series A Preferred Stock were entitled immediately prior to such
event under clause (ii) at paragraph (a) of this Section 6 shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event, and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In the event that the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, or otherwise changed, then and in
each such event, the shares of Series A Preferred Stock shall at the same time
be similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 4,000 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common Stock
is changed or exchanged. In the event that the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then and in each such event, the amount
set forth in the preceding sentence with respect to the exchange or change of
shares of Series A Preferred Stock shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event, and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable. Notwithstanding the foregoing, the Corporation may acquire
shares of Series A Preferred Stock in any other manner permitted by law, the
Restated Articles of Incorporation of the Corporation or herein.
Section 9. Amendment. The Restated Articles of Incorporation of the
Corporation shall not be amended in any manner that would materially and
adversely alter or change the powers, preferences or special rights of the
Series A Preferred Stock without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single series.
9
<PAGE> 54
Section 10. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share (in one four-thousandth (1/4000) of a share and integral
multiples thereof) that shall entitle the holder thereof, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of shares of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate of
Amendment and do affirm the foregoing as true under the penalties of perjury
this day of , 19 .
------------------------------
Hayward D. Fisk
Vice President
------------------------------
Stephen E. Johnson
Assistant Secretary
10
<PAGE> 55
EXHIBIT B
FORM OF
RIGHTS CERTIFICATE
Certificate No. R-______ ______ Rights
NOT EXERCISABLE AFTER DECEMBER 21, 1998 OR EARLIER IF REDEEMED. THE RIGHTS ARE
SUBJECT TO REDEMPTION AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY CERTAIN PERSONS OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS
MAY BECOME NULL AND VOID.
Rights Certificate
COMPUTER SCIENCES CORPORATION
This certifies that ________________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner thereof, subject to the terms and conditions of a
Rights Agreement (the "Rights Agreement") dated as of December 21, 1988, as
amended and restated as of August 1, 1996, by and between COMPUTER SCIENCES
CORPORATION, a Nevada corporation (the "Company"), and CHASEMELLON SHAREHOLDER
SERVICES, L.L.C. (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 o'clock p.m., California time, on the earliest of (i) the date of
the action of a majority, but not less than three, of the Independent Directors
directing the Company to redeem the Rights pursuant to Section 23(a) of the
Rights Agreement, (ii) the date upon which the Rights are redeemed pursuant to
Section 25 of the Rights Agreement, or (iii) December 21, 1998, at the office or
agency of the Rights Agent at 85 Challenger Road, Overpeck Centre, Ridgefield
Park, New Jersey 07660, or at the office of its successor as Rights Agent, one
four-thousandth of a fully paid and nonassessable share of Series A Junior
Participating Cumulative Preferred Stock, par value $1.00 per share, of the
Company (a "Preferred Share") or, in certain circumstances, other securities or
other property, at a purchase price of $235.00 per one four-thousandth of a
Preferred Share (the "Exercise Price"), upon presentation and surrender of this
Rights Certificate with the Form of Election to Purchase, including Certificate,
on the reverse side hereof completed and duly executed, with signature
guaranteed.
The number of Rights represented by this Rights Certificate and the
Exercise Price set forth above are the number of Rights and the Exercise Price
as of December 21, 1988, based upon the Preferred Shares as constituted on such
date. As provided in the Rights Agreement, the Exercise Price and the number of
<PAGE> 56
Preferred Shares or other securities or other property that may be purchased
upon the exercise of the Rights represented by this Rights Certificate are
subject to modification and adjustment upon the occurrence of certain events.
