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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant / /
Filed by a party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Computer Sciences Corporation
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Computer Associates
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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PRELIMINARY COPY SUBJECT TO COMPLETION
DATED FEBRUARY __, 1998
CONSENT SOLICITATION,
and
SOLICITATION OF AGENT DESIGNATIONS
IN CONNECTION WITH
THE CALL OF A SPECIAL MEETING OF STOCKHOLDERS
OF
COMPUTER SCIENCES CORPORATION
___________
SOLICITATION STATEMENT
OF
COMPUTER ASSOCIATES INTERNATIONAL, INC.
One Computer Associates Plaza
Islandia, NY 11788-7000
(516) DIAL CAI (342-5224)
___________
This Solicitation Statement and the accompanying [COLOR] Consent Card with
Agent Designation are being furnished to holders of outstanding common stock,
par value $1.00 per share (the "Common Stock"), of Computer Sciences
Corporation, a Nevada corporation ("CSC" or the "Company"), on
, 1998 by Computer Associates International, Inc. ("Computer Associates")
in connection with the solicitation of one or both of the following stockholder
actions (i) consents of the stockholders of the Company (the "Shareholders") in
lieu of a Shareholders meeting (the "Consents") and (ii) appointments of
Designated Agents ("Agent Designations") to provide for the call of a special
meeting of the Shareholders (the "Special Meeting"). Each of the Consents and
Agent Designations are being solicited for the purpose of acting upon or
facilitating action upon the Proposals (defined below). The Proposals are
targeted principally at (1) replacing the existing directors of CSC with
directors who are committed, subject to their fiduciary duties, to removing any
impediments to the ability of Shareholders to choose freely whether to accept
the Offer (defined below) and approve the Proposed Merger (the "Director
Replacement Proposals"),
THESE ARE PRELIMINARY SOLICITATION MATERIALS AND, IN ACCORDANCE WITH U.S.
SECURITIES LAWS, DO NOT INCLUDE CONSENT CARD WITH AGENT DESIGNATION. ONCE OUR
SOLICITATION MATERIALS BECOME DEFINITIVE, YOU WILL RECEIVE ANOTHER COPY ALONG
WITH OUR CONSENT CARD WITH AGENT DESIGNATION.
<PAGE>
and (2) clarifying that the Company's board of directors (the "Board") may not
delay the Company's annual meeting of Shareholders (the "Annual Meeting") at
which Computer Associates will seek to replace the existing directors if this
action cannot be accomplished by consent or at the Special Meeting and to limit
the Board's ability to take certain Defensive Actions (defined below) (the
"Anti- Entrenchment Proposals" and, together with the Director Replacement
Proposals, the "Proposals"). See "Proposals" and "The Offer and the Proposed
Merger."
THIS SOLICITATION STATEMENT AND THE ACCOMPANYING [COLOR] CONSENT CARD WITH
AGENT DESIGNATION ARE FIRST BEING SENT TO THE SHAREHOLDERS ON OR ABOUT
, 1998. CONSENTS AND AGENT DESIGNATIONS SHOULD BE DELIVERED AS
PROMPTLY AS POSSIBLE, BY FAX OR BY MAIL (USING THE ENCLOSED ENVELOPE), TO
COMPUTER ASSOCIATES' INFORMATION AGENT AND CONSENT SOLICITOR, MACKENZIE
PARTNERS, INC. ("MACKENZIE PARTNERS"), 156 FIFTH AVENUE, NEW YORK, NEW YORK
10010, FAX: (212) 929-0308.
REASONS FOR THE SOLICITATION
On February 17, 1998, CAI Computer Services Corp., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of Computer Associates,
commenced an offer to purchase all outstanding shares of Common Stock of the
Company (the "Shares"), together with (unless and until the Purchaser declares
that the Rights Condition (as hereinafter defined) has been satisfied) the
associated Series A Junior Participating Preferred Stock Purchase Rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of December 21,
1988, amended and restated as of August 1, 1996 (the "Rights Agreement"),
between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent, at a purchase price of $108.00 per Share (and associated Right), net to
the seller in cash, without interest thereon, in each case upon the terms and
subject to the conditions set forth in an Offer to Purchase (the "Offer to
Purchase") and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"). See
"The Offer and the Proposed Merger." At any time, and from time to time, the
period of time during which the Offer will be open may be extended for any
reason, and because the timing of the Offer and the Proposed Merger (as defined
below) are dependent on a variety of factors, it is likely that the Offer could
be extended beyond the original expiration date. The Offer is currently
scheduled to expire at 12:00 Midnight, New York City time, on Monday, March 16,
1998 (the "Expiration Date").
The purpose of the Offer is to enable Computer Associates to acquire
control of, and the entire equity interest in, the Company. The Offer, as the
first step in the acquisition of the Company, is intended to facilitate the
acquisition of all the Shares. Computer Associates currently intends, as soon as
practicable following consummation of the Offer, to propose and seek to have the
Company consummate a merger or similar business combination with the Purchaser
or another direct or indirect wholly owned subsidiary of Computer Associates
(the "Proposed Merger"). The purpose of the Proposed Merger is to acquire all
Shares not tendered and purchased pursuant to the Offer or otherwise. Pursuant
to the Proposed Merger, each then outstanding Share (other than Shares owned by
the Purchaser, Computer Associates or any of their subsidiaries, Shares held in
the treasury of the Company and Shares owned by Shareholders who perfect any
available appraisal
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rights under the NRS) would be converted into the right to receive an amount in
cash equal to the price per Share paid pursuant to the Offer.
THIS SOLICITATION STATEMENT IS NEITHER A REQUEST FOR THE TENDER OF SHARES NOR AN
OFFER WITH RESPECT THERETO. THE OFFER IS BEING MADE BY MEANS OF THE OFFER TO
PURCHASE.
Although the Purchaser will seek to have the Company consummate the
Proposed Merger as soon as practicable after consummation of the Offer, if the
Board opposes the Offer and the Merger, certain terms of the Rights and certain
provisions of the NRS may affect the ability of the Purchaser to consummate the
Offer, to obtain control of the Company and to effect the Proposed Merger.
Accordingly, the timing and details of the Proposed Merger will depend on a
variety of factors and legal requirements, the actions of the Board of Directors
of the Company, the number of Shares acquired by the Purchaser pursuant to the
Offer and whether the Conditions to the Offer (defined below) are satisfied or
waived. See "The Offer and the Proposed Merger."
THERE CAN BE NO ASSURANCE THAT THE SUCCESSFUL ADOPTION OF THE PROPOSALS WILL
LEAD TO THE CONSUMMATION OF THE OFFER AND THE PROPOSED MERGER. SEE "THE OFFER
AND THE PROPOSED MERGER."
Computer Associates seeks to adopt the Proposals in order to replace the
existing directors with directors who are committed, subject to their duties as
directors of the Company (which may require them to consider and/or accept
offers from other persons to purchase or otherwise combine with the Company), to
removing any impediments to the ability of Shareholders to choose freely whether
to accept the Offer and to approve the Proposed Merger.
The Proposals consist of two sets of proposals: the Director Replacement
Proposals and the Anti-Entrenchment Proposals.
THE DIRECTOR REPLACEMENT PROPOSALS.
- a proposal to amend the Amended and Restated Bylaws of the Company
(the "Bylaws") to permit any Shareholder action to be taken by written
consent of the greater of a majority of outstanding Shares or such
greater number as required by statute;
- a proposal to remove all of the existing members of the Board and to
increase the size of the Board from nine to fifteen directors;
- a proposal to fill the vacancies created by such removal and by any
increase in the size of the Board with directors who are committed,
subject to their duties as directors of the Company (which may require
them to consider and/or accept offers from other persons to purchase
or otherwise combine with the Company), to removing any impediments to
the ability of Shareholders to choose freely whether
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to accept the Offer and to approving the Proposed Merger, thereby
ensuring that the Offer and the Proposed Merger get a full and fair
hearing.
THE ANTI-ENTRENCHMENT PROPOSALS.
- a proposal to clarify that the Board may not delay the 1998 Annual
Meeting to a date later than August 10, 1998; except for delays of not
more than 30 days for extraordinary circumstances beyond the Board's
control;
- a proposal to adopt a "Stockholder Protection Bylaw" that would
establish that a quorum consists of all the directors then in office
at a meeting duly assembled for taking any "Defensive Action," but
would leave a quorum to consist of a majority of the directors then in
office if such action were also approved by a majority of the
outstanding Shares. "Defensive Actions" include any action or inaction
by the Board with the purpose or effect, in whole or in part, of
impeding a change in control of the Company not including actions over
which the Board is granted unilateral authority by the NRS or the
Company's charter; and
- a proposal to repeal any Bylaws adopted by the Board since February 1,
1998.
Computer Associates intends to solicit one or both of the following
Shareholder actions (i) your Consent to act in lieu of a meeting, (ii) your
Agent Designation to call the Special Meeting each to adopt the Proposals.
Computer Associates will pursue one or both means of adopting the
Proposals:
1. The solicitation of Shareholder Consents to adopt the Proposals;
and
2. The solicitation of Agent Designations to call the Special
Meeting.
Computer Associates will pursue the method that will insure the adoption of
the Proposals at the earliest possible date. In the event that Computer
Associates fails to implement the Proposals by Consent of the Shareholders,
which presents certain statutory and bylaw interpretation issues, Computer
Associates will utilize the Agent Designations and Special Meeting as
alternative means of adopting the Proposals. See "Proposals--Required Vote."
Computer Associates has brought a declaratory judgment action in the United
States District Court for the District of Nevada (the "Declaratory Judgment
Action") to determine the manner of action and the vote required to adopt the
Proposals, to determine whether the Proposals can be introduced at a 78.379
Meeting and to clarify that the Board may not delay the Company's Annual
Meeting. See "Certain Litigation." Depending on the outcome of the Declaratory
Judgment Action and the results of the Consent and Agent Designation
solicitations, Computer Associates may use one or both of these methods of
adopting the Proposals.
