<PAGE>
As filed with the Securities and Exchange Commission on October 12, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
COMPUTER SCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
Nevada 7371, 7373, 7376 95-2043126
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation of organization) Classification Code Number) Identification No.)
</TABLE>
---------------
2100 East Grand Avenue
El Segundo, California 90245
(310) 615-0311
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
---------------
Copies to:
<TABLE>
<S> <C>
Ronald S. Beard Frederick S. Green
Gibson, Dunn & Crutcher LLP Weil, Gotshal & Manges LLP
333 South Grand Avenue 767 Fifth Avenue
Los Angeles, California 90071 New York, New York 10153
(213) 229-7000 (212) 310-8000
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement and the
satisfaction or waiver of all other conditions to the merger described in the
proxy statement/prospectus.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
Proposed Proposed
Title of Each Class of Amount Maximum Maximum Amount of
Securities to be to be Offering Price Aggregate Registration
Registered Registered(1) Per Share Offering Price(2) Fee(3)
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1.00 par
value................. 7,588,341 shares N/A $407,514,666 $113,290
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
(1) Represents the maximum number of shares of the Registrant's Common Stock
to be issued in connection with the transaction, based on 14,266,547
shares of Nichols Research Corporation Common Stock outstanding, and
assuming in addition the exercise of all 1,675,347 outstanding options (as
at October 7, 1999) to purchase shares of Nichols' Common Stock. Also
includes associated preferred share rights to purchase shares of the
Registrant's common stock, which preferred share rights are not currently
separable from the shares of common stock and not currently exercisable.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f)(1) and 457(c) under the Securities Act of 1933, as
amended, based on $26.5625, the average of the high and low prices of
Nichols' Common Stock as reported on the Nasdaq Stock Market on October 6,
1999.
(3) Calculated by multiplying 0.000278 by the proposed maximum aggregate
offering price. Pursuant to Rule 457(b), $77,648.00 of the registration
fee that was previously paid pursuant to Section 14(g) of the Securities
Exchange Act of 1934, as amended, in connection with the filing of
preliminary proxy materials on September 28, 1999, has been credited
against the registration fee payable in connection with this filing .
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
NICHOLS RESEARCH CORPORATION
PROXY STATEMENT/PROSPECTUS
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
To all Nichols stockholders:
Nichols' board of directors unanimously approved a merger agreement between
Nichols and Computer Sciences Corporation. Your vote, as stockholders of
Nichols, is now needed to adopt the merger agreement.
In the merger, each share of your Nichols common stock will be converted
into a fraction of a share of Computer Sciences common stock having a market
value of between $25.20 and $30.80 per share, unless the average closing price
of Computer Sciences common stock over a specified period before our special
meeting is below $52.9552. If the average closing price is below $52.9552 per
share, and we do not exercise our right to terminate the merger agreement, you
will receive 0.476 of a share of Computer Sciences common stock for each share
of Nichols common stock you own, which may have a market value below $25.20.
Computer Sciences common stock is listed on the New York Stock Exchange
under the trading symbol "CSC." On October 8, 1999, Computer Sciences common
stock closed at $65.50 per share. The merger cannot be completed unless the
holders of a majority of Nichols common stock entitled to vote adopt the merger
agreement. Only stockholders who hold shares of Nichols common stock at the
close of business on October 8, 1999 will be entitled to vote.
After careful consideration, Nichols' board of directors has unanimously
determined the merger to be advisable, fair to you and in your best interests.
Nichols' board of directors has approved the merger agreement and unanimously
recommends that you adopt it.
This proxy statement/prospectus provides you with detailed information
concerning Computer Sciences, the merger and the merger agreement. Please give
all of the information contained in the proxy statement/prospectus your careful
attention. In particular, you should carefully consider the discussion in the
section entitled "Risk Factors" on page 18 of this proxy statement/prospectus.
The special meeting will occur on November 16, 1999, at 10:00 a.m., local
time, at the following location:
Nichols Research Corporation
4090 South Memorial Parkway
Huntsville, Alabama 35815-1502
Regardless of the number of shares you own or whether you plan to attend the
meeting, it is important that your shares be represented and voted. Please
complete, sign, date and return the accompanying proxy in the enclosed self-
addressed, stamped envelope. Returning the proxy does NOT deprive you of your
right to attend the meeting and to vote your shares in person. YOUR VOTE IS
VERY IMPORTANT.
We appreciate your cooperation and consideration of this matter.
Sincerely,
/s/ Chris H. Horgen
________________________________________
Chris H. Horgen
Chairman of the Board and Chief
Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved the securities to be issued in this transaction or
determined that this proxy statement/prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated October 12, 1999, and is first
being mailed to Nichols stockholders on or about October 15, 1999.
<PAGE>
NICHOLS RESEARCH CORPORATION
----------------
Notice of Special Meeting of Stockholders
To be held on November 16, 1999
----------------
To the Stockholders of
Nichols Research Corporation:
As a stockholder of Nichols Research Corporation, you are hereby notified of
and cordially invited to attend a special meeting of stockholders of Nichols to
be held at Nichols Research Corporation, 4090 South Memorial Parkway,
Huntsville, Alabama 35815-1502 on November 16, 1999 at 10:00 a.m., local time.
The special meeting is called to consider and vote upon a proposal to adopt the
Agreement and Plan of Merger, dated as of September 19, 1999, among Nichols,
Computer Sciences Corporation, a Nevada corporation, and Nevada Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of Computer
Sciences.
The Agreement and Plan of Merger provides for the merger of Nevada
Acquisition into Nichols. Following the merger, Nichols will become a wholly
owned subsidiary of Computer Sciences. If the merger is completed, each of your
shares of Nichols common stock will be converted into a fraction of a share of
Computer Sciences common stock having a market value of between $25.20 and
$30.80 per share, unless the average closing price of Computer Sciences common
stock over a specified period prior to the special meeting is below $52.9552
per share. If the average closing price is below $52.9552 per share and we do
not exercise our right to terminate the merger agreement, you will receive
0.476 of a share of Computer Sciences common stock for each share of Nichols
common stock you own, which may have a market value below $25.20.
Nichols' board of directors has fixed the close of business on October 8,
1999 as the record date for the determination of the holders of Nichols common
stock entitled to notice of and to vote at the meeting. Only holders of record
of Nichols common stock at the close of business on October 8, 1999 will be
entitled to vote at the special meeting or any adjournment or postponement of
the meeting.
We hope you will be present at the meeting. Whether or not you plan to
attend the special meeting, please sign and date the enclosed proxy card and
return it at your earliest convenience in the envelope provided so that your
shares will be represented. The envelope requires no postage if mailed in the
United States. If you attend the special meeting, you may vote in person if you
wish, even if you have previously returned your proxy card.
By Order of the Board of Directors
/s/ Patsy L. Hattox
Patsy L. Hattox
Corporate Vice President,
Chief Administrative Officer,
Secretary and Director
October 12, 1999
The merger agreement must be adopted by the holders of a majority of the
outstanding shares of Nichols common stock. Your vote on this matter is very
important. We urge you to review carefully the enclosed material and to return
your proxy card promptly.
Your board of directors unanimously recommends that you vote FOR adoption of
the merger agreement.