The Rights Agreement contains a full description of the rights,
limitations of rights, obligations, duties and immunities of the Rights Agent,
the Company and the holders of Rights Certificates. This Rights Certificate is
subject to all the terms and conditions of the Rights Agreement, which terms and
conditions are hereby incorporated herein by reference and made a part hereof.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned offices of the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
presentation and surrender at the above-mentioned offices of the Rights Agent,
with the Form of Assignment, including Certificate, on the reverse side hereof
completed and duly executed, with signature guaranteed, may be exchanged for
another Rights Certificate or Rights Certificates of like tenor and date
representing Rights entitling the holder thereof to purchase a like aggregate
number of Preferred Shares or, in certain circumstances, other securities or
other property, as the Rights represented by the Rights Certificate or Rights
Certificates surrendered shall have entitled such holder to purchase. If this
Rights Certificate shall be exercised in part, the holder shall be entitled to
receive, upon the surrender hereof with the Form of Election to Purchase,
including Certificate, on the reverse side hereof completed and duly executed,
with signature guaranteed, another Rights Certificate or Rights Certificates for
the number of whole Rights not exercised. Subject to the provisions of the
Rights Agreement, the Rights represented by this Rights Certificate may be
redeemed by the Company, at its option, at a redemption price of $.01 per Right.
No fractional securities shall be issued upon the exercise of any Right
or Rights represented hereby (other than fractions of Preferred Shares that are
integral multiples of one four-thousandth of a Preferred Share, that may, at the
option of the Company, be represented by depositary receipts), but in lieu
thereof, a cash payment shall be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to vote
or receive dividends or be deemed for any purpose the holder of the Preferred
Shares or other securities or property that may at any time be issuable on the
exercise hereof, nor shall anything contained herein be construed to confer upon
the holder hereof, as such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights,
2
<PAGE> 57
until the Right or Rights represented by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ____________, _____.
Attest: COMPUTER SCIENCES CORPORATION
a Nevada corporation
By__________________________ By__________________________________
Name: Name:
Title: Title:
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.,
as Rights Agent
By___________________________
Name:
Title:
3
<PAGE> 58
Form of Reverse Side of Rights Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer any or all of the Rights
represented by this Rights Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
________________________________________________________________________________
(Name, address and social security or other identifying number of
transferee)______________________________ ( ) of the Rights represented
by this Rights Certificate, together with all right, title and interest in and
to said Rights, and hereby irrevocably constitutes and appoints
______________________ attorney to transfer said Rights on the books of Project
First Corporation with full power of substitution.
Dated:_______________, 19___ _____________________________
(Signature)
Signature Guaranteed:
Certificate
(to be completed, if true)
The undersigned hereby certifies that the Rights represented by this
Rights Certificate are not Beneficially owned by a 20% Stockholder or an
Affiliate or Associate of a 20% Stockholder (as such capitalized terms are
defined in the Rights Agreement).
Dated: _______________, 19___ ______________________________
(Signature)
Signature Guaranteed:
4
<PAGE> 59
Form of Reverse Side of Rights Certificate
(continued)
NOTICE
The signatures to the foregoing Assignment and the foregoing
Certificate, if applicable, must correspond to the name as written upon the face
of this Rights Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a member firm of
a registered national securities exchange, a member of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company may deem the Rights represented by this Rights
Certificate to be Beneficially Owned by a 20% Stockholder or an Affiliate or
Associate of a 20% Stockholder (as such capitalized terms are defined in the
Rights Agreement), and not issue any Rights Certificate or Rights Certificates
in exchange for this Rights Certificate.
5
<PAGE> 60
Form of Reverse Side of Rights Certificate
(continued)
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder if such holder
desires to exercise any or all of the Rights
represented by this Rights Certificate)
To COMPUTER SCIENCES CORPORATION:
The undersigned hereby irrevocably elects to exercise ________________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other Person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to:
Please insert social security _____________________________
or other identifying number
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
Please insert social security ______________________________
or other identifying number
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address)
Dated: ______________, 19___ ______________________________
(Signature)
Signature Guaranteed:
6
<PAGE> 61
Form of Reverse Side of Rights Certificate
(continued)
Certificate
(to be completed, if true)
The undersigned hereby certifies that the Rights represented by this
Rights Certificate are not Beneficially Owned by a 20% Stockholder or an
Affiliate or Associate of a 20% Stockholder (as such capitalized terms are
defined in the Rights Agreement).
Dated: ______________ 19___ ______________________________
(Signature)
Signature Guaranteed:
NOTICE
The signatures to the foregoing Election and the foregoing Certificate,
if applicable, must correspond to the name as written upon the face of this
Rights Certificate in every particular, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in the United States.