SOLICITATION OF AGENT DESIGNATIONS;
THE SPECIAL MEETING
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Computer Associates is soliciting Agent Designations from Shareholders to
call a Special Meeting. Under Article II, Section 3 of the Bylaws, the Company
is required to call and hold a Special Meeting upon the request of a majority of
the outstanding Shares. When the persons designated as the Shareholders' agents
in the Agent Designations (each a "Designated Agent") have unrevoked Agent
Designations from the holders of a majority of the outstanding Shares, Computer
Associates may instruct the Company to call the Special Meeting, fix the place,
date and time of the Special Meeting and cause notice thereof to be given to the
Shareholders entitled thereto.
Note: The Agent Designations will not give the Designated Agents the right to
vote any shares of Common Stock at the Special Meeting and no proxies for such
votes are being solicited with this Solicitation Statement. Computer Associates
will send the Shareholders additional materials soliciting proxies to vote at
the Special Meeting.
STOCKHOLDERS ENTITLED TO EXECUTE CONSENTS
AND AGENT DESIGNATIONS
Computer Associates believes that under the NRS, the Bylaws and the
Certificate, Shareholders of record on the date on which a Consent is first
submitted to the Company will be the Shareholders who are entitled to execute
Consents. Computer Associates believes that the Board does not have the power to
set such record date. If the Board does have such power, however, Computer
Associates believes that the Board must exercise the power equitably. Computer
Associates believes that under the NRS, the Bylaws and the Certificate, the
Board does not have the power to set a record date for determining Shareholders
entitled to execute Agent Designations. Therefore, Computer Associates believes
that Shareholders of record on the date on which Agent Designations are first
submitted to the Company will be the Shareholders who are entitled to execute
Agent Designations.
YOU HAVE A SAY IN REALIZING THE FULL VALUE OF YOUR INVESTMENT IN THE COMPANY.
Computer Associates believes that the Offer presents an extremely
attractive opportunity for the Shareholders, at a price which represents a
premium of nearly 35% over the closing price of the Shares on the day Computer
Associates commenced discussions with the Company in mid-December. The Board
should allow the Shareholders to decide for themselves whether or not to accept
the Offer. Adoption of the Proposals will provide the Shareholders with an
opportunity to stop the Board from blocking the Offer.
EXERCISE YOUR RIGHT TO SEND THE BOARD A MESSAGE THAT IT SHOULD ALLOW THE
SHAREHOLDERS TO TAKE ADVANTAGE OF THE OFFER.
By executing and returning the [COLOR] Consent Card with Agent Designation
to MacKenzie Partners you will be (i) acting by Consent to authorize the
Proposals, (ii) committing to vote in favor of the Proposals at any 78.379
Meeting and (iii) authorizing Computer Associates to call the Special Meeting.
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If any of your shares of Common Stock are held in the name of a brokerage
firm, bank, bank nominee or other institution, only it can execute a Consent
Card with Agent Designation for such shares and will do so only upon receipt of
your specific instructions. Accordingly, you are asked to contact the person
responsible for your account and instruct that person to execute the [COLOR]
Consent Card with Agent Designation.
THE FAILURE TO EXECUTE AND RETURN THE [COLOR] CONSENT CARD WITH AGENT
DESIGNATION WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE SPECIAL MEETING AND
CONSENT PROPOSALS AND OPPOSING THE CALL OF THE SPECIAL MEETING. IN ORDER TO
FACILITATE THE OFFER AND THE PROPOSED MERGER, COMPUTER ASSOCIATES MAY SOLICIT
ONE OR BOTH OF CONSENTS AND AGENT DESIGNATIONS.
COMPUTER ASSOCIATES URGES THAT YOU NOT SIGN ANY CARD SENT TO YOU BY THE
COMPANY. WHETHER OR NOT YOU HAVE PREVIOUSLY SIGNED A CARD SENT TO YOU BY THE
COMPANY, COMPUTER ASSOCIATES URGES YOU TO SIGN, DATE AND RETURN THE [COLOR]
CONSENT CARD WITH AGENT DESIGNATION AS SOON AS POSSIBLE.
BACKGROUND AND RECENT EVENTS
Computer Associates and the Company are parties to license agreements
pursuant to which the Company licenses Computer Associates software for internal
use and for third party processing on behalf of the Company's clients, and are
parties to other arrangements under which the Company has the right to resell
Computer Associates software. Representatives of Computer Associates and the
Company have met from time to time over the past several years to discuss
technical and marketing aspects of these arrangements.
Early in the week of December 15, 1997, Sanjay Kumar, President and Chief
Operating Officer of Computer Associates, telephoned the office of Van
Honeycutt, Chairman and Chief Executive Officer of the Company, to arrange a
meeting to discuss a possible business combination between the companies. On
December 18, Mr. Kumar and Charles B. Wang, Chairman and Chief Executive Officer
of Computer Associates, met with Mr. Honeycutt at Mr. Honeycutt's office in El
Segundo, California to discuss the merits of combining Computer Associates and
the Company. Mr. Honeycutt agreed to review the idea and get back to Computer
Associates.
On or about January 9, 1998, Mr. Honeycutt called Mr. Kumar. Mr. Kumar and
Mr. Honeycutt discussed a number of issues relating to a business combination,
including possible synergies of a transaction. They agreed to meet in early
February to continue the discussions. On January 19 and 20, the Computer
Associates Board of Directors met and considered the possible business
combination. On or about January 19, Mr. Kumar called Mr. Honeycutt to request
to have their respective financial advisors meet. Mr. Honeycutt expressed his
desire to keep the discussions between principals until a general agreement had
been reached. Following that discussion, Mr. Kumar sent Mr. Honeycutt the
following letter:
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January 21, 1998
Mr. Van B. Honeycutt
Chairman
CSC
2100 East Grand Avenue
El Segundo, CA 90245
Dear Van:
I appreciate your candid views of the merits of combining our two
companies, as well as the appreciating value of CSC. While you and I have
some differences over valuation and the synergies of the combined
companies, I continue to believe that a merger would benefit both companies
and our collective shareholders tremendously. Computer Associates Board of
Directors has unanimously supported our negotiation of this transaction.
Your shareholders would receive a substantial premium to market value, and
we are confident that they would be pleased with our offer.
We for a long time have held the strategic view that the strengths of
our company's software products and development capabilities should be
combined with a provider of strategic management consulting and information
technology services. More and more we are seeing the industry moving toward
this view. Such a combination is highly complementary to both companies, in
our case adding strategic consulting and integration services to our strong
group of products and in your case gaining access to a large pool of
products and one of the best stables of new software developers. As year
2000 approaches, our combined enterprise should lead the technology world
into the 21st century.
I look forward to our February 5, 1998 meeting to discuss on-going
management and continue our discussions of other issues. In the interim, I
am requesting that you reconsider having our mutual advisors and a limited
group of senior management further our due diligence. In this way, we both
can be informed by the facts, and in a position to move quickly before any
notice of our discussions becomes generally known.
Again, congratulations on CSC's 3rd Quarter results. I am traveling
for the next few days, but can be reached through my office or by
confidential fax.
Sincerely,
/s/ SANJAY KUMAR
Sanjay Kumar
President and
Chief Operating Officer
On January 21 and 23, Computer Associates, through a wholly owned
subsidiary, bought 170,000 Shares.
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On January 27, Mr. Honeycutt advised Mr. Kumar that he did not want to
engage advisors in the process until after the February 5 meeting. On February
2, Mr. Honeycutt called Mr. Kumar to suggest that the February 5 meeting cover
several significant issues and Mr. Honeycutt agreed to travel to Scottsdale,
Arizona to accommodate Mr. Wang's schedule so that he could also participate in
the discussions.
Mr. Honeycutt met with Mr. Wang and Mr. Kumar in Scottsdale, Arizona on
February 5. At that meeting, Mr. Honeycutt raised several issues, including
organization, employee retention, stock options and severance plans, board
composition and valuation. Messrs. Wang and Kumar addressed all of the issues
with Mr. Honeycutt, reaching agreement on all points other than board
composition and valuation. On February 6, Mr. Kumar and Mr. Honeycutt discussed
value and compensation issues and Mr. Honeycutt's role in a combined
organization. After discussing Mr. Honeycutt's range of values for the Company,
Mr. Kumar offered to begin immediate negotiations. After Mr. Honeycutt declined,
he agreed that he and Mr. Kumar would speak further on February 10. Mr. Kumar
sent the following letter summarizing his understanding of the discussions from
the meeting:
February 6, 1998
Mr. Van B. Honeycutt
Chairman and CEO
CSC
2100 East Grand Avenue
El Segundo, CA 90245
Dear Van:
Thank you for taking the time yesterday to meet with Charles and me in
Scottsdale and for our telephone conversation of today. I found the
discussions beneficial but remain disappointed that we were unable to reach
agreement on price.
As we have discussed since our first meeting on this subject in
December, we believe that the combination of CA and CSC would create a
world class information technology solution provider with unparalleled
depth in both software and services. The combination of CA's people and
CA's software product strength together with CSC's people and CSC's
services capability would create the perfect model for the next generation
of information technology solutions provider that will lead our industry
into the next millennium.
In reviewing our discussions of yesterday, it is apparent that we are
in agreement on all points with the exception of price. To confirm our
views on a number of the key issues you raised yesterday:
- We are in agreement on the need and manner of retaining key
managers and employees. We would supply key managers and
employees with
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employment agreements that will provide them with a strong
incentive to remain with the combined company.
- We are in agreement on providing stock option grants, consistent
with CA's prior practice for our own employees, to key managers
and employees. This will allow them to participate in the success
of the combined company, and will further ensure continuity with
respect to the combined company's commitment to our mutual
clients.
- We are in agreement that the CSC organization within the combined
company will be on equal footing to CA's existing product
organization. I am committed to making sure that all of the
members of the CSC organization are welcomed into the combined
company with open arms.
- We do not expect the combined company to have to reduce any
headcount to achieve the synergies that a transaction of this
size demands. Consequently, as in our last major acquisition of
Cheyenne Software, we anticipate that all of the valuable CSC
employees will be offered positions with the combined company.
- Beyond the absolute level of staffing, we expect to maintain the
current structure of CSC's organization with little change. As we
discussed, it would make sense for the CA part of the combined
company to take over CSC's product development efforts and for
CSC, in turn, to take over CA's service commitments and efforts.