Please do not return your common stock certificates with your enclosed proxy
and do not forward your certificates until you receive instructions following
the merger.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................... 1
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.................. 4
REFERENCE TO ADDITIONAL INFORMATION........................................ 5
SUMMARY.................................................................... 6
RISK FACTORS............................................................... 18
Risk Factors Relating to the Merger.................................... 18
Risk Factors Relating to Computer Sciences............................. 20
NICHOLS SPECIAL MEETING.................................................... 22
General................................................................ 22
Purpose of the Special Meeting......................................... 22
Recommendation of Nichols' Board....................................... 22
Required Vote.......................................................... 22
Record Date............................................................ 22
Quorum................................................................. 23
Proxies................................................................ 23
Revocation............................................................. 23
Solicitation of Proxies................................................ 24
THE MERGER................................................................. 25
General................................................................ 25
Background of the Merger............................................... 25
Reasons for the Merger................................................. 28
The Exchange Ratio..................................................... 30
Opinion of Nichols' Financial Advisors................................. 32
Regulatory Approvals Required for the Merger........................... 48
Material Federal Income Tax Consequences of the Merger................. 48
Accounting Treatment................................................... 50
Interests of Directors and Officers in the Merger...................... 50
Restrictions on Resales by Affiliates.................................. 51
THE MERGER AGREEMENT....................................................... 52
Structure of the Merger................................................ 52
Closing................................................................ 52
Treatment of Nichols Stock Options and Other Stock Rights.............. 52
Fractional Shares...................................................... 53
Exchange of Certificates............................................... 53
Representations and Warranties......................................... 54
Covenants.............................................................. 55
Conduct of Business Pending the Merger................................. 56
No Solicitation of Transactions........................................ 58
Conditions to Completing the Merger.................................... 59
Termination of the Merger Agreement.................................... 60
Extension, Waiver and Amendment of the Merger Agreement................ 63
Employee Benefits and Plans............................................ 63
Management After the Merger............................................ 63
INFORMATION ABOUT THE COMPANIES............................................ 64
Computer Sciences...................................................... 64
Nichols................................................................ 65
Nevada Acquisition Corporation......................................... 66
</TABLE>
i
<PAGE>
TABLE OF CONTENTS--(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
DESCRIPTION OF CAPITAL STOCK............................................... 67
Computer Sciences Capital Stock........................................ 67
Nichols Capital Stock.................................................. 68
COMPARISON OF STOCKHOLDERS RIGHTS.......................................... 69
Size of Board of Directors............................................. 69
Classified Board of Directors.......................................... 69
Cumulative Voting...................................................... 69
Stockholder Power to Call Special Stockholders' Meeting................ 70
Dissolution............................................................ 70
Removal of Directors................................................... 70
Filling Vacancies on the Board of Directors............................ 71
Voting Requirements to Amend Charter and Bylaws........................ 71
Inspection of Stockholders List........................................ 71
Dividends.............................................................. 72
Transactions Involving Officers or Directors........................... 72
Limitation of Liability of Directors and Indemnification............... 73
Business Combinations/Reorganizations.................................. 74
Rights Plan............................................................ 75
ADDITIONAL INFORMATION..................................................... 76
Dissenters' Appraisal Rights........................................... 76
Legal Matters.......................................................... 76
Experts................................................................ 76
Stockholder Proposals.................................................. 76
Other Matters.......................................................... 76
WHERE YOU CAN FIND MORE INFORMATION........................................ 77
APPENDIX A--THE MERGER AGREEMENT........................................... A-1
APPENDIX B--OPINION OF GOLDMAN, SACHS & CO. ............................... B-1
APPENDIX C--OPINION OF THE ROBINSON-HUMPHREY COMPANY, LLC.................. C-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. What is the proposed transaction for which I am being asked to vote?
A. Nichols proposes to be acquired by Computer Sciences. In the merger, Nevada
Acquisition Corporation, a wholly owned subsidiary of Computer Sciences,
will merge into Nichols, with Nichols surviving the merger. As a result,
Nichols will become a wholly owned subsidiary of Computer Sciences.
Q. What effect will the merger have on my Nichols shares?
A. Each share of your Nichols common stock will be exchanged for a fraction of
a share of Computer Sciences common stock having a market value of between
$25.20 and $30.80, unless the average closing price of Computer Sciences
common stock over a specified period before the special meeting is below
$52.9552 per share. If the average closing price is below $52.9552 per share
and Nichols does not exercise its right to terminate the merger agreement,
you will receive 0.476 of a share of Computer Sciences common stock for each
share of Nichols common stock you own, which may have a market value below
$25.20. The specified period is fifteen days selected at random from the
twenty trading days ending on November 10, 1999.
A table containing examples of a range of average closing prices, the
resulting exchange ratios and the corresponding values of the Computer
Sciences common stock to be received by Nichols stockholders appears in the
Summary section on page 7 and in the full text on page 32.
Q. How will stockholders know what the actual exchange ratio is?
A. We will issue a press release several days before the special meeting that
will disclose the average closing price and the exchange ratio. The exchange
ratio is the fraction of a share of Computer Sciences common stock that you
would receive in the merger for each share you own of Nichols common stock.
Q. What percentage of Computer Sciences' outstanding common stock will be held
by former Nichols' stockholders after the merger?
A. When the merger is completed, we estimate that the former holders of Nichols
common stock will hold between 3.2% and 4.1% of Computer Sciences
outstanding common stock.
Q. What is the tax impact of the merger on Nichols stockholders?
A. The merger has been structured to qualify as a tax-free reorganization under
the U.S. Internal Revenue Code. As a result, it is expected that you will
not recognize any taxable gain or loss for U.S. federal income tax purposes
on the exchange of your Nichols shares for Computer Sciences shares in the
merger. Any cash payments you receive in place of fractional Computer
Sciences shares will, however, be taxable. The tax consequences of the
transaction are very complicated and will depend on the facts of your own
situation. You should consult your tax advisor for a full understanding of
the tax consequences of the merger to you.
1
<PAGE>
QUESTIONS AND ANSWERS
Q. Am I entitled to appraisal rights?
A. No. Under Delaware law, which governs Nichols and the rights of Nichols
stockholders in the merger, you are not entitled to appraisal rights.
Q. When and where is the special meeting?
A. The Nichols special meeting is scheduled to take place on November 16, 1999
at 10:00 a.m., local time, at Nichols Research Corporation, 4090 South
Memorial Parkway, Huntsville, Alabama 35815-1502.
Q. When do you expect the merger to be completed?
A. We expect to complete the merger promptly after receiving the Nichols
stockholder approval at the special meeting and after all necessary
regulatory approvals are received.
Q. What do I need to do now?
A. After carefully reading and considering the information contained in this
document, please fill out and sign the proxy card, and then mail your
signed proxy card in the enclosed postage-paid envelope as soon as possible
so that your shares may be voted at the special meeting. Your proxy card
will instruct the persons named on the card to vote your shares at the
special meeting as you direct on the card. If you sign and send in your
proxy card and do not indicate how you want to vote, your proxy will be
voted FOR adoption of the merger agreement. If you do not vote or you
abstain, the effect will be a vote against the merger. Your vote is very
important.
Q. May I change my vote after I have mailed my signed proxy card?
A. You may change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send
a written notice stating that you want to revoke your proxy. Second, you
can complete and submit a new proxy card. If you choose either of these two
methods, you must submit your notice of revocation or your new proxy card
to Corporate Investor Communications, Inc., 111 Commerce Road, Carlstadt,
New Jersey 07072. Third, you can attend the Nichols special meeting and
vote in person. Simply attending the meeting, however, will not revoke your
proxy; you must vote at the meeting. If you have instructed a broker to
vote your shares, you must follow directions received from your broker to
change your vote.
Q. Should I send in my stock certificates now?
A. No. After the merger is completed, you will receive written instructions
for exchanging your stock certificates.
Q. If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A. Your broker will vote your shares only if you provide instructions on how
to vote. You should follow the directions provided by your broker to vote
your shares. You cannot vote shares held in "street name" by returning a
proxy card to us.
Q. What vote is required for approval?
A. The merger agreement must be adopted by a majority of the outstanding
shares of Nichols common stock.
Q. What does Nichols' board of directors recommend?
A. Nichols' board of directors has determined that the proposed merger is
advisable, fair
2
<PAGE>
QUESTIONS AND ANSWERS
to and in the best interests of Nichols and its stockholders and unanimously
recommends that you vote FOR the proposal to adopt the merger agreement.
Q. Who can help answer my questions?
A. If you have more questions about the merger, you should contact:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072
(877) 460-9334
3
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains forward-looking statements that are
subject to risks and uncertainties. These forward-looking statements represent
expectations or beliefs of Computer Sciences and Nichols concerning future
events, and no assurance can be given that the results described will be
achieved. These forward-looking statements can generally be identified by the
use of statements that include words or phrases such as "estimate," "project,"
"believe," "expect," "anticipate," "intend," "plan," "foresee," "likely,"
"will" or other similar words or phrases.