In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company may deem the Rights represented by this Rights
Certificate to be Beneficially Owned by a 20% Stockholder or an Affiliate or
Associate of a 20% Stockholder (as such capitalized terms are defined in the
Rights Agreement), and not issue any property or certificate for securities upon
the exercise of this Rights Certificate or issue any new Rights Certificate for
any remaining balance of unexercised Rights represented by this Rights
Certificate.
7
<PAGE> 62
EXHIBIT C
SUMMARY OF THE RIGHTS
On December 21, 1988, the Board of Directors of Computer Sciences
Corporation (the "Company") authorized and declared a dividend distribution of
one preferred stock purchase right (a "Right") for each share of common stock,
$1.00 par value, of the Company (the "Common Stock") outstanding at the close of
business on January 3, 1989 (the "Record Date"), and authorized the issuance of
one Right for each share of Common Stock issued between the Record Date (whether
originally issued or delivered from the Company's treasury) and the Distribution
Date (as defined in Section 2 below).
The following is a brief description of the Rights. It is intended to
provide a general description only and is subject to the detailed terms and
conditions of a Rights Agreement (the "Rights Agreement") dated as of December
21, 1988, as amended and restated as of August 1, 1996, by and between the
Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the
"Rights Agent").
1. Common Share Certificates Representing Rights
Until the Distribution Date, (a) the Rights are not exercisable, (b) the
Rights are attached to and trade only together with the Common Shares and (c)
Common Share certificates represent the Rights related thereto. Common Share
certificates issued after the Record Date and prior to the Distribution Date
will contain a notation incorporating the Rights Agreement by reference.
2. Distribution Date
The "Distribution Date" is the earlier of (a) the tenth business day
following the date of the first public announcement that any person (other than
the Company or certain related entities) has become the beneficial owner of 20%
or more of the outstanding Common Shares (such person is a "20% Stockholder" and
the date of such public announcement is the "20% Ownership Date") or (b) the
tenth business day following the date of the commencement of, or the
announcement of an intention to make, a tender offer or exchange offer by any
Person (other than the Company or certain related entities), if upon the
consummation thereof such person would be the owner of at least 30% of the
Common Shares.
Upon the close of business on the Distribution Date, the Rights will
separate from the Common Shares, Right certificates will be issued and the
Rights will become exercisable to purchase Preferred Shares, Common Shares or
other securities as described in Section 4 below.
<PAGE> 63
3. Expiration of Rights
The Rights will expire on December 21, 1998, unless earlier redeemed.
4. Exercise of Rights
Rights may be exercised, at the option of the holders, pursuant to
paragraphs (a), (b) or (c) below. No Right may be exercised more than once or
pursuant to more than one of such paragraphs. From and after the first event of
the type described in paragraphs (b) or (c) below, each Right that is
beneficially owned by a 20% Stockholder or that was attached to a Common Share
that is subject to an option beneficially owned by a 20% Stockholder will be
void.
(a) Right to Purchase Preferred Shares. Unless the Rights have
previously expired or been redeemed, from and after the close of business on the
Distribution Date, each Right (other than a Right that has become void) will be
exercisable to purchase one four-thousandth of a share of Series A Junior
Participating Cumulative Preferred Stock, par value $1.00 per share, of the
Company (the "Preferred Shares"), at the exercise price calculated in accordance
with the terms of the Rights Agreement (as such price may be adjusted from time
to time to prevent dilution, the "Exercise Price"). The Exercise Price as of
August 1, 1996 was $78.33. Prior to the Distribution Date, the Company may
substitute for all or any portion of the Preferred Shares that would otherwise
be issuable upon exercise of the Rights, cash, assets or other securities having
the same aggregate value as such Preferred Shares. The Preferred Shares are
nonredeemable and may not be issued except upon exercise of Rights. The holder
of a Preferred Share is entitled to receive when, as and if declared, the
greater of (a) cash and non-cash dividends in an amount equal to 4,000 times the
dividends declared on each Common Share or (b) a preferential annual dividend of
$4.00 per Preferred Share ($.001 per one four-thousandth of a Preferred Share).