The inherent synergies in this process will allow both the CA and
CSC parts of the combined company to do what they do best.
- We expect to staff new projects with both outside hiring and some
redeployment of existing CA staff. This will allow the combined
company to aggressively seek new services opportunities.
Given all of the points of agreement, I remain confident that the
employees of both CA and CSC will embrace this combination. Our mutual
clients would also be excited by the possibility of being serviced by a
stronger and broader information technology solutions provider. The
industry and the market will clearly applaud such a combination.
With respect to CSC's shareholders, I remain confident that they would
find CA's proposal of an all cash offer of $100 very attractive. At our
offer, CSC's shareholders would be receiving a premium of approximately 30%
to the average closing price for the month of December, when we first
initiated discussions regarding a combination of our respective businesses.
We have expressed our concern that knowledge of our discussions might be
contributing to the recent rise in your stock price, to an all time high
during the last week. Even so, our proposed offer still yields a
significant premium. Any analysis of our proposed offer must consider the
recent run up in your stock price.
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A transaction would be subject, among other things, to receipt of any
required regulatory approvals and third-party consents and the taking of
all necessary actions to eliminate the applicability of, or to satisfy, any
anti-takeover or other defensive provisions contained in the applicable
corporate statues or CSC's charter and by-laws including CSC's poison pill.
As I mentioned to you yesterday, we have made financing arrangements to
facilitate a rapid conclusion. The Board of Directors, key senior
management, and I have discussed this transaction in detail, and we are all
excited about the possibilities of creating a world class combination of CA
and CSC. Our proposal remains subject to the approval of our Board of
Directors.
Van, I hope that CSC's Board of Directors and you share our enthusiasm
for this transaction. We view our offer as an excellent opportunity for the
shareholders of CSC to realize full value for their holdings, and equally
importantly we view our offer as a tremendous opportunity for CSC's
employees and clients. We are prepared to enter into immediate negotiations
with your directors, management, advisors and you to answer any additional
questions that you may have regarding our proposal. As I mentioned to you
yesterday and today, we would prefer a negotiated transaction that can be
presented to your shareholders as a joint product of CA's and CSC's Boards
of Directors and management. In this spirit, we would be willing to
consider some adjustment to our offer based on the outcome of our due
diligence reviews and discussions. I look forward to hearing from you at
your earliest convenience.
Sincerely,
/s/ SANJAY KUMAR
Sanjay Kumar
President and
Chief Operating Officer
On February 10, after not having received any response to the February 6
letter, Mr. Kumar contacted Mr. Honeycutt to advise him that the Computer
Associates Board of Directors had unanimously approved an offer to acquire the
Company. Mr. Kumar also discussed Mr. Honeycutt's continuing role in the
Company, and had further discussions on value. Mr. Kumar suggested that the
parties immediately begin negotiations to bridge the gap on value with a view to
quickly concluding a negotiated transaction. After Mr. Honeycutt declined, Mr.
Kumar sent to Mr. Honeycutt the following letter:
On February 10, 1998, Computer Associates sent the following letter to Mr.
Van B. Honeycutt, Chairman of the Board, and Chief Executive Officer of the
Company:
February 10, 1998
Mr. Van B. Honeycutt
Chairman and CEO
Computer Sciences Corporation
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2100 East Grand Avenue
El Segundo, CA 90245
Dear Van,
Charles and I appreciate the significant time you have invested over
the last few months in the discussions that we have had regarding the
combination of Computer Associates International, Inc. ("CA") and Computer
Sciences Corporation ("CSC"). However, we are disappointed that CA and CSC
have not been able to come to a final resolution.
Consequently, we are writing to offer to acquire CSC in a merger
transaction in which your stockholders would receive $108 in cash for each
share of CSC common stock. We believe our offer presents an extremely
attractive opportunity for your stockholders, at a price which represents a
premium of nearly 35% over the closing price of CSC's common stock on the
day we commenced our discussions in mid-December. At that time, CSC's stock
was trading close to its all-time high.
The CA Board of Directors has unanimously approved this offer.
Further, as I have previously informed you, CA has obtained the necessary
financing commitments to consummate this transaction without delay. As we
agreed, the combination of CA and CSC would create a world-class
information technology solutions provider with unparalleled depth in both
software and services. The combination of CA's strength in software and
CSC's services capabilities, together with our collective personnel, would
create the perfect model for the next generation of information technology
solutions provider that will lead our industry into the next millennium.
As we discussed at our meeting on February 5, and as confirmed by my
letter of February 6:
- We are in agreement on the need and manner of retaining key
managers and employees. We would supply key managers and
employees with employment agreements that will provide them with
a strong incentive to remain with the combined company.
- We are in agreement on providing stock option grants to key
managers and employees. This will allow them to participate in
the success of the combined company, and will further ensure
continuity with respect to the combined company's commitment to
our mutual clients.
- We are in agreement that the CSC organization within the combined
company will be on equal footing to CA's existing product
organization. CA is committed to making sure that all of the
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members of the CSC organization are welcomed into the combined
company with open arms.
- We do not expect the combined company to need to reduce any
headcount to achieve the synergies that a transaction of this
size demands. Consequently, as in our last major acquisition of
Cheyenne Software, we anticipate that all of the valuable CSC
employees will be offered positions with the combined company.
- Beyond the absolute level of staffing, we expect to maintain the
current structure of CSC's organization with little change. As we
discussed, it would make sense for the CA part of the combined
company to take over CSC's product development efforts and for
CSC, in turn, to take over CA's service commitments and efforts.
The inherent synergies in this process will allow both the CA and
CSC parts of the combined company to do what they do best.
- We expect to staff new projects with both outside hiring and some
redeployment of existing CA staff. This will allow the combined
company to aggressively seek new services opportunities.
As we have previously discussed, we have conducted an extensive
analysis of CSC based on publicly available information. We believe that CA
and CSC may be able to bridge some of our differences with respect to
valuation if CA is given the opportunity to conduct limited due diligence
on CSC's business and operations. With CSC's cooperation, our due diligence
review can be accomplished within a week.
Our offer is subject to the execution of a mutually satisfactory
merger agreement containing customary terms and conditions. We believe that
such an agreement can be negotiated while we are conducting our due
diligence review of CSC. Our counsel has advised us that an acquisition of
CSC by CA should not encounter regulatory delays.
We look forward to meeting with you to discuss our offer. We are
hopeful your Board will conclude that your stockholders should not be
denied the opportunity to consider our offer. We at CA are determined to
take every appropriate action to pursue this transaction. In view of the
importance of this matter, time is of the essence, and we await your prompt
response.
Sincerely,
/s/ Sanjay Kumar
Sanjay Kumar
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<PAGE>
President and Chief Operating Officer
Mr. Kumar attempted to reach Mr. Honeycutt on February 11 and 12 without
success. On February 14 and 15, at Mr. Kumar's request, Mr. Michael Urfirer of
Bear, Stearns & Co. Inc., Computer Associates' financial advisor, discussed with
Gene Sykes of Goldman Sachs & Co., financial advisor to the Company, Computer
Associates' strong desire to make every effort to consummate a friendly,
negotiated transaction. Mr. Urfirer also advised Mr. Sykes that Computer
Associates believed that the value of a negotiated transaction would be $114 per
Share, the increased price reflecting the difference in value between a friendly
and a contested transaction. Mr. Urfirer offered to arrange a meeting between
the principals to attempt to reach agreement on valuation which was declined.
Following these discussions, Mr. Kumar sent the following letter to
Mr. Honeycutt.
February 15, 1998
Mr.Van B. Honeycutt
Chairman and CEO
Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, CA 90245
Dear Van:
We have been disappointed by the response to date to the offer that we
made last Tuesday to combine our two companies' businesses by means of a
cash merger at $108 per CSC share. As we have expressed from the beginning,
our hope and intent was to prompt a meaningful effort to move ahead on both
our parts to a negotiated transaction.
We believe that the best way, by far, to effect a combination of our
two companies' businesses is through prompt negotiation of the terms
followed by equally prompt implementation. Every one of CSC's
constituencies--shareholders, employees, customers and partners--will
greatly benefit from this approach.
We made it clear in our February 10th letter that we believed that we
could bridge some of our differences with respect to value in a friendly
transaction. The value of a friendly, promptly negotiated and concluded
transaction is substantial in our view. Our financial advisor, Michael
Urfirer of Bear Stearns, has communicated to your financial advisor, Gene
Sykes of Goldman Sachs, in very specific terms the magnitude of the value
increase to your shareholders in a negotiated transaction.
Conversely, an adverse impact to CSC's business and people,
substantially increased difficulty in combining the businesses and
significant costs to both companies are inevitable outcomes of a contested
process, which would result in a reduced value of CSC. In short, we are
proposing a transaction that has compelling value to your shareholders and
other constituencies, especially when measured against a contested
alternative.
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<PAGE>
Our request is simple. We would like to commence negotiations with you
this weekend. We would be guided in those negotiations by the thinking
reflected in my letters of February 6 and 10, which remains unchanged,
except as to price. I very much look forward to this. We are committed to
the business strategy of combining our two companies' businesses and, as I
have stated, believe a negotiated transaction is clearly preferable for all
concerned. However, as we communicated to Mr. Sykes earlier today, if
substantive negotiations have not started by Monday at 12:00 noon EST, we
will have no choice but to move ahead on a unilateral basis at a
substantially lower price than we communicated to Mr. Sykes which would be
required to reflect the diminution in value as indicated above.
We hope this demonstrates our continuing efforts to consummate a
friendly transaction. It is truly important to us that you and your Board
are fully informed at this critical stage.
I look forward to hearing from you. I can be reached at the numbers I
previously left with you or through Michael Urfirer of Bear Stearns.
Sincerely,
Sanjay Kumar
President and
Chief Operating Officer
cc: Board of Directors of Computer Sciences Corporation
Gene Sykes, Goldman, Sachs & Co.
Mr. Urfirer attempted to reach Mr. Sykes on February 16 without success.
On February 17, 1998, Computer Associates commenced the Offer.