Computer Sciences and Nichols caution that these statements are subject to
risks, uncertainties and other factors, many of which are outside of Computer
Sciences' and Nichols' control, that could cause actual results to differ
significantly from those in the forward-looking statements, including, among
other things:
. competitive pressures;
. Computer Sciences' and Nichols' ability to attract and retain key
personnel;
. changes in the demand for information technology outsourcing and business
process outsourcing;
. changes in the financial condition of major commercial customers;
. changes in U.S. federal government spending levels for information
technology services;
. Computer Sciences' and Nichols' ability to complete strategic
acquisitions and alliances;
. the future profitability of customer contracts;
. Computer Sciences' and Nichols' ability to continue to develop and expand
service offerings to address emerging business demand and technological
trends;
. general economic conditions in countries in which both companies do
business;
. the ability of Computer Sciences, Nichols and their customers and
suppliers to become Year 2000 compliant; and
. other risks described in Computer Sciences' and Nichols' filings with the
Securities and Exchange Commission.
Forward-looking statements are not guarantees of performance. By their
nature, they involve risks, uncertainties and assumptions. The future results
and stockholder values of Computer Sciences and Nichols may differ
significantly from those expressed in these forward-looking statements.
Stockholders are cautioned not to put undue reliance on any forward-looking
statement. Any such statement speaks only as of the date of this proxy
statement/prospectus, and we do not have any intention or obligation to revise
or update forward-looking statements, even if new information, future events or
other circumstances have made them incorrect or misleading.
CAUTIONARY STATEMENTS REGARDING
FORWARD LOOKING STATEMENTS
4
<PAGE>
REFERENCE TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Computer Sciences and Nichols from documents that
are not included in or delivered with this proxy statement/prospectus. This
information is available to you without charge upon your written or oral
request. You can obtain documents incorporated by reference in this proxy
statement/prospectus by requesting them in writing or by telephone from
Computer Sciences or Nichols, as the case may be, at the following locations:
<TABLE>
<S> <C>
Computer Sciences Corporation Nichols Research Corporation
Investor Relations Investor Relations
2100 East Grand Avenue 4090 South Memorial Parkway
El Segundo, California 90245 Huntsville, Alabama 35815-1502
(310) 615-0311 (256) 883-1140
</TABLE>
If you would like to request documents, please do so by November 2, 1999 to
receive them before the Nichols special meeting.
REFERENCE TO ADDITIONAL INFORMATION
5
<PAGE>
SUMMARY
SUMMARY
This brief summary highlights selected information from this proxy
statement/prospectus. It does not contain all of the information that is
important to you. We urge you to carefully read this entire proxy
statement/prospectus and the other documents to which this proxy
statement/prospectus refers to fully understand our proposed merger. See "Where
You Can Find More Information" on page 77.
The Companies
Computer Sciences Corporation (page 64)
2100 East Grand Avenue
El Segundo, California 90245
(310) 615-0311
Computer Sciences is a leader in the information technology services
industry. Since 1959, Computer Sciences has helped clients improve their
operations and profitability by using information technology more efficiently.
Computer Sciences does not have exclusive agreements with hardware or software
providers and believes that this vendor neutrality enables it to better
identify and manage solutions specifically tailored to each client's needs.
Computer Sciences offers a broad array of professional services to industry and
government, including outsourcing, systems integration, information technology
and management consulting.
Nichols Research Corporation (page 65)
4090 South Memorial Parkway
Huntsville, Alabama 35815-1502
(256) 883-1140
Nichols is a leading provider of technical and information technology
services, including information processing, systems development and systems
integration. Nichols provides these services to a wide range of clients,
including the U.S. Department of Defense, other federal agencies, state and
local governments, healthcare and insurance organizations, and other commercial
enterprises. Nichols is organized into three strategic business units,
reflecting the particular market focus of each line of business: government,
commercial information technology and healthcare information technology.
Structure of the Merger (page 52)
Nichols will merge with Nevada Acquisition, a wholly owned subsidiary of
Computer Sciences and become a wholly owned subsidiary of Computer Sciences. As
a result of the merger, you will be entitled to receive a fraction of a share
of Computer Sciences common stock equal to the exchange ratio in exchange for
each of your shares of Nichols common stock. Following the merger, as a
stockholder of Computer Sciences, you will have an equity stake in Nichols'
parent company, but will no longer have any direct interest in Nichols alone.
We have attached the merger agreement to this document as Appendix A. The
merger agreement describes the terms of the merger. Please read the merger
agreement. It is the legal document that governs the merger and its exact
language prevails over the more general, abbreviated description in this proxy
statement/prospectus.
Reasons for the Merger (page 28)
Nichols' board considered a number of factors in approving the merger
agreement and recommending it to you, including:
. the fact that the merger represents a 28.0% premium over the closing
price of Nichols common stock ($21.88) on August 23, 1999, the day
Computer
6
<PAGE>
SUMMARY
Sciences made its preliminary proposal to Nichols, and a 9.8% premium over
the closing price of Nichols' common stock ($25.50) on September 17, 1999,
the last trading day before the announcement of the merger agreement, in
each case based on the $28.00 midpoint between the maximum merger
consideration of $30.80 per Nichols' share and the $25.20 value below
which Nichols has a walk-away right under the merger agreement;
. the opportunity for you to receive shares of Computer Sciences common
stock, which Nichols' board believes will have greater liquidity than
Nichols common stock;
. the fact that the merger will provide a significant enhancement of the
strategic and marketing position of Nichols beyond that achievable by
Nichols alone; and
. the opinions of Goldman, Sachs & Co. and The Robinson-Humphrey Company,
LLC to the effect that the exchange ratio was fair, from a financial
point of view, to Nichols stockholders.
As a result, Nichols' board believes that the merger should provide
increased value to you as a stockholder.
What Nichols Stockholders Will Receive (page 30)
If the merger is completed, each of your shares of Nichols common stock will
be exchanged for a fraction of a share of Computer Sciences common stock with a
market value between $25.20 and $30.80, unless the average closing price of
Computer Sciences common stock over a specified period prior to the special
meeting is below $52.9552 per share. If the average closing price is below
$52.9552 per share and Nichols does not exercise its right to terminate the
merger agreement, you will receive 0.476 of a share of Computer Sciences common
stock, which may have a market value below $25.20. The exact exchange ratio you
will receive will depend on the average closing price for Computer Sciences
common stock on the New York Stock Exchange for fifteen days selected at random
out of the twenty trading days ending on November 10, 1999.
The table below shows a range of average closing prices of Computer Sciences
common stock, along with the corresponding exchange ratios and the
corresponding valuations of the Computer Sciences common stock you will receive
for each share you own of Nichols common stock. The table also shows when
Nichols' right to terminate the merger agreement would be effective:
<TABLE>
<CAPTION>
Value of
Computer Sciences
Average closing common stock
price of received per
Computer Sciences share of Nichols
common stock Exchange Ratio common stock
- ----------------- -------------- -----------------
<S> <C> <C>
$84.00 0.367 $30.80
82.00 0.376 30.80
78.00 0.395 30.80
74.00 0.416 30.80
72.81 0.423 30.80
70.00 0.423 29.61
68.00 0.423 28.76
66.00 0.423 27.92
64.00 0.423 27.07
62.00 0.423 26.23
59.57 0.423 25.20
58.00 0.434 25.20
54.00 0.467 25.20
52.96 0.476 25.20
50.00* 0.476 23.80
48.00* 0.476 22.85
</TABLE>
- --------
* If the average stock price is less than $52.9552, Nichols may terminate the
merger agreement.
For example, if a stockholder owns 100 shares of Nichols common stock, and
Computer Sciences' average closing stock price is $66 per
7
<PAGE>
SUMMARY
share, then the exchange ratio will be 0.423 and the stockholder would be
entitled to 42.3 shares of Computer Sciences common stock. Since cash will be
paid instead of fractional shares, the Nichols stockholder will receive 42
shares of Computer Sciences common stock and cash equal to 0.3 times Computer
Sciences' closing price on the NYSE five trading days before completion of the
merger.