In the event of liquidation, the holders of Preferred Shares will be entitled to
receive a liquidation payment in an amount equal to the greater of (x) $40.00
per Preferred Share ($.01 per one four-thousandth of a Preferred Share), plus
all accrued and unpaid dividends and distributions on the Preferred Shares, or
(y) an amount equal to 4,000 times the aggregate amount to be distributed per
Common Share. Each Preferred Share has one vote, voting together with the Common
Shares. In the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, the holder of a Preferred Share will be entitled to
receive 4,000 times the amount received per Common Share. The rights of the
Preferred Shares as to dividends, voting and liquidation preferences are
protected by anti-dilution provisions.
(b) Right to Purchase Common Shares of the Company. Unless the Rights
have previously expired or been redeemed, from and after the close of business
on the tenth business
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day following the 20% Ownership Date (or, if the tenth business day after the
20% ownership Date occurs before the Record Date, the close of business on the
Record Date), each Right (other than a Right that has become void) will be
exercisable to purchase one Common Share at 10% of the then current market value
of the Common Shares. If the Company does not have sufficient Common Shares
available for all Rights to be exercised, the Company will substitute for all or
any portion of the Common Shares that would otherwise be issuable upon the
exercise of the Rights, cash, assets or other securities or any combination of
the foregoing having the same aggregate value as such Common Shares.
(c) Right to Purchase Common Stock of a Successor Corporation. Unless
the Rights have previously expired or been redeemed, if, on or after the 20%
Ownership Date, (a) the Company is acquired in a merger or other business
combination in which the Company is not the surviving corporation or in which
the outstanding Common Shares are changed into or exchanged for stock or assets
of another person or (b) 50% or more of the Company's consolidated assets or
earning power are sold (other than in transactions in the ordinary course of
business), then each Right (other than a Right that has become void) will
thereafter be exercisable to purchase, at the Exercise Price (initially
$235.00), shares of common stock of the surviving corporation or purchaser,
respectively, with an aggregate market value equal to two times the Exercise
Price. If the surviving corporation or purchaser does not have sufficient common
stock available or is not publicly held, then each Right can be put to the
surviving corporation or purchaser for a cash payment equal to the Exercise
Price.
5. Adjustments to Prevent Dilution. The Exercise Price, the number of
outstanding Rights and the number of Preferred Shares or Common Shares issuable
upon exercise of the Rights are subject to adjustment from time to time as set
forth in the Rights Agreement in order to prevent dilution.
6. Cash Paid Instead of Issuing Fractional Securities. No fractional
securities will be issued upon exercise of a Right (other than fractions of
Preferred Shares that are integral multiples of one four-thousandth of a
Preferred Share and that may, at the election of the Company, be evidenced by
depositary receipts) and in lieu thereof, an adjustment in cash will be made
based on the market price of such securities.
7. Redemption. At any time prior to the close of business on the
earliest of (i) the tenth business day after the date of the first event of the
type described in Section 4(b) above, (ii) the date of the first event of the
type described in Section 4(c) above or (iii) the Rights' date of expiration
given in Section 3 above, the Board of Directors may direct the Company to
redeem the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"), and the Company
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will so redeem the Rights. Thereafter, the right to exercise Rights will
terminate and the only right of the holders of Rights will be to receive the
Redemption Price.
8. No Stockholder Rights Prior to Exercise. Until a Right is exercised,
the holder thereof, as such, will have no rights as a stockholder of the Company
(other than rights resulting from such holder's ownership of Common Shares),
including, without limitation, the right to vote or receive dividends.
9. Amendment of Rights Agreement. At any time prior to the close of
business on the earliest of (i) the tenth business day after the date of the
first event of the type described in Section 4(b) above, (ii) the date of the
first event of the type described in Section 4(c) above or (iii) the Rights'
date of expiration given in Section 3 above, the Board of Directors may, without
the approval of any holders of Rights, direct the Company and the Rights Agent
to amend the Rights Agreement in any manner, whether or not such amendment is
adverse to the holders of Rights. At any time thereafter the first event of the
type described in Section 4(b) or (c) above, the Board of Directors may, without
the approval of any holders of Rights, direct the Company and the Rights Agent
to amend the Rights Agreement in any manner so long as such amendment does not
materially and adversely affect the interests of the holders of Rights.
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