In addition, on February 17, 1998, Computer Associates filed a complaint
(the "Initial Complaint") in the United States District Court for the District
of Nevada (the "Court"). The Initial Complaint requested that the Company be
enjoined from taking actions to impede the exercise of the shareholder
franchise, or the consummation of the Offer, and that the Company be required to
render inapplicable various anti-takeover devices including its Rights
Agreement, so that the Offer may be consummated.
The Initial Complaint also sought various declarations pursuant to the NRS
and the Bylaws regarding the solicitation of Consents, Proxies and Agent
Designations. Computer Associates asked the Court to declare that the holders of
a majority of the Shares may act, by written consent or vote, to amend the
Bylaws. Computer Associates also asked the Court to declare that the holders of
two-thirds of the Shares may act, by written consent or vote, to remove a
sufficient number of the existing directors to be able to designate a majority
of the members of the Board. Computer Associates moved the Court for an
expedited determination of these issues. The Court ordered the
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Company to respond to Computer Associates' motion for an expedited determination
by Monday, February 23, 1998. Computer Associates' motion is pending before the
Court.
Also, on February 17, 1998, with respect to the Solicitation of Consents,
Proxies and Agent Designations, Computer Associates filed preliminary copies of
solicitation materials with the Commission.
According to a Current Report on Form 8-K filed by the Company on
February 17, 1998, effective February 16, 1998, the Board purported to adopt a
bylaw opting out of Section 78:378 to 78:3793 of the NRS, inclusive.
Accordingly, Computer Associates will no longer seek to cause the Company to
call a special meeting of stockholders pursuant to those provisions of the NRS.
According to a Current Report on Form 8-K filed by the Company on February
18, 1998, the Board has purported to adopt extensive amendments to the Bylaws
effective February 18, 1998 (the "Amendments"), limiting the Shareholders'
ability to enact the Proposals. The Board purported to amend Article VIII,
Section 1 (the "Purported Article VIII Amendment") to require a vote or written
consent of 90% of the Company's outstanding shares to amend the Bylaws.
Moreover, the Board purported to amend Article III, Section 2 of the Bylaws to
increase to 90% the percentage of Shareholders required to remove a director;
purported to amend Article II, Section 3 to eliminate the power of Shareholders
to call a Special Meeting unless the Company has not held a shareholder meeting
in eighteen months; and purported to amend Article II, Section 2 of the Bylaws
to give the Board power to fix any date within the eighteen months of the
anniversary of the prior annual meeting as the date for the Annual Meeting
Computer Associates believes that the Amendments are not legally valid.
Computer Associates believes that the Board did not have authority to make the
Purported Article VIII Amendment because the Board's power to amend the Bylaws
under Article VIII, Section 2 is subject to Shareholders' power under Article
VIII, Section 1 to amend the bylaws by vote or consent of a majority of the
outstanding Shares. Therefore, Computer Associates believes that the Board
cannot amend the Bylaws to reduce or eliminate Shareholders' power to amend the
Bylaws. Computer Associates believes that because the Purported Article VIII
Amendment is not authorized under the Bylaws, the Shareholders maintain the
ability to adopt, amend or repeal bylaws by vote or written consent of a
majority of the outstanding Shares, including the ability to repeal, by means of
Proposal number 7, the Amendments other than the Purported Article VIII
Amendment. See "Proposals."
Computer Associates also believes that the Bylaw purporting to increase to
90% the percentage of the outstanding shares required to remove a director is
legally invalid because Section 78.335 of the NRS prescribes a 2/3 vote for the
removal of directors, subject to the cumulative voting provisions discussed
below under "Legal Validity of and Vote Required for the Director Replacement
Proposals--Removal of Directors." Finally, Computer Associates believes that
under HILTON HOTELS CORPORATION V. ITT CORPORATION, 978 F. Supp. 1342 (D. Nevada
1997) the Amendments are generally invalid because they are an illegal attempt
to impede the effective exercise of the stockholder franchise, without
compelling justification. See "Certain Litigation."
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<PAGE>
On February 23, 1998, Computer Associates filed a supplemental and amended
complaint (the "Amended Complaint") with the Court asking the Court, in addition
to the relief requested in the Initial Complaint, to declare the Amendments are
illegal, null and void. See "Certain Litigation."
PROPOSALS
DIRECTOR REPLACEMENT PROPOSALS.
1. ACTION BY WRITTEN CONSENT PROPOSAL
(Item 1 on Consent Card with Agent Designation)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE ACTION BY WRITTEN CONSENT
RESOLUTION:
"Resolved, that pursuant to the Bylaws of the Company, the stockholders of
the Company hereby amend the Bylaws by deleting Article II, Section 10 in its
entirety and replacing the same with the following effective immediately:
"Any action that may be taken by a vote of the stockholders at a
meeting including, without limitation, the election of directors to fill
vacancies or newly created directorships on the Company's board of
directors, may be taken without a meeting and without notice if authorized
by the written consent of stockholders holding at least a majority of the
outstanding shares of voting stock of the Company or such greater number
required by statute. This bylaw may not be amended or repealed except by a
vote of the stockholders."'
2. DIRECTOR REMOVAL RESOLUTION
(Item 2 on Consent Card with Agent Designation)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE DIRECTOR REMOVAL
RESOLUTION:
"Resolved, that all of the existing members of the board of directors or,
if this resolution is not voted for by holders of sufficient shares to remove
the entire board of directors, the maximum number of directors that may properly
be removed by the stockholders approving this resolution, be and hereby are
removed from the board of directors, effective immediately or, if the next
succeeding sentence applies effective one week after the date on which this
resolution is adopted. If this resolution is not approved by holders of
sufficient shares to remove the entire board of directors, the existing
directors shall name for removal within one week after the date on which this
resolution is adopted a number of names of existing directors equal to the
maximum number of directors that may be removed by the stockholders approving
this resolution. If the existing board of directors shall fail to name such
directors for removal within such one-week period, existing
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<PAGE>
directors shall be removed in ascending order of number of votes received by
each director at the Company's annual meeting of stockholders on August 11,
1997, as set forth in the Quarterly Report on Form 10-Q for the period ended
September 26, 1997, until that maximum number of directors that may be removed
by the stockholders approving this resolution has been removed."
3. BOARD INCREASE RESOLUTION
(Item 3 on Consent Card with Agent Designation)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON A RESOLUTION INCREASING THE
SIZE OF THE COMPANY'S BOARD OF DIRECTORS:
"Resolved, that pursuant to the Bylaws of the Company, the stockholders of
the Company hereby amend the Bylaws by deleting the first sentence of
Article III, Section 1 thereof in its entirety and replacing the same with the
following effective immediately:
"The exact number of directors which shall constitute the whole board shall
be 15, all of whom shall be at least 18 years of age.'
and by adding the following sentence at the end of Article VIII, Section 1:
"This bylaw may not be amended or repealed except by a vote of the
stockholders."'
4. ELECTION OF DIRECTORS RESOLUTION
(Item 4 on Consent Card with Agent Designation)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE ELECTION OF DIRECTORS
RESOLUTION:
"Resolved, the stockholders hereby elect as directors of the Company so
many of Charles B. Wang, Sanjay Kumar, Russell Artzt, Peter A. Schwartz, Steven
M. Woghin, Charles P. McWade, Ira Zar, Michael A. McElroy, David Kaplan, Robert
Toth, Richard Chiarello, Lisa Savino, Gary Quinn, Abraham Poznanski, Douglas
Robinson, (the "Nominees") as may be necessary to fill the vacancies on the
Board created by the adoption of resolutions proposed by Computer Associates
removing directors and amending the Bylaws to increase the size of the Board and
to the extent that cumulative voting applies to the filling of such vacancies
and newly created directorships, the votes or consents of stockholders voting
for or consenting to this resolution shall be cumulated so as to elect the
maximum number of such Nominees, in each case, to hold such office until each of
their successors has been elected and qualified or until their earlier
resignation or removal. The Nominees shall be elected in the order they are
listed herein effective immediately upon the creation of such vacancies and/or
newly created directorships."
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<PAGE>
Computer Associates proposes the election of the following Nominees to the
Board to fill the vacancies and/or newly created directorships. Unless
otherwise indicated, the address of each of the Nominees is care of Computer
Associates One Computer Associates Plaza, Islandia, NY 11788-7000.
<TABLE>
<CAPTION>
NAME AGE PRESENT PRINCIPAL OCCUPATION AND EMPLOYMENT
- - ---- --- -------------------------------------------
<S> <C> <C>
Charles B. Wang 52 Mr. Wang has been Chief Executive Officer
of Computer Associates since 1976 and
Chairman of the Board of Computer
Associates since April 1980. He is a
Director of Computer Associates and is also
a director of Symbol Technologies, Inc.
Sanjay Kumar 35 Mr. Kumar has been President and Chief
Operating Officer of Computer Associates
since January 1994. He was Executive Vice
President-Operations of Computer Associates
from January 1993 to December 1993, Senior
Vice President-Planning from April 1989 to
December 1992, Vice President-Planning from
November 1988 to March 1989. He joined
Computer Associates with the acquisition of
UCCEL in August 1987. Mr. Kumar is a
Director of Computer Associates.
Russell Artzt 50 Mr. Artzt has been Executive Vice
President-Research and Development of
Computer Associates since April 1987 and
the Senior Development Officer of Computer
Associates since 1976. Mr. Artzt is a
director of Computer Associates.
Peter A. Schwartz 54 Mr. Schwartz has been Senior Vice
President-Finance and Chief Financial
Officer of the Company since April 1987. He
has served in various financial roles since
joining the Company in July 1983.
Steven M. Woghin 51 Mr. Woghin has been Senior Vice President
and General Counsel of Computer Associates
since April 1995. He was Vice
President--Legal of Computer Associates
from April 1992 to March 1995. Prior to
1990 through April 1992, he was a partner
in the law firm of Arter & Hadden.
Charles P. McWade 52 Mr. McWade has been Senior Vice
President-Finance of the Company since
April 1990, having served in various
financial positions including Treasurer
from April 1988 to March 1994. Mr. McWade
joined the Company in October 1983.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
Ira Zar 36 Mr. Zar was elected Senior Vice President
and Treasurer of the Company effective
April 1994, having previously served as
Vice President-Finance since April 1990.