The values of Computer Sciences common stock in the table above are
illustrative only and do not represent the actual value per share of Nichols
common stock that you might realize on or after consummation of the merger.
The method for calculating the exchange ratio is explained in more detail in
"The Merger--The Exchange Ratio" beginning on page 30.
The Nichols Stockholders' Special Meeting (page 22)
The Nichols stockholders' special meeting to adopt the merger agreement will
be held on November 16, 1999 10:00 a.m., local time, at 4090 South Memorial
Parkway, Huntsville, Alabama 35815-1502.
Record Date (page 22)
You can vote at the special meeting if you owned Nichols common stock at the
close of business on October 8, 1999. You can cast one vote for each share of
Nichols common stock you owned at that time.
Vote Required (page 22)
To adopt the merger agreement, the holders of a majority of the outstanding
shares of Nichols common stock must vote in favor of the merger.
You may vote your shares in person by attending the meeting or by proxy. You
can revoke your proxy at any time before we take a vote at the meeting by
sending a written notice revoking the proxy or a later-dated proxy to the
Corporate Investor Communications, Inc., or by attending the meeting and voting
in person.
Nichols' Board's Recommendation to Stockholders (pages 22 and 28)
Nichols' board of directors believes that the merger is advisable and fair
to you and in your best interests, and unanimously approved the merger.
Nichols' board recommends that you vote FOR adoption of the merger agreement.
Opinion of Nichols' Financial Advisors (page 32)
In deciding to approve the merger, Nichols' board of directors considered
fairness opinions from its financial advisors. Nichols received opinions from
Goldman Sachs and from Robinson-Humphrey that the exchange ratio, as of the
date and based upon the assumptions and considerations stated in the opinions,
was fair to Nichols' stockholders from a financial point of view. We have
attached these opinions as Appendix B and C. You are encouraged to read them.
What We Need to Do to Complete the Merger (page 59)
The merger will not be completed unless a number of conditions are satisfied
or waived. Before the merger is completed:
. holders of a majority of the outstanding shares of Nichols common stock
must approve the merger;
. Nichols' and Computer Sciences' law firms must issue their legal opinions
as to the tax-free nature of the merger;
. each of Nichols and Computer Sciences must receive a letter from its
8
<PAGE>
SUMMARY
independent public accountants as to the availability of pooling-of-
interests accounting treatment of the merger;
. Nichols must receive any consents necessary to permit Nichols to enjoy
post-merger the benefits of any significant contracts to which it is a
party;
. no material adverse change shall have occurred with respect to either
company;
. we must receive all regulatory approvals, and any waiting periods
required by law must have passed; and
. the New York Stock Exchange must have approved the listing of the
Computer Sciences shares to be issued in the merger.
Either Computer Sciences or Nichols could choose to complete the merger even
though one or more of these conditions has not been satisfied, as long as
applicable law allows it to do so.
Termination of the Merger Agreement (page 60)
Before the merger is completed, Nichols and Computer Sciences can mutually
agree to terminate the merger agreement. Either of us can decide, without the
consent of the other, to terminate the merger agreement under the following
circumstances:
. if Nichols' stockholders do not approve the merger;
. if the merger is not completed by February 29, 2000;
. if Nichols' board withdraws or modifies its recommendation of the merger;
. if Nichols' board recommends to its stockholders a proposal by a third
party to acquire Nichols;
. if the other company has made significant misrepresentations or has
failed to perform its significant obligations under the merger agreement;
. if the merger is enjoined by a court or other governmental authority; or
. if an event occurs that has a material adverse effect on the other
company.
In addition, Nichols may terminate the merger if the average closing price
of Computer Sciences common stock for fifteen trading days selected at random
out of the twenty trading days ending on November 10, 1999, is below $52.9552.
We refer to this as Nichols' walk-away right.
Payment of Termination Fee and Expenses (page 61)
Nichols has agreed to pay Computer Sciences a termination fee of $16.5
million if the merger agreement is terminated under any of the following
circumstances:
. Nichols' board withdraws or modifies its recommendation of the merger;
. Nichols' stockholders do not approve the merger and at the time of the
special meeting a third party has an outstanding offer to acquire
Nichols, or a third party beneficially owns 20% of Nichols' stock;
. Nichols' board recommends to its stockholders a proposal by a third party
to acquire Nichols; or
. Nichols has made significant misrepresentations or has failed to perform
its significant obligations under the merger agreement and within twelve
months of termination is acquired by a third party that had expressed an
interest in Nichols prior to the termination of the merger agreement.
9
<PAGE>
SUMMARY
Nichols has agreed to reimburse Computer Sciences for its costs and expenses
related to the merger up to $5 million if:
. Nichols exercises its walk-away right,
. Nichols' stockholders do not approve the merger or circumstances occur
involving a significant breach of the merger agreement by Nichols.
The amount reimbursed by Nichols will be credited against the termination
fee, if any.
Computer Sciences has agreed to reimburse Nichols for its costs and expenses
related to the merger up to $5 million under circumstances involving a
significant breach of the merger agreement by Computer Sciences. Otherwise,
whether or not the merger is completed, we will each pay our own fees and
expenses.
Regulatory Approvals (page 48)
In order to complete the merger, we must obtain the approval of federal and
state regulatory authorities. We have filed, or soon will file, all of the
required applications or notices with these regulatory authorities. The initial
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 were
made on October 12, 1999. As of the date of this proxy statement/prospectus, we
have not yet received all of the required approvals. Although we expect to
obtain the necessary approvals, we cannot be certain we will obtain them.
Interest of Nichols' Directors and Officers in the Merger (page 50)
As you consider the recommendation of Nichols' board of directors in favor
of the merger, you should be aware that some Nichols' directors and officers
have interests regarding the merger that are different from, or in addition to,
your interests.
In particular, Nichols' chief executive officer, president and five other
executive officers have severance agreements that entitle them to compensation.
The severance agreements for the chief executive officer and the president
provide that each will be paid two times his annual salary at the closing of
the merger. The severance agreements for the other five executive officers
provide for compensation of one or two times his/her annual salary if the
officer is terminated without cause or resigns for good reason within a year
after the merger.
We estimate that the aggregate severance payments required to be paid to
Nichols' officers, if all such persons were terminated after the merger, would
be approximately $2,760,000.
Accounting Treatment (page 50)
We expect to account for the merger as a pooling-of-interests. This means
that, for accounting purposes, Computer Sciences will treat our two companies
as if they have always been one company. The availability of this accounting
treatment is a condition to the merger.
No Dissenters' or Appraisal Rights (page 76)
Under Delaware law, you are not entitled to dissenters' or appraisal rights
in the merger.
Material Federal Income Tax Consequences to Nichols Stockholders (page 48)
In the opinion of Weil, Gotshal & Manges LLP, counsel to Nichols, and
Gibson, Dunn & Crutcher LLP, counsel to Computer Sciences, the merger will be
treated as a reorganization for U.S. federal income tax purposes. Assuming such
treatment, your exchange of shares of Nichols common stock for shares of
Computer Sciences common stock generally will not cause you to recognize any
gain or loss. You
10
<PAGE>
SUMMARY
will, however, be taxed on any gain in connection with any cash you receive
instead of fractional shares.
This tax treatment may not apply to every Nichols stockholder. Determining
your actual tax consequences of the merger may be complicated. They will depend
on your specific situation and on variables not within our control. You should
consult your own tax advisor for a full understanding of the merger's tax
consequences to you.
Comparative Per Share Market Price Information (page 16)
Nichols common stock is listed on The Nasdaq Stock Market and Computer
Sciences common stock is listed on the New York Stock Exchange. On September
17, 1999, the last trading day before Nichols and Computer Sciences announced
the merger, Nichols common stock closed at $25.50 per share and Computer
Sciences common stock closed at $64.3125 per share.
Comparison of Stockholder Rights (page 69)
Nichols and Computer Sciences are incorporated in different states having
different corporate laws. In addition, the governing documents of each company
vary. As a result, you will have different rights as a Computer Sciences
stockholder from the rights you currently have as a Nichols stockholder.
11
<PAGE>
SUMMARY
SELECTED FINANCIAL DATA
We are providing the following selected financial data to assist you in
analyzing the financial aspects of the merger. You should read it together with
the consolidated financial statements of Computer Sciences and Nichols and
other financial information contained in the most recent annual and quarterly
reports of Computer Sciences and Nichols, which have been incorporated into
this proxy statement/prospectus by reference. See "Where You Can Find More
Information" on page 77.
Selected Historical Consolidated Financial Data
The financial information in the following tables relating to fiscal years
has been derived from Computer Sciences' audited consolidated financial
statements and Nichols' audited consolidated financial statements contained in
prior Securities and Exchange Commission filings. The interim period financial
information, which is not necessarily indicative of the results for a full
year, is unaudited but includes all adjustments which we consider necessary for
a fair presentation and was derived from financial information included in
prior Securities and Exchange Commission filings.
Computer Sciences Corporation
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
Three ----------------------------------------------------------
Months Ended April 2, April 3, March 28, March 29, March 31,
July 2, 1999 1999 1998 1997 1996 1995
------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:
Revenues................ $2,063,380 $7,659,965 $6,600,838 $5,616,048 $4,740,760 $3,788,026
Income before taxes..... 117,468 511,357 190,869 303,313 196,930 220,814
Net income.............. 78,268 341,157 260,369 192,413 109,431 143,237
Earnings per share:
Basic................. 0.49 2.16 1.68 1.27 0.74 1.02
Diluted............... 0.48 2.11 1.64 1.23 0.71 1.00
Average common shares:
Outstanding........... 159,389 158,213 155,125 151,895 148,865 140,297
Assuming dilution..... 162,677 161,949 158,526 156,394 153,070 143,702
Cash dividends per
share.................. $ .02
Balance Sheet Data:
Total assets............ $4,995,581 $5,007,709 $4,046,795 $3,493,087 $2,936,019 $2,631,580
Working capital......... 540,986 587,573 767,820 533,915 430,484 390,726
Property and equipment:
At cost............... 2,447,570 2,313,444 1,944,799 1,668,905 1,249,729 994,520
Accumulated
depreciation and
amortization......... (1,293,141) (1,226,569) (987,606) (780,836) (569,670) (430,249)
---------- ---------- ---------- ---------- ---------- ----------
Property and
equipment, net...... $1,154,429 $1,086,875 $ 957,193 $ 888,069 $ 680,059 $ 564,271
========== ========== ========== ========== ========== ==========
Debt:
Long-term............. $ 420,841 $ 397,860 $ 736,054 $ 630,842 $ 426,634 $ 335,696
Short-term............ 441,134 426,421 7,110 20,311 71,422 128,237
Current maturities.... 14,833 166,521 21,811 9,622 6,917 11,933
---------- ---------- ---------- ---------- ---------- ----------
Total debt........... $ 876,808 $ 990,802 $ 764,975 $ 660,775 $ 504,973 $ 475,866
========== ========== ========== ========== ========== ==========
Stockholders' equity.... $2,497,337 $2,399,854 $2,001,275 $1,669,560 $1,420,113 $1,290,769
</TABLE>
12
<PAGE>
SUMMARY
Nichols Research Corporation
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine
Months Fiscal Year Ended
Ended ------------------------------------------------
May 31, August August August August August
1999 31, 1998 31, 1997 31, 1996 31, 1995 31, 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income
Data:
Revenues................ $327,040 $427,043 $398,142 $256,605 $180,698 $149,874
Income before taxes..... 15,226 23,499 12,345 15,855 12,075 10,877
Net income.............. 9,288 14,198 4,699 10,063 7,651 6,858
Earnings per share:
Basic................. 0.67 1.04 0.39 1.00 0.80 0.72
Diluted............... 0.65 1.01 0.37 0.94 0.77 0.70
Average common shares:
Outstanding........... 13,929 13,607 12,090 10,091 9,592 9,497
Assuming dilution..... 14,238 14,125 12,713 10,681 9,882 9,757
Balance Sheet Data:
Total assets............ $260,086 $227,336 $213,632 $165,321 $103,283 $ 82,318
Working capital......... 67,407 77,984 68,761 74,687 48,116 45,062
Property and equipment:
At cost............... 54,323 47,446 38,372 30,463 23,275 19,683
Accumulated
depreciation and
amortization......... (28,022) (25,011) (19,101) (14,974) (11,656) (9,089)
-------- -------- -------- -------- -------- --------
Property and
equipment, net..... $ 26,301 $ 22,435 $ 19,271 $ 15,489 $ 11,619 $ 10,594
======== ======== ======== ======== ======== ========
Debt:
Long-term............. $ 2,189 $ 2,948 $ 4,025 $ 4,784 $ 5,366 $ 4,328
Short-term............ 20,000 5,000 10,500
Current maturities.... 997 997 761 764 1,187 962
-------- -------- -------- -------- -------- --------
Total debt.......... $ 23,186 $ 8,945 $ 15,286 $ 5,548 $ 6,553 $ 5,290
======== ======== ======== ======== ======== ========
Stockholders' equity.... $182,129 $169,747 $150,468 $115,052 $ 69,358 $ 58,365
</TABLE>
13
<PAGE>
SUMMARY
Unaudited Comparative Per Common Share Data
The following table shows our historical earnings per common share and book
value per common share and corresponding unaudited pro forma information
reflecting the completion of our proposed merger using pooling-of-interests
method of accounting. The pro forma information, while helpful in illustrating
the financial characteristics of the combined company under one set of
assumptions, does not attempt to predict or suggest future results and does not
necessarily reflect what the historical results of the combined company would
have been if Computer Sciences and Nichols had actually been combined during
the periods presented.
Computer Sciences' fiscal year ends on the Friday closest to March 31.
Nichols' fiscal year ends on August 31. Nichols' historical and unaudited pro
forma data have been derived based on its financial information for the twelve
months ended May 31, 1999, 1998 and 1997 and for the three months ended May 31,
1999. The unaudited pro forma per common share data is based on Computer
Sciences' fiscal periods indicated and Nichols' periods described above. The
historical book value per common share is computed by dividing total
stockholders' equity by the number of shares of common stock outstanding at the
end of the period. The unaudited pro forma book value per share is computed by
dividing pro forma stockholders' equity by the pro forma number of shares of
Computer Sciences common stock outstanding at the end of the period. The
Computer Sciences per share data reflects a two-for-one stock split paid in
March 1998.
The unaudited equivalent pro forma per common share data is computed by
multiplying the pro forma amounts by an assumed exchange ratio of 0.423 share
of Computer Sciences common stock for each share of Nichols common stock.
Unaudited Comparative Per Common Share Data
of Computer Sciences and Nichols
<TABLE>
<CAPTION>
Fiscal Year Ended
Three ---------------------------
Months Ended April 2, April 3, March 28,
July 2, 1999 1999 1998 1997
------------ -------- -------- ---------
<S> <C> <C> <C> <C>
Computer Sciences Corporation
Historical Per Common Share Data:
Basic earnings per share............. $ 0.49 $ 2.16 $ 1.68 $ 1.27
Diluted earnings per share........... 0.48 2.11 1.64 1.23
Book value per share................. 15.62 15.08
Cash dividends per share.............
Computer Sciences Corporation
Unaudited Pro Forma Per Common Share
Data:
Basic earnings per share............. $ 0.50 $ 2.16 $ 1.65 $ 1.31
Diluted earnings per share........... 0.49 2.11 1.62 1.28
Book value per share................. 16.16 15.64
Cash dividends per share.............
</TABLE>
14
<PAGE>
SUMMARY
<TABLE>
<CAPTION>
Twelve Months Ended
Three ---------------------------
Months Ended May 31, May 31, May 31,
May 31, 1999 1999 1998 1997
------------ -------- -------- ---------
<S> <C> <C> <C> <C>
Nichols Research Corporation
Historical Per Common Share Data:
Basic earnings per share............. $ 0.33 $ 0.93 $ 0.42 $ 1.20
Diluted earnings per share........... 0.33 0.91 0.40 1.13
Book value per share................. 12.95 12.95
Cash dividends per share.............