Mr. Zar joined the Company in June 1982.
Michael A. McElroy 53 Mr. McElroy was elected Secretary of the
Company effective January 1997, and has
been a Vice President of the Company since
April 1989. He joined the Company in
January 1988 and served as Secretary from
April 1988 through April 1991.
David Kaplan 31 Mr. Kaplan is the Divisional Vice
President--Finance of Computer Associates,
where he has been employed since 1990.
Robert Toth 41 Mr. Toth is the Senior Vice
President--Strategic Business Alliances of
Computer Associates, where he has been
employed since 1984.
Richard Chiarello 45 Mr. Chiarello is the Senior Vice President
and General Manager--North America of
Computer Associates, where he has been
employed since 1985.
Lisa Savino 32 Ms. Savino has been Vice President and
Treasurer of Computer Associates since
November 1997. She was Vice President and
Assistant Treasurer from April 1996 to
November 1997. She was Assistant Vice
President and Assistant Treasurer from
April 1995 to April 1996. From 1990 to
April 1996, she held various positions at
Computer Associates.
Gary Quinn 37 Mr. Quinn is the Senior Vice President,
Global Information Services of Computer
Associates, where he has been employed
since 1985.
Abraham Poznanski 42 Mr. Poznanski is the Senior Vice President,
Internal Audit of Computer Associates,
where he has been employed since 1991.
Douglas Robinson 41 Mr. Robinson is the Senior Vice President,
Investor Relations of Computer Associates,
where he has been employed since 1983.
</TABLE>
If Computer Associates is successful in removing fewer than all of the
Company's directors or is not successful in increasing the size of the Board,
Computer Associates may reduce the number of Nominees to the Board. The Nominees
will be eliminated in reverse order in which they are listed, as necessary,
depending on the number of vacancies and/or newly created directorships to be
filled.
LEGAL VALIDITY OF AND VOTE REQUIRED FOR THE DIRECTOR REPLACEMENT PROPOSALS.
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<PAGE>
On February 18, 1998, the Board purported to enact the Amendments which
would severely limit the Shareholders' power to implement the Director
Replacement Proposals. Computer Associates believes that the Amendments are
legally invalid and has asked the Court for a declaration to that effect. See
"Background and Recent Events" and "Certain Litigation." The following
discussion of the legal validity of the Director Replacement Proposals is based
on the Bylaws without giving effect to the Amendments.
AMENDMENT OF BYLAWS.
The NRS permits the adoption of bylaws prescribing the vote required for
shareholder action at a meeting or by written consent. Article VIII, Section 1
of the Bylaws authorizes the adoption or amendment of Bylaws "by the affirmative
vote or written consent of a majority of the outstanding voting shares of this
corporation, except as otherwise provided in these Bylaws." Computer Associates
believes that Article VIII, Section 1 authorizes the adoption of those proposals
consisting of Bylaw amendments (the "Bylaw Amendment Proposals") by a majority
of the outstanding Shares, whether such action is taken by written consent or at
a shareholders meeting. Article II, Section 10 of the Bylaws currently states
that "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
three-fourths of the voting power." Computer Associates believes that
Article II, Section 10 does not impair the authority under Article VIII, Section
1 of the holders of a majority of the outstanding Shares to amend the Bylaws by
written consent because Article II, Section 10 merely contains a general
authorization for Shareholders to act by written consent by a three-fourths
vote, without limiting rights Shareholders may have to act on specific matters
by written consent of a lesser number of Shares. Computer Associates believes
that the reference to action by written consent in Article VIII, Section 1 would
be meaningless if Article II, Section 10 set the minimum vote requirements for
amending the Bylaws by written consent of Shareholders. The Declaratory Judgment
Action also seeks confirmation of the minimum vote required to amend the Bylaws
by written consent. See "Certain Litigation."
REMOVAL OF DIRECTORS
Under Article III, Section 2 of the Bylaws, and Section 78.335 of the NRS,
directors can be removed by a vote or written consent of two-thirds of the
issued and outstanding Shares, but in a corporation, such as the Company, having
a cumulative voting system, no single director may be removed except by
stockholders owning sufficient shares to prevent such director's election to the
board. Computer Associates believes that the purpose of the cumulative voting
limitation on shareholder removal powers is to prevent a shareholder majority
from using its removal powers to undermine the right of the minority to elect
directors under cumulative voting. Therefore, Computer Associates believes that
the cumulative voting limitation on removal would be interpreted as allowing
Computer Associates to remove as many directors as it would be assured of
electing under the Company's cumulative voting system. Assuming that Computer
Associates had Proxies or Consents from 66 2/3% of the outstanding shares,
Computer Associates would be able to remove six
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<PAGE>
directors. The Declaratory Judgment Action also seeks confirmation of this
cumulative voting test in the context of a contest for corporate control. See
"Certain Litigation."
FILLING VACANCIES AND/OR NEWLY CREATED DIRECTORSHIPS
Computer Associates also intends to fill the vacancies created by the
removal of directors. Section 78.335 of the NRS and Article III, Section 2 of
the Bylaws provide that board vacancies MAY be filled by a majority of the
remaining directors (emphasis added). Computer Associates believes that such
language does not preclude Shareholders' right to fill vacancies created the by
removal of directors because courts interpret narrowly any incursion into the
inherent powers of the Shareholders to fill board vacancies and/or newly created
directorships. Such interpretation has been firmly upheld in other
jurisdictions. MOON V. MOON MOTOR CAR, Del Ch. 151 A. 298 (1930); CAMPBELL V.
LOEW'S, INC., Del. Ch. 134 A.2d 852 (1957); DILEUTERIO V. U.C. CAVALIERS, Del.
Ch. Civil Action No. 8801 (1987); SIEGMAN V. TRI-STAR PICTURES, INC., C.A. No.
9477 (Del. Ch. 1989). The Declaratory Judgment Action seeks confirmation that
the Shareholders may fill such vacancies and/or newly created directorships on
the Board. See "Certain Litigation." With respect to the Shareholders' power to
fill such vacancies and/or newly created directorships by written consent,
Computer Associates believes that the clause ", EXCEPT ELECTION OF DIRECTORS,"
in the existing Article II, Section 10 of the Bylaws does not bar Shareholders
from filling the existing vacancies or newly created directorships by consent,
but merely excepts election of directors from the three-fourths voting
requirement of the existing Article II, Section 10, thereby making the election
of directors subject to the general requirements of Section 78.320 of the NRS
for action by consent, regardless of whether the action by written consent
proposal is adopted. The Declaratory Judgment Action also seeks confirmation
that the Shareholders may fill vacancies and/or newly created directorships on
the Company's Board acting by written Consents, so long as the Shareholders
comply with Section 78.320. See "Certain Litigation."
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<PAGE>
ANTI-ENTRENCHMENT PROPOSALS.
5. PROPOSAL TO AMEND THE BYLAWS TO CLARIFY THAT THE BOARD MAY NOT DELAY THE 1998
ANNUAL MEETING TO A DATE LATER THAN AUGUST 10, 1998
(Item 5 on Consent Card with Agent Designation)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON A PROPOSAL TO ADOPT THE
FOLLOWING AMENDMENT TO THE COMPANY'S BYLAWS, CLARIFYING THAT THE BOARD MAY NOT
DELAY THE 1998 ANNUAL MEETING:
"Resolved, that pursuant to the Bylaws of the Company, the stockholders of
the Company hereby amend the Bylaws by deleting Article II, Section 2 thereof in
its entirety and replacing the same with the following:
"Section 2. DATE OF THE ANNUAL MEETING; ELECTION OF DIRECTORS.
Annual meetings of stockholders shall be held on the second Monday in
August, if not a legal holiday, and if a legal holiday, then on the next
secular day following at 2:00 p.m.; provided, however, that if the Board of
Directors is unable to hold the 1998 Annual Meeting on such second Monday
due entirely to forces beyond their control, then the meeting shall be held
on the next earliest practicable date but in no event later than the second
Monday in September. At such annual meeting, the stockholders of the
corporation shall elect a Board of Directors and transact such other
business as may properly be brought before the meeting. This bylaw may not
be amended or repealed except by a vote of the stockholders."'
6. PROPOSAL TO ADOPT A "STOCKHOLDER PROTECTION BYLAW" THAT WOULD ESTABLISH THAT
A QUORUM CONSISTS OF ALL THE DIRECTORS THEN IN OFFICE AT A MEETING DULY
ASSEMBLED FOR TAKING ANY DEFENSIVE ACTION, BUT WOULD LEAVE A QUORUM TO CONSIST
OF A MAJORITY OF THE DIRECTORS THEN IN OFFICE IF SUCH ACTION WERE ALSO APPROVED
BY A MAJORITY OF THE OUTSTANDING SHARES
(Item 6 on Consent Card with Agent Designation)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO ADOPT A
"STOCKHOLDER PROTECTION BYLAW" THAT WOULD ESTABLISH THAT A QUORUM CONSISTS OF
ALL THE DIRECTORS THEN IN OFFICE AT A MEETING DULY ASSEMBLED FOR TAKING ANY
DEFENSIVE ACTION, BUT WOULD LEAVE A QUORUM TO CONSIST OF A MAJORITY OF THE
DIRECTORS THEN IN OFFICE IF SUCH ACTION WERE APPROVED BY A MAJORITY OF THE
OUTSTANDING SHARES:
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<PAGE>
"Resolved, that pursuant to the Bylaws of the Company, the stockholders of
the Company hereby amend the Bylaws by adding a new Article III, Section 11
thereof which shall read as follows:
"Section 11. DEFENSIVE ACTIONS.
Notwithstanding any provision to the contrary contained in these Bylaws,
all of the directors then in office at a meeting duly assembled shall be a
quorum for any meeting at which any Defensive Action is approved by the
directors unless such action is approved by a majority outstanding shares
entitled to vote. "Defensive Action' shall mean any action by the Board
with the purpose or effect, in whole or in part, of impeding a change in
control of the Company or increasing the Board's power to impede such a
change in control in the future; provided, however, that any actions over
which the NRS or the Company's Charter grants unilateral authority to the
Board to the exclusion of stockholders, notwithstanding the presence of a
provision requiring certain stockholder approval, shall not be Defensive
Actions hereunder and provided further that if an offer is made to acquire
the Company or all of the Company's shares, and the Board determines that
such offer will maximize the Company's value at a sale for the
Shareholders' benefit, no action taken by the Board to facilitate such
Offer shall be a Defensive Action within the meaning of this Section 11.
This bylaw may not be amended or repealed except by a vote of the
stockholders."'
7. PROPOSAL TO REPEAL ANY BYLAWS ADOPTED BY THE BOARD SINCE FEBRUARY 1, 1998.
(Item 7 on Consent Card with Agent Designation)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON A PROPOSAL TO REPEAL ANY
BYLAW ADOPTED BY THE BOARD SINCE FEBRUARY 1, 1998:
"RESOLVED, that any Bylaws adopted by the board of directors since February
1, 1998, other than any Bylaw adopted pursuant to NRS 78.378, be and hereby are
repealed."
The purpose of this proposal is to prevent the Board from interfering with
the implementation of the proposals being voted upon by the Shareholders at any
78.379 Meeting or being acted upon by the Shareholders by consents and to
prevent the Board from enacting further defensive Bylaws intended to block the
Shareholders' ability to take advantage of the Offer.
DESCRIPTION AND LEGAL VALIDITY OF THE ANTI-ENTRENCHMENT PROPOSALS.
The Amendments would also severely limit the Shareholders' power to
implement the Anti-Entrenchment Proposals. Computer Associates believes that
the Amendments are legally invalid and has asked the Court for a declaration to
that effect. See "Certain Litigation." The following discussion of the legal
validity of the Anti-Entrenchment Proposals is based on the Bylaws without
giving effect to the Amendments.
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<PAGE>
Article II, Section 2 of the Company's Bylaws states in relevant part:
"Annual meetings of the stockholders shall be held on the second Monday in
August, if not a legal holiday, AND IF A LEGAL HOLIDAY, THEN ON THE NEXT SECULAR
DAY FOLLOWING AT 2:00 P.M., OR AT SUCH OTHER TIME AND DATE AS THE BOARD OF
DIRECTORS SHALL DETERMINE" (emphasis added).
Section 78.345 of the NRS states in relevant part: "If any corporation
fails to elect directors within 18 months after the last election of directors
required by NRS 78.330, the district court has jurisdiction in equity, upon
application of any one or more stockholders holding stock entitling them to
exercise at least 15% of the voting power, to order the election of directors in
the manner required by NRS 78.330."
Computer Associates believes that Article II, Section 2 of the Bylaws means
that the Board may not delay the Annual Meeting unless the second Monday in
August falls on a legal holiday. Nevertheless, Computer Associates is seeking to
amend Article II, Section 2 because the existing Bylaws may be interpreted to
mean that the Board has the ability, subject to its fiduciary duties, to delay
an Annual Meeting for the full 18 months allowed by Section 78.345 of the NRS
even if the second Monday of August does not fall on a legal holiday. The 1997
annual meeting was held on August 11, 1997; the eighteen-month anniversary of
that date is February 8, 1999.
At the 1998 Annual Meeting if the Director Replacement Proposals are not
duly adopted by Shareholders, Computer Associates intends to seek to replace the
existing directors and to fill any newly created directorships with a slate of
nominees who are committed, subject to their duties as directors of the Company
(which may require them to consider and/or accept offers from other persons to
purchase or otherwise combine with the Company), to removing any impediments to
the ability of Shareholders being able to choose freely whether to accept the
Offer and to approving the Proposed Merger. Shareholders will have the ability
to replace the entire Board at the 1998 Annual Meeting. Computer Associates
believes if the Director Replacement Proposals are not duly adopted by
Shareholders it is in the best interests of Computer Associates and the other
Shareholders to hold the Annual Meeting, and elect such a slate of directors, at
the earliest possible date. However, given the Board's opposition to the Offer,
Computer Associates believes there is a risk that the Board will delay the 1998
Annual Meeting until February 8, 1999, or an even later date if possible, unless
Shareholders amend the Bylaws to impose an additional limitation on the power of
the Board to delay the Annual Meeting.
Under the proposed amendment to Article II, Section 2, it would be clear
that the Board is required to hold the Annual Meeting on the second Monday in
August (subject to legal holiday delays) unless it is unable to do so due to
forces entirely beyond its control.
Article III, Section 1 of the Bylaws provides that all of the directors
shall be elected at the Annual Meeting. Under Nevada law, directors are elected
by a plurality of the votes cast at the stockholders' meeting. However, the
provisions for cumulative voting in the Company's Certificate and Bylaws grant
each Shareholder a number of votes equal to the number of shares owned by such
Shareholder multiplied by the number of directors to be elected, and gives each
Shareholder discretion to distribute such votes among the nominees including
casting all votes for one
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<PAGE>
candidate. This provision may allow holders of a minority of the Shares
represented at an annual meeting to elect one or more directors.
When the Shareholders elect directors at the 1998 Annual Meeting, they
will, in effect, be deciding whether to accept the Offer. Computer Associates
believes that the Board may interfere with the Shareholders' right to make that
choice by taking Defensive Actions such as attempting to limit the Shareholders
by amending Bylaws, issuing voting stock to a friendly party, entering into
transactions that make the Company less attractive to Computer Associates, or
using the Company's "poison pill" against the Offer.
Therefore, Computer Associates proposes the adoption of the Stockholder
Protection Bylaw that would establish a quorum of all the directors then in
office at a meeting duly assembled for taking a Defensive Action, but would
leave a quorum of a majority of the directors then in office if such action were
approved by a majority of the outstanding Shares.
The proposed bylaw defines "Defensive Action" to include any action with
the purpose or effect, in whole or in part, of impeding a change in control of
the Company or increasing the Board's power to impede such a change in control
in the future. Computer Associates believes it is desirable to include a general
definition of Defensive Action in the bylaw, so that the bylaw covers any new
devices that are created to block takeover bids in the future. It also believes
that such a general definition can be applied by the courts, since courts
applying Nevada law and Delaware law (which the courts frequently have followed
in determining Nevada corporate law) already apply a similar test in determining
whether a board is engaged in anti-takeover defenses that give rise to
"enhanced" duties under UNOCAL CORP. V. MESA PETROLEUM CO., 493 A.2d 946 (Del.
1985) and HILTON HOTELS CORP. V. ITT CORP., 978 F. Supp. 1342 (D. Nev. 1997).
With limited exceptions, the definition of Defensive Action specifically
excludes any action taken by the Board to facilitate an offer that a majority of
the Board determines will maximize the Company's value in a sale for the benefit
of Shareholders. Therefore, if after receiving an acquisition proposal, the
Company receives a higher offer from a "white knight," the Board would not have
to obtain Shareholder approval to block the original acquisition proposal and
facilitate the offer from the white knight.
Subsection 4 of Section 78.138 of the NRS states in relevant part:
"Directors may resist a change or potential change in control of the corporation
if the directors BY A MAJORITY VOTE OF A QUORUM determine that the change or
potential change is opposed to or not in the best interest of the
corporation..." (emphasis added).
Subsection 1 of Section 78.315 states: "Unless the articles of
incorporation or THE BYLAWS PROVIDE FOR A DIFFERENT PROPORTION, a majority of
the board of directors of the corporation then in office, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of business,
and the act of directors holding a majority of the voting power of the
directors, present at a meeting at which a quorum is present, is the act of the
board of directors" (emphasis added).
Therefore, Computer Associates believes that the Shareholders are
authorized to adopt a bylaw prescribing a quorum of all the directors then in
office for Defensive Actions by the Board.
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VOTE REQUIRED TO ADOPT ANTI-ENTRENCHMENT PROPOSALS.
The Anti-Entrenchment Proposals are all bylaw amendments. The required vote
for bylaw amendments are discussed above under "Director Replacement
Proposals--Legal Validity of and Vote Required for the Director Replacement
Proposals."
METHODS OF ADOPTING THE PROPOSALS.
Computer Associates will pursue one of two different means of adopting the
Proposals:
1. The solicitation of Shareholder Consents to adopt the Proposals;
2. The solicitation of Agent Designations to call the Special
Meeting.
THE OFFER AND THE PROPOSED MERGER
The purpose of the Offer is to enable Computer Associates to acquire
control of, and the entire equity interest in, the Company. The Offer, as the
first step in the acquisition of the Company, is intended to facilitate the
acquisition of all the Shares. Computer Associates currently intends, as soon as
practicable following consummation of the Offer, to propose and seek to have the
Company consummate a merger or similar business combination with the Purchaser
or another direct or indirect wholly owned subsidiary of Computer Associates
(the "Proposed Merger"). The purpose of the Proposed Merger is to acquire all
Shares not tendered and purchased pursuant to the Offer or otherwise. Pursuant
to the Proposed Merger, each then outstanding Share (other than Shares owned by
the Purchaser, Computer Associates or any of their subsidiaries, Shares held in
the treasury of the Company and Shares owned by Shareholders who perfect any
available appraisal rights under the NRS) would be converted into the right to
receive an amount in cash equal to the price per Share paid pursuant to the
Offer.
Although the Purchaser will seek to have the Company consummate the
Proposed Merger as soon as practicable after consummation of the Offer, if the
Board opposes the Offer and the Merger, certain terms of the Rights and certain
provisions of the NRS may affect the ability of the Purchaser to consummate the
Offer, to obtain control of the Company and to effect the Proposed Merger.
Accordingly, the timing and details of the Proposed Merger will depend on a
variety of factors and legal requirements, the actions of the Board of Directors
of the Company, the number of shares of Common Stock acquired by the Purchaser
pursuant to the Offer and whether the conditions to the Offer described below
(the "Conditions") are satisfied or waived.
CONDITIONS TO THE OFFER
MINIMUM CONDITION. Consummation of the Offer is conditioned (the "Minimum
Condition") upon there being validly tendered and not withdrawn prior to the
Expiration Date a number of Shares, which when added to the number of Shares
owned by the Purchaser and its affiliates, constitutes a majority of the total
number of outstanding Shares on a fully diluted basis on the date of purchase.