<CAPTION>
Fiscal Year Ended
Three ---------------------------
Months Ended April 2, April 3, March 28,
July 2, 1999 1999 1998 1997
------------ -------- -------- ---------
<S> <C> <C> <C> <C>
Nichols Research Corporation
Unaudited Equivalent Pro Forma Per
Common Share Data:
Basic earnings per share............. $ 0.21 $ 0.91 $ 0.70 $ 0.55
Diluted earnings per share........... 0.21 0.89 0.69 0.54
Book value per share................. 6.84 6.62
Cash dividends per share.............
</TABLE>
15
<PAGE>
SUMMARY
COMPARATIVE MARKET PRICES AND DIVIDENDS
Market Prices. Computer Sciences common stock is traded on the New York
Stock Exchange under the symbol "CSC." Nichols common stock is traded on The
Nasdaq Stock Market under the symbol "NRES."
The following table shows the high and low intra-day-prices for the calendar
quarters shown for Computer Sciences common stock on the New York Stock
Exchange and for Nichols common stock on The Nasdaq Stock Market. The
quotations are as reported in published financial sources.
<TABLE>
<CAPTION>
Computer
Sciences Nichols
---------------- ---------------
High Low High Low
------- -------- ------- -------
<S> <C> <C> <C> <C>
Calendar 1997
First Quarter............................... 41.1875 30.8125 29.75 14.625
Second Quarter.............................. 40.0625 28.9375 22.25 17.00
Third Quarter............................... 41.5625 34.50 25.875 19.875
Fourth Quarter.............................. 43.875 33.625 28.125 20.375
Calendar 1998
First Quarter............................... 56.75 39.96875 28.125 22.00
Second Quarter.............................. 65.00 49.125 28.375 22.00
Third Quarter............................... 74.875 51.50 28.75 18.00
Fourth Quarter.............................. 70.9375 46.25 24.00 17.25
Calendar 1999
First Quarter............................... 74.375 54.9375 26.00 15.625
Second Quarter.............................. 69.875 52.375 22.3125 17.6875
Third Quarter............................... 74.00 61.875 26.75 17.625
</TABLE>
Recent Closing Prices. On September 17, 1999, the last trading day
immediately before the public announcement of the merger, the closing price per
share of Computer Sciences common stock on the New York Stock Exchange was
$64.3125 and the closing price per share of Nichols common stock on The Nasdaq
Stock Market was $25.50. The equivalent pro forma price per share of Nichols on
that date was $27.20. This was determined by multiplying the closing price per
share of Computer Sciences by an assumed exchange ratio of 0.423. On October
11, 1999, the latest practicable trading day before the printing of this proxy
statement/prospectus, the closing price per share of Computer Sciences common
stock on the New York Stock Exchange was $66.625 and the closing price per
share of Nichols common stock on The Nasdaq Stock Market was $26.1875. The
equivalent pro forma price per share of Nichols on that date was $28.18.
Following the merger, Nichols common stock will cease to be traded on The
Nasdaq Stock Market and will represent only the right to receive Computer
Sciences common stock under the merger agreement.
Because the market price of Computer Sciences common stock is subject to
fluctuation, the market value of the shares of Computer Sciences common stock
that holders of Nichols common stock will receive in the merger may increase or
decrease before and after the merger. See "Risk Factors--Risk Factors Relating
to the Merger." If the market price of Computer Sciences common stock declines
before the merger, you will receive less value for your Nichols stock.
Stockholders are urged to obtain current market quotations for Computer
Sciences common stock and Nichols common stock.
16
<PAGE>
SUMMARY
Dividends. It has been Computer Sciences' policy to invest earnings in the
growth of its business rather than distribute earnings as dividends. This
policy, under which dividends have not been paid since fiscal year 1969, is
expected to continue, but is subject to regular review by the Computer Sciences
board of directors. A company acquired by Computer Sciences in fiscal 1996,
accounted for as a pooling-of-interests, paid dividends prior to its
acquisition. On February 27, 1998, the Computer Sciences board of directors
redeemed the Computer Sciences stock purchase rights, for one sixth of one cent
per right. The redemption price was paid on April 13, 1998. Nichols has never
declared or paid a cash dividend on its common stock and does not anticipate
paying any cash dividends in the foreseeable future. In addition, the merger
agreement prohibits Nichols from paying dividends on Nichols common stock until
the completion of the merger. See "The Merger--Conduct of Business Pending the
Merger" on page 56.
17
<PAGE>
RISK FACTORS
By voting in favor of the merger and holding your Nichols shares until the
merger, you will be choosing to invest in Computer Sciences common stock. An
investment in Computer Sciences common stock involves a high degree of risk.
Nichols stockholders should consider the following risk factors, together with
the other information included and incorporated by reference in this proxy
statement/prospectus, in deciding whether to vote to approve the merger.
Risk Factors Relating to the Merger
The value of the Computer Sciences common stock that you will receive in the
merger based on the exchange ratio cannot be determined until shortly before
the special meeting.
The exact dollar value of the Computer Sciences common stock that Nichols'
stockholders will receive in the merger cannot be determined until shortly
before the special meeting. The exact dollar value will depend on the average
closing price of the Computer Sciences common stock, calculated over fifteen
days selected at random from the twenty trading days ending November 10, 1999,
which will determine the exchange ratio. The exact dollar value also will
depend on the market price of Computer Sciences common stock at the time of the
merger, as discussed in the next risk factor. If the average closing price of
Computer Sciences common stock is at least $52.9552 per share, the exchange
ratio is designed to provide Nichols stockholders with an amount of Computer
Sciences common stock equal in value to between $25.20 and $30.80 for each
share of Nichols common stock. If the average closing price of the Computer
Sciences common stock is less than $52.9552 per share, the exchange ratio is
designed to provide Nichols stockholders with an amount of Computer Sciences
common stock having a value of less than $25.20 for each share of Nichols
common stock. Consequently, no prediction can be made as to the exact value
that Nichols' stockholders will receive.
If the market price of the Computer Sciences common stock at the time of the
merger is less than the average closing price, you will receive less value for
your Nichols stock.
The market price of a share of Computer Sciences' common stock at the time
of the merger could be more or less than the average closing price. The market
price of Computer Sciences common stock is likely to fluctuate based on the
business, operations and prospects of Computer Sciences, general market and
economic conditions, the prospects for the post-merger operations of the
combined company and other factors beyond the control of Computer Sciences and
Nichols. If the market price at the time of the merger is less than the average
closing price, the value of the Computer Sciences common stock you will receive
in the merger will be lower than the value indicated in the table on page 32.
Computer Sciences and Nichols may not successfully integrate their business
operations after the merger.
Integrating the operations of Nichols with those of Computer Sciences after
the merger may be difficult, time consuming and costly. After the merger has
been completed, Computer Sciences must successfully integrate, among other
things:
. services;
RISK FACTORS
18
<PAGE>
. delivery;
. sales and marketing;
. research and development;
. administrative and customer service functions; and
. management information systems.
In addition, Computer Sciences will need to retain management, key
employees, customers and business partners of both companies. Among the
challenges involved in this integration is demonstrating to our customers that
the merger will not result in an adverse change in client service standards or
business focus and persuading our personnel that our business cultures are
compatible. Further, the attention and effort devoted to the integration of the
two companies will significantly divert management's attention from other
important issues. If we are not able to effectively integrate our operations,
technology and personnel in a timely and efficient manner, then we will not
realize the benefits we expect from the merger. In particular, if the
integration is not successful:
. our operating results may be harmed;
. we may lose key personnel;
. we may not be able to retain Nichols' governmental and commercial
clients; and
. the market price of Computer Sciences common stock may decline as a
result of the merger.
The merger could cause organizational conflicts of interest between Computer
Sciences and Nichols which would require us to decline business.
Both Computer Sciences and Nichols are engaged in providing services for
government contracts and projects that are subject to organizational conflicts
of interest regulations. With respect to these contracts and projects, either
company may be prohibited from providing services where a conflict of interest
exists. After the merger, we intend to implement a system to mitigate the
effect of organizational conflicts of interest on our business. To the extent
we are unable to avoid organizational conflicts of interest, Computer Sciences
or Nichols may be excluded from eligibility for performing services related to
these contracts and projects.
The IRS may challenge the tax-free nature of the merger.
We intend the merger to be tax-free to Nichols stockholders for federal
income tax purposes, but we have not requested or obtained a ruling from the
IRS. Therefore, there is a risk that the IRS may challenge the tax-free nature
of the merger, in which case any gain Nichols stockholders realize because of
the merger may be subject to tax.
Failure of the merger to qualify as a pooling-of-interests would negatively
affect financial results.
The failure of the merger to qualify for pooling-of-interests accounting
treatment for financial reporting purposes for any reason would materially harm
Computer Sciences' reported earnings and, likely, the price of Computer
Sciences common stock.
The availability of pooling-of-interests accounting treatment for the merger
depends on many things, including circumstances and events occurring after the
merger's completion. For example, the
RISK FACTORS
19
<PAGE>
combined company must not make any significant changes in its business,
including significant dispositions of assets, for a period of two years
following the date of the merger other than changes in the ordinary course of
business.
Risk Factors Relating to Computer Sciences
Computer Sciences may not continue to grow at historical rates.
Computer Sciences' growth has resulted from acquisitions, large outsourcing
contracts and internal growth. A slowdown in any of these activities would
likely result in a slower growth rate.
Computer Sciences may not continue to acquire and successfully integrate other
companies.
Growth through acquisition involves a number of risks, including:
. difficulties in continuing to identify acquisition candidates that are
attractive from a strategic and financial perspective;
. difficulties related to combining separate businesses into a single unit;
and
. the failure of the combined business to realize anticipated benefits.
Computer Sciences may not continue to win large outsourcing contracts.
Computer Sciences must win large outsourcing contracts in order to continue
its growth. A substantial number of companies offer outsourcing services that
overlap and are competitive with those offered by Computer Sciences. Some of
these are large industrial firms, including computer manufacturers and major
aerospace firms, that have greater financial resources than Computer Sciences
and may have greater capabilities to deliver services similar to those provided
by Computer Sciences. Computer Sciences' ability to attract and retain
outsourcing clients is dependent upon its ability to offer better strategic
concepts and technical solutions, better value, a quicker response, or a
combination of these factors.
Computer Sciences may not continue to attract, motivate and retain highly
skilled professionals.
Computer Sciences is heavily dependent upon the efforts and abilities of
highly skilled information technology professionals. Any tightening in the
labor market could adversely affect our ability to attract, motivate and retain
these professionals and thus adversely impact our internal growth rate.
Anti-takeover defenses in Computer Sciences' charter and under Nevada law could
prevent an acquisition of Computer Sciences or limit the price that investors
might be willing to pay for Computer Sciences common stock.
Section 78.438 of Nevada's corporation law prohibits a Nevada corporation
from engaging in any business combination with any interested stockholder for a
period of three years from the date the person became an interested stockholder
unless specific conditions are met. In addition, Computer Sciences has a
stockholder rights plan that would make it difficult to acquire Computer
Sciences
RISK FACTORS
20
<PAGE>
without the approval of Computer Sciences' board of directors. See "Comparison
of Stockholders Rights-- Rights Plans." All of the above could delay or prevent
a change in control of Computer Sciences and could limit the price that
investors might be willing to pay in the future for shares of Computer Sciences
common stock.
Year 2000 problems could interrupt Computer Sciences' business operations.
Computer Sciences or its major suppliers may be unable to complete their
Year 2000 readiness efforts before the onset of failures, which could
materially harm Computer Sciences' operations. Computer Sciences could also be
harmed materially by any significant economic, financial market or
infrastructure disruption attributable to Year 2000 problems. The amount of
potential liability and lost revenue from Year 2000 computer problems cannot be
reasonably estimated at this time.
RISK FACTORS
21
<PAGE>
NICHOLS SPECIAL MEETING
General
We are sending you this proxy statement/prospectus as part of the
solicitation of proxies by Nichols' board of directors for use at the special
meeting of Nichols stockholders on November 16, 1999. We are first mailing this
proxy statement/prospectus, including a notice of the special meeting of
Nichols stockholders and a form of proxy, on or about October 15, 1999.
The special meeting is scheduled to be held on:
November 16, 1999
at 10:00 a.m., local time
at Nichols Research Corporation
4090 South Memorial Parkway
Huntsville, Alabama 35815-1502.
Purpose of the Special Meeting
The purpose of the Nichols special meeting is to vote on the adoption of the
merger agreement. As a result of the merger, each share of Nichols' outstanding
common stock will be converted into a fraction of a share of Computer Sciences
common stock and Nichols will be a wholly owned subsidiary of Computer
Sciences.
We know of no other matters to be brought before the special meeting.
However, if any other matters are properly presented for action at the Nichols
special meeting, including a motion to adjourn the meeting to another time or
place, the persons named in the enclosed proxy form will have the discretion,
unless otherwise noted on any proxy form, to vote on those matters, subject to
applicable law. No proxy form that is voted against the merger will be voted in
favor of any adjournment or postponement of the special meeting.
Recommendation of Nichols' Board
Nichols' board of directors has unanimously approved the merger agreement
and the merger. Nichols' board believes that the merger agreement is advisable
and fair to and in the best interests of Nichols and its stockholders and
recommends that Nichols stockholders vote FOR the adoption of the merger
agreement. See "The Merger--Reasons for the Merger."
Required Vote
Adoption of the merger agreement requires the affirmative vote of a majority
of the outstanding shares of Nichols common stock entitled to vote at the
special meeting. Each share of outstanding Nichols common stock entitles its
holder to one vote.
Record Date
Nichols' board has fixed October 8, 1999, as the record date for the Nichols
special meeting. Only stockholders of record at the close of business on the
record date will receive notice of and be able to vote at the Nichols special
meeting. At the close of business on the record date, there were 14,266,547
shares of Nichols common stock outstanding held by about 1,779 record holders.
NICHOLS SPECIAL MEETING
22
<PAGE>
As of the record date, directors, executive officers and affiliates of
Nichols beneficially owned 2,415,854 shares of Nichols common stock, including
options exercisable within 60 days, entitling them to exercise approximately
16.76% of the voting power of the Nichols common stock.
Quorum
A majority of the Nichols common shares entitled to vote must be present at
the special meeting, either in person or by proxy, in order for there to be a
quorum at the special meeting. There must be a quorum in order for the vote on
the merger agreement to occur.
We will count the following shares of Nichols common stock as present at the
special meeting for purposes of determining whether or not a quorum exists:
. shares held by persons who attend or are represented at the Nichols
special meeting whether or not the shares are voted,
. shares for which Nichols has received properly executed proxies, and
. shares held by brokers in nominee or street name for beneficial owners
who have not given their brokers specific instructions on how to vote
shares.
Proxies
You should complete and return the accompanying proxy card whether or not
you plan to attend the special meeting in person. All properly executed proxies
received by Nichols before the special meeting that are not revoked will be
voted at the special meeting in accordance with the instructions indicated on
the proxies or, if no direction is indicated, FOR approval of the merger
agreement. Properly executed proxies also will be voted for any adjournment or
postponement of the Nichols special meeting for the purpose of soliciting
additional votes to approve the merger agreement, if necessary.
Proxies marked "Abstain" will not be voted at the special meeting. In
addition, under Nasdaq rules, your broker cannot vote Nichols common shares
without specific instructions from you. You should follow the directions your
broker provides to you regarding how to instruct your broker to vote your
shares. Abstentions and broker non-votes will have the same effect as votes
against adoption of the merger agreement. Accordingly, Nichols' board of
directors urges Nichols stockholders to complete, date and sign the
accompanying proxy and return it promptly in the enclosed, postage-paid
envelope.
Revocation
Your grant of a proxy on the enclosed proxy card does not prevent you from
voting in person or otherwise revoking your proxy at any time before it is
voted at the special meeting. To revoke your proxy, either:
. deliver a signed notice of revocation or a properly executed new proxy
bearing a later date to:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072; or
. attend the Nichols special meeting and vote your shares in person.