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According to the Company's Quarterly Report on Form 10-Q for the quarter
ended December 26, 1997 (the "December 1997 10-Q"), at December 26, 1997,
77,952,347 Shares were issued and outstanding. According to the Company's Annual
Report on Form-10-K for the fiscal year ended March 28, 1997 (the "1997 10-K"),
at March 28, 1997, options covering a total of 6,578,881 Shares were outstanding
under the Company's various stock option plans. Computer Associates currently
beneficially owns 170,000 Shares. Based on the foregoing and assuming that no
options were granted after March 28, 1997, and no options were exercised or
expired from March 29, 1997 through December 26, 1997, there would be 84,531,228
Shares outstanding on a fully diluted basis and the Minimum Condition would be
satisfied if 42,095,614 Shares were validly tendered pursuant to the Offer and
not properly withdrawn. However, the actual number of Shares that must be
validly tendered pursuant to the Offer and not properly withdrawn in order to
satisfy the Minimum Condition will depend on the facts as they exist on the date
of purchase. See the Offer to Purchase for information regarding the effect on
the Offer of the Company's two-for-one stock split.
RIGHTS CONDITION. Consummation of the Offer is conditioned (the "Rights
Condition") upon the Rights having been redeemed by the Board or the Purchaser
being satisfied, in its sole discretion, that the Rights have been invalidated
or are inapplicable to the Offer and the Proposed Merger. The Rights are
described in the Company's registration statement on Form 8-A dated December 21,
1988, as amended (the "Company 8-A"), and a summary description is provided
below. The following summary is based on information contained in the Company
8-A.
The Rights Agreement provides that, until the close of business on the
Distribution Date (as defined therein), the Rights will be represented by and
transferred with the associated Shares. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates representing the Shares will constitute the transfer of the Rights
associated with the Shares represented by such certificate. The Rights Agreement
further provides that, following the Distribution Date, the Rights become
exercisable, and separate certificates evidencing the Rights ("Rights
Certificates") will be mailed to the holders of record of the outstanding
Shares.
The Rights Agreement provides that, at any time prior to the close of
business on the earliest of (i) the tenth business day after the first public
announcement that a person has become an Acquiring Person (as defined therein),
(ii) the date an Acquisition Event (as defined therein) has occurred, and (iii)
the Final Expiration Date (as defined therein), the Board of Directors of the
Company may direct the Company to redeem the Rights in whole, but not in part,
at a price of $.01 per Right (except as provided in the Rights Agreement).
Based on publicly available information, the Purchaser believes that, as of
February 17, 1998, the Rights were not exercisable, Rights Certificates had not
been issued and the Rights were evidenced by the Shares. The Purchaser believes
that, as a result of the commencement of the Offer on February 17, 1998, the
Distribution Date may occur as early as March 3, 1998, unless prior to such date
the Company's Board of Directors redeems the Rights or takes action to delay the
Distribution Date. The Distribution Date may also occur sooner.
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<PAGE>
THE CONTROL SHARE CONDITION. Consummation of the Offer is conditioned (the
"Control Share Condition") upon the Purchaser being satisfied, in its sole
discretion, that Sections 78.378 through 78.3793 of the NRS (the "Nevada Control
Share Acquisition Statute") are inapplicable to the Offer and the Proposed
Merger.
Pursuant to the Nevada Control Share Acquisition Statute, an "acquiring
person," who acquires a "controlling interest" in an "issuing corporation," may
not exercise voting rights on any "control share" unless such voting rights are
conferred by a majority vote of the disinterested stockholders of the issuing
corporation at a meeting of such stockholders. In the event that the control
shares are accorded full voting rights and the acquiring person acquires control
shares with a majority or more of all the voting power, any stockholder, other
than the acquiring person, who does not vote in favor of authorizing voting
rights for the control shares, is entitled to demand payment for the fair value
of such stockholder's shares, and the corporation must comply with the demand.
For purposes of the provisions under this subsection, "acquiring person" means
any person who, individually or in association with others, acquires or offers
to acquire, directly or indirectly, the ownership of outstanding voting shares
of an issuing corporation sufficient to enable the acquiring person,
individually or in association with others, directly or indirectly, to exercise
(i) one-fifth or more but less than one-third, (ii) one-third or more but less
than a majority, and/or (iii) a majority or more of the voting power of the
issuing corporation in the election of directors. Voting rights must be
conferred by a majority of the outstanding voting shares of disinterested
stockholders as each threshold is reached and/or exceeded.
"Control share" means those outstanding voting shares of an issuing
corporation which an acquiring person acquires or offers to acquire in an
acquisition or within 90 days immediately preceding the date when the acquiring
person became an acquiring person. "Issuing corporation" means a corporation
that is organized in Nevada, has 200 or more stockholders (at least 100 of whom
are stockholders of record and residents of Nevada) and does business in Nevada
directly or through an affiliated corporation.
The above provisions do not apply if before the acquisition is made the
articles of incorporation or bylaws of the Company to be in effect on the tenth
day following the acquisition of a controlling interest by an acquiring person
provide that said provisions do not apply. The Certificate and Bylaws currently
do not exclude the Company from the restrictions imposed by such provisions. The
Control Share Condition would be satisfied if the Bylaws were amended such that,
on the tenth day following consummation of the Offer, the Bylaws provide that
the provisions of the Nevada Control Share Acquisition Statute do not apply, or
if the Purchaser, in its sole discretion, were satisfied that the Nevada Control
Share Acquisition Statute was invalid or its restrictions were otherwise
inapplicable to the Purchaser in connection with the Offer and the Proposed
Merger for any reason, including, without limitation, those specified in the
Nevada Control Share Acquisition Statute.
THE BUSINESS COMBINATION CONDITION. Consummation of the Offer is
conditioned (the "Business Combination Condition") upon the Purchaser being
satisfied, in its sole discretion, that Sections 78.411 through 78.444 of the
NRS (the "Nevada Business Combination Statute") are inapplicable to the
Purchaser in connection with the Offer and the Proposed Merger.
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<PAGE>
The Nevada Business Combination Statute restricts the ability of a
"resident domestic corporation" to engage in any combination with an "interested
stockholder" for three years following the date on which the interested
stockholder acquired the shares that caused such stockholder to become an
interested stockholder, unless the combination or the purchase of shares by the
interested stockholder on the date on which the interested stockholder acquired
the shares that caused such stockholder to become an interested stockholder is
approved by the board of directors of the resident domestic corporation before
that date.
If the combination were not previously approved, the interested stockholder
may effect a combination after the three-year period only if such stockholder
receives approval from a majority of the disinterested shares or the offer meets
certain fair price criteria.
For purposes of the above provisions, "resident domestic corporation" means
a Nevada corporation that has 200 or more stockholders. "Interested stockholder"
means any person, other than the resident domestic corporation or its
subsidiaries, who is (i) the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the outstanding voting shares of the resident
domestic corporation or (ii) an affiliate or associate of the resident domestic
corporation and, at any time within three years immediately before the date in
question was the beneficial owner, directly or indirectly, of 10% or more of the
voting power of the then outstanding shares of the resident domestic
corporation. The above provisions do not apply to corporations that so elect in
their articles of incorporation or in a charter amendment approved by a majority
of the outstanding voting shares of disinterested stockholders. Such a charter
amendment, however, would not become effective for 18 months after its passage
and could apply only to stock acquisitions occurring after its effective date.
The Certificate does not exclude the Company from the restrictions imposed by
such provisions.
The Business Combination Condition would be satisfied if the Company's
Board of Directors approved the Offer and the Proposed Merger prior to
consummation of the Offer and the Proposed Merger or if the Purchaser, in its
sole discretion, were satisfied that the Nevada Business Combination Statute was
invalid or its restrictions were otherwise inapplicable to the Purchaser in
connection with the Offer and the Proposed Merger for any reason, including,
without limitation, those specified in the Nevada Business Combination Statute.
Certain other conditions to the consummation of the Offer are described in
the Offer to Purchase. The Purchaser expressly reserves the right, in its sole
discretion, to waive any one or more of the conditions to the Offer.
CERTAIN LITIGATION
On February 17, 1998, Computer Associates filed the Complaint in the United
States District Court for the District of Nevada (the "Court"). The Complaint
requests that the Company be enjoined from taking actions to impede the exercise
of the shareholder franchise, or the
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<PAGE>
consummation of the Offer, and that the Company be required to render
inapplicable various anti-takeover devices including its Rights Agreement, so
that the Offer may be consummated.
The Complaint also seeks various declarations pursuant to the NRS and the
Bylaws regarding the solicitation of Consents, Proxies and Agent Designations.
Computer Associates has asked the Court to declare that the holders of a
majority of the Shares may act, by written consent or vote, to amend the Bylaws.
Computer Associates also has asked the Court to declare that the holders of
two-thirds of the Shares may act, by written consent or vote, to remove a
sufficient number of the existing directors to be able to designate a majority
of the members of the Board. Computer Associates has moved the Court for an
expedited determination of these issues. That motion is pending before the
Court.
Also, on February 17, 1998, with respect to the Solicitation of Consents,
Proxies and Agent Designations, Computer Associates filed preliminary copies of
solicitation materials with the Commission.
CERTAIN INFORMATION CONCERNING
COMPUTER ASSOCIATES AND OTHER PARTICIPANTS
IN THE SOLICITATION
Computer Associates beneficially owns 170,000 Shares. Certain information
about the directors and executive officers of Computer Associates and certain
other persons who may solicit Consents and/or Agent Designations from the
Shareholders is set forth in Schedule I attached hereto. No officer or director
of Computer Associates owns any Shares.
Except as set forth in this Solicitation Statement or in the Schedules
hereto, to the best knowledge of Computer Associates, none of Computer
Associates, any of the persons participating in this solicitation on behalf of
Computer Associates, or any associate of any of the foregoing persons (i) owns
beneficially, directly or indirectly, or has the right to acquire, any
securities of the Company or any parent or subsidiary of the Company, (ii) owns
any securities of the Company of record but not beneficially, (iii) has
purchased or sold any securities of the Company within the past two years, (iv)
has incurred indebtedness for the purpose of acquiring or holding securities of
the Company, (v) is or has been a party to any contract, arrangement or
understanding with respect to any securities of the Company within the past
year, (vi) has been indebted to the Company or any of its subsidiaries since the
beginning of the Company's last fiscal year, (vii) has any arrangement or
understanding with respect to future employment by the Company or with respect
to any future transactions to which the Company or any of its affiliates will or
may be a party, (viii) knows of any currently proposed transaction, or series of
similar transactions, to which Computer Associates or any other participant is
to be a party, in which the amount involved exceeds $60,000 and in which any of
them or their respective associates had, or will have, a direct or indirect
material interest or (ix) has been convicted during the last ten years in a
criminal proceeding (excluding traffic violations or other similar
misdemeanors). In addition, except as set forth in this Solicitation Statement
or in the Schedules hereto, to the best knowledge of Computer Associates, none
of Computer Associates, any of the persons participating in this solicitation on
behalf of Computer Associates, or any associate or immediate family member of
any of the foregoing persons has had
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<PAGE>
or is to have a direct or indirect material interest in any transaction with the
Company since the beginning of the Company's last fiscal year, or any proposed
transaction, to which the Company or any of its affiliates was or is a party.
VOTING RIGHTS
According to the December 1997 10-Q, at December 26, 1997, 77,952,347
Shares were outstanding and entitled to vote. Computer Associates believes that
the only outstanding class of securities of the Company entitled to act by
written Consent or vote at any 78.379 Meeting are the Shares. Each Share is
entitled to one vote. For a description of the vote required to adopt the
Proposals, see "Proposals--Legal Validity of and Vote Required for the Director
Replacement Proposals.
CERTAIN OTHER INFORMATION REGARDING THE COMPANY
Shareholders are referred to the Company's [Statement] with respect to
other information related to beneficial ownership of the Company's securities,
including dissenters' rights of appraisal, procedures for submitting stockholder
proposals intended to be presented at the Company's 1998 annual meeting of
stockholders, information regarding the beneficial ownership of the Shares, any
arrangements regarding the Shares the operation of which may result in a change
of control of the Company and any change of control of the Company that may have
occurred since the beginning of the Company's last fiscal year and information
regarding the Company's stock option and other incentive compensation plans.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Solicitation Statement, including any
forecasts, projections and descriptions of anticipated synergies referred to
therein, including any statements contained herein regarding the development or
possible assumed future results of operations of Computer Associates'
businesses, the markets for Computer Associates' services and products,
anticipated expenditures, regulatory developments and the effects of the
Computer Associates Offer and the Proposed Merger, any statements preceded by,
followed by or that include the words "believes," "expects," "anticipates," or
similar expressions, and other statements contained or incorporated by reference
herein regarding matters that are not historical facts, are or may constitute
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995). Because such statements are subject to risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. All subsequent written and oral
forward-looking statements attributable to Computer Associates or persons acting
on its behalf are expressly qualified in their entirety by the cautionary
statements set forth or referred to above in this paragraph. Investors are
cautioned not to place undue reliance on such statements, which speak only as of
the date hereof. Computer Associates undertakes no obligation to release
publicly any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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GENERAL INFORMATION
This Solicitation Statement and the accompanying [COLOR] Consent Card with
Agent Designation are first being made available to Shareholders on or about
, 1998. Executed Consent Cards with Agent Designations will
be solicited by mail, advertisement, telephone, telecopier and in person.
Solicitation will be made by [ ] and [ ] of Computer
Associates, none of whom will receive additional compensation for such
solicitation. Consents and/or Agent Designations will be solicited from
individuals, brokers, banks, bank nominees and other institutional holders.
Computer Associates has requested banks, brokerage houses and other custodians,
nominees and fiduciaries to forward all solicitation materials to the beneficial
owners of the shares they hold of record. Computer Associates will reimburse
these record holders for their reasonable out-of-pocket expenses.
In addition, Computer Associates has retained MacKenzie Partners to solicit
Consents and/or Agent Designations in connection with calling the Special
Meeting for which MacKenzie Partners will be paid a fee of approximately $[
] and will be reimbursed for its reasonable expenses. MacKenzie Partners
will employ approximately [ ] people in its efforts. Costs incidental
to this solicitation include expenditures for printing, postage, legal and
related expenses and are expected to be approximately $[ ]. The total
costs incurred to date in connection with this solicitation are not in excess of
$[ ]. Computer Associates intends to ask the Board to have the
Company reimburse it for costs and expenses incurred in connection with this
solicitation. Computer Associates does not intend to request that its
reimbursement request be submitted to a vote of the Shareholders.
Computer Associates has also retained Bear, Stearns & Co. Inc. and its
affiliates ("Bear Stearns") to provide certain financial advisory services to
Computer Associates. Bear Stearns is acting as Dealer Manager in connection with
the Offer and as financial advisor to Computer Associates and the Purchaser in
connection with the proposed acquisition of the Company, but Bear Stearns has
not been retained to specifically assist in this solicitation. Computer
Associates is obligated to pay to Bear Stearns, if, as more fully described in
the engagement letter relating thereto, during the term of the engagement or
within 12 months thereafter Computer Associates acquires the Company or more
than 50% of its outstanding voting securities, a fee of $5 million and a fee of
$1 million (which will be credited against such $5 million fee) if Computer
Associates requests Bear Stearns to render a customary fairness opinion. Bear
Stearns is also entitled to act as sole lead underwriter, placement agreement
and financial advisor in connection with certain debt and equity financings (and
certain refinancings) and certain asset sales for a specified period following
the acquisition and to receive fees in connection therewith. In addition,
Computer Associates has agreed to reimburse Bear Stearns for its reasonable
expenses, including reasonable fees and disbursements of its counsel, incurred
in rendering its services under its engagement agreement with Computer
Associates and has agreed to indemnify Bear Stearns against certain liabilities
and expenses in connection with the Offer and the Proposed Merger, including
certain liabilities under the federal securities laws. Bear Stearns from time to
time renders various investment banking services to Computer Associates and its
affiliates for which it is paid customary fees. In connection with Bear Stearns'
engagement as financial advisor, Computer Associates anticipates that certain
employees of Bear Stearns may communicate in person, by telephone or
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otherwise with a limited number of institutions, brokers or other persons who
are Company Shareholders for the purpose of assisting in this solicitation. Bear
Stearns will not receive any fee for, or in connection with, such solicitation
activities by its employees apart from the fees it is otherwise entitled to
receive as described above.
REVOCABILITY OF SIGNED CONSENTS AND AGENT DESIGNATIONS
You may revoke your Consent or Agent Designation at any time by executing
and delivering a written revocation to the Company (please send a copy of any
revocation sent to the Company to MacKenzie so that Computer Associates is aware
of the revocation). Such a revocation must clearly state that your Consent Card
with Agent Designation is no longer effective. A Consent Card with Agent
Designation may also be revoked by notice given to the Company in a meeting of
the Shareholders. Any revocation of a Consent or Agent Designation will not
effect any action taken by the Designated Agents or proxies, or pursuant to the
Consent prior to such revocation.
IF YOU HAVE ANY QUESTIONS ABOUT GIVING YOUR CONSENT AND AGENT DESIGNATION
OR REQUIRE ASSISTANCE, PLEASE CONTACT MACKENZIE PARTNERS, INC., TOLL- FREE AT
(800) 322-2885.
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF
COMPUTER ASSOCIATES AND THEIR ADVISORS THAT MAY PARTICIPATE
IN THE SOLICITATION OF CONSENTS AND AGENT DESIGNATIONS
The name, business address, and present principal occupation or employment
of each of the directors and executive officers of Computer Associates and its
advisors and certain other employees and representatives of Computer Associates
that may participate in the solicitation of Consents and Agent Designations are
set forth below. Unless otherwise indicated, the principal business address of
each director or executive officer of Computer Associates is One Computer
Associates Plaza, Islandia, NY 11788-7000 and the principal business address of
each representative of Bear Stearns is 245 Park Avenue, New York, NY 10167.
Consents and Agent Designations may be solicited by mail, advertisement,
telephone, telecopier and in person. In addition to the solicitation of tenders,
solicitation of the foregoing may be made by Michael J. Urfirer, Senior Managing
Director of Bear Stearns, Lisa M. Price, Senior Managing Director of Bear
Stearns and Barry J. Cohen, Senior Managing Director of Bear Stearns none of
whom will receive additional compensation for such solicitation.
Bear Stearns engages in a full range of investment banking, securities
trading, market-making and brokerage services for institutional and individual
clients. In the ordinary
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course of its business, Bear Stearns may actively trade the securities of the
Company for its own account and the accounts of its customers and, accordingly,
may at any time hold a long or short position in such securities. As of
February 16, 1998, Bear Stearns held for its own account and the account of its
affiliates a net short position of approximately 700 Shares. Bear Stearns from
time to time owns, in the ordinary course of business, certain of the Company's
securities of record but not beneficially for the account of its customers.
Bear Stearns does not admit that it or any of its directors, officers,
employees or affiliates is a "participant," as defined in Schedule 14A
promulgated under the Exchange Act by the Commission, in the solicitation to
which this Solicitation Statement relates or that such Schedule 14A requires
disclosure in the Solicitation Statement of certain information concerning Bear
Stearns.
PARTICIPANT DIRECTORS AND EXECUTIVE OFFICERS OF COMPUTER ASSOCIATES
<TABLE>
<CAPTION>
PRESENT OFFICE OR OTHER
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT
- - ---- ----------------------------------
<S> <C>
Charles B. Wang Director and
Chief Executive Officer
Sanjay Kumar Director, President and
Chief Operating Officer
Peter A. Schwartz Senior Vice President, Finance and
Chief Financial Officer
</TABLE>
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<PAGE>
SCHEDULE II
Except as disclosed in this Solicitation Statement, to the best of Computer
Associates' knowledge, none of Computer Associates, its directors, executive
officers, or other employees or representatives named in Schedule I hereto has
any interest, direct or indirect, by security holdings or otherwise, in the
Company.
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SCHEDULE III
TRANSACTIONS IN THE COMPANY'S SECURITIES
Computer Associates purchased through a wholly-owned subsidiary, 150,000
Shares on January 21, 1998 for $87.28 per Share and 20,000 Shares on January 23,
1998 for $83.90 per Share.
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