NICHOLS SPECIAL MEETING
23
<PAGE>
Attendance at the special meeting will not, in and of itself, have the
effect of revoking the proxy.
Solicitation of Proxies
The solicitation of the enclosed proxies from Nichols stockholders is made
on behalf of Nichols' board. Nichols will pay the entire cost of soliciting
proxies. In addition to the solicitation of proxies by mail, Nichols will ask
banks, brokers and other record holders to send proxies and proxy materials to
the beneficial owners of the stock and secure their voting instructions, if
necessary. Nichols will reimburse these record holders for their reasonable
expenses in forwarding these proxy materials. Nichols has engaged Corporate
Investor Communications Inc. to assist it in soliciting proxies from banks,
brokers and nominees and has agreed to pay approximately $6,000 plus reasonable
out-of-pocket expenses for these services. Nichols may also use several of its
employees, who will not be specially compensated, to solicit proxies from
Nichols stockholders.
NICHOLS SPECIAL MEETING
24
<PAGE>
THE MERGER
General
The boards of directors of Computer Sciences and Nichols have each
unanimously approved the merger agreement, which provides for the acquisition
by Computer Sciences of Nichols through a merger that will result in Nichols
becoming a wholly owned subsidiary of Computer Sciences and you becoming
Computer Sciences stockholders. Upon completion of the merger, each share of
your Nichols common stock will be converted into a fraction of a share of
Computer Sciences common stock having a market value between $25.20 and $30.80
per share, unless the average closing price of Computer Sciences common stock
over a specified period prior to the special meeting is below $52.9552 per
share. If the average closing price is below $52.9552 per share and Nichols
does not exercise its right to terminate the merger agreement, you will receive
0.476 of a share of Computer Sciences common stock, which may have a market
value below $25.20. See "--The Exchange Ratio."
Each share of Computer Sciences common stock issued to you will also
represent one series A preferred share purchase right issued under Computer
Sciences' stockholder rights plan. See "Comparison of Stockholders Rights--
Rights Plans."
Background of the Merger
At the beginning of 1999, in an effort to enhance stockholder value,
Nichols' board began to explore strategic alternatives, including the possible
sale of the company as well as the possible initial public offering of one or
more of its subsidiaries.
In January 1999, Nichols' board decided to pursue an initial public offering
of its wholly owned subsidiary, Nichols TXEN Corporation. On January 22, 1999,
Nichols TXEN filed a registration statement with the Securities and Exchange
Commission for the initial public offering of its common stock.
In March 1999, in order to assist Nichols in implementing its strategy,
Nichols' board appointed its chairman, Chris Horgen, as chief executive
officer, a position he had previously held until stepping down in September
1997. Nichols' board also decided to continue to explore other strategic
alternatives while it prepared the initial public offering of Nichols TXEN.
Nichols' board engaged Goldman, Sachs & Co. to assist Nichols in identifying
and evaluating strategic alternatives, including the potential sale of Nichols.
Nichols' board also retained Weil, Gotshal & Manges LLP to provide advice
regarding the fiduciary duties of the directors and other legal matters that
might arise in connection with a possible transaction.
On April 8, 1999, Goldman Sachs began contacting potential strategic and
financial buyers. Potential buyers were selected based on their existing
businesses and financial capacity. Approximately fifteen companies were
contacted. Eight of these signed confidentiality agreements entitling them to
receive confidential information prepared by Nichols for this purpose. Four
companies, including Computer Sciences, were invited to attend presentations by
Nichols' senior management.
On April 26, 1999, Goldman Sachs outlined for Nichols' board its process to
identify and approach potential buyers. Goldman Sachs reported on the status of
these discussions.
THE MERGER
25
<PAGE>
On May 17, 1999, Nichols' board held a meeting at which Goldman Sachs
updated the board on its progress in identifying potential buyers and
preliminary discussions with them.
On June 18, 1999, Nichols' board held a meeting at which Goldman Sachs
further updated the board on the status of discussions with potential buyers.
At that meeting, Weil, Gotshal & Manges reviewed the board's fiduciary duties
in connection with its review of strategic alternatives. Based on these
presentations and the board's view of the value to Nichols stockholders that
the pending Nichols TXEN public offering could provide, the board concluded
that the Nichols TXEN initial public offering presented the best opportunity at
that time to create value for Nichols stockholders. As a result, the board
decided to terminate discussions regarding a possible sale of Nichols and
directed Goldman Sachs to discontinue its efforts to identify a potential
buyer.
In August 1999, due to unfavorable market conditions, the underwriters of
the Nichols TXEN initial public offering advised Nichols to postpone the
offering. In light of the postponement of the offering, Nichols' board directed
Goldman Sachs to resume its discussions with potential buyers.
During the second and third weeks of August 1999, Goldman Sachs contacted
potential buyers and explored with them alternative transaction structures and
preliminary valuations of Nichols. These potential buyers included companies
that had previously expressed an interest in acquiring Nichols.
Goldman Sachs updated the board on the status of these discussions at the
board's August 19, 1999 meeting. After deliberations among the directors,
Nichols' board directed Nichols management and Goldman Sachs to negotiate with
interested parties to clarify the terms of their proposals. Prior to the
meeting and throughout the process, members of Nichols' board were kept advised
by Nichols' management on an informal basis of the status of the discussions
with Computer Sciences and the other interested parties.
Over the next several days, Nichols management and Goldman Sachs held
discussions with potential buyers. Some of these parties said they were
interested in merger transactions with Nichols, although at lower valuations of
Nichols than the Computer Sciences offer discussed below.
On August 23, 1999, Mr. Horgen and representatives of Goldman Sachs met with
Van Honeycutt, chairman, president and chief executive officer of Computer
Sciences, and other members of Computer Sciences' management, to discuss the
terms of a proposed transaction. Computer Sciences said it was interested in a
stock-for-stock merger accounted for as a pooling-of-interests with a
preliminary valuation of Nichols of approximately $28 per share.
On August 24, 1999, Nichols' management and representatives of Goldman Sachs
again met with Computer Sciences management. The parties discussed, among other
items, possible merger exchange ratios, the structure of the merger, due
diligence procedures and timing.
On August 26, 1999, Nichols' board met and was advised of the terms proposed
by Computer Sciences as well as the preliminary indications given by other
interested parties. Mr. Horgen reviewed management's preliminary assessment of
Computer Sciences' business, financial condition and prospects, and the
strategic advantages that might arise from a merger with Computer Sciences. Mr.
Horgen also reviewed the status of the discussions to date with other potential
buyers.
THE MERGER
26
<PAGE>
After deliberation, Nichols' board authorized Nichols' management and its
financial and legal advisors to continue discussions with Computer Sciences
with a view to negotiating a merger agreement. Mr. Horgen communicated the
board's decision to Computer Sciences. Nichols retained The Robinson-Humphrey
Company, LLC to assist Nichols' board and management in evaluating the fairness
of the Computer Sciences proposal. Nichols directed Mark Dunkel, an independent
consultant under contract to Nichols, to assist Nichols in the due diligence
investigation of Computer Sciences.
On August 26, 1999, counsel for Computer Sciences distributed a draft merger
agreement to Nichols and its legal counsel and financial advisors. Thereafter,
the parties, acting through their legal counsel and financial advisors,
negotiated the definitive merger agreement, including exchange ratio formulas,
closing conditions, termination rights and other provisions. During the period
from August 30, 1999 through September 17, 1999, the parties conducted due
diligence investigations.
On September 13, 1999, members of Nichols' board were provided with the
draft merger agreement, a summary of its material terms and other documents
relating to the proposed transaction, as well as materials prepared by Goldman
Sachs and Robinson-Humphrey relating to the merger.
The final terms of the merger agreement were negotiated between September 13
and September 18, 1999. The exchange ratio was determined after extensive
negotiations between Nichols and Computer Sciences. The historical fluctuations
in the prices of shares of Nichols common stock and Computer Sciences common
stock were considered, as well as the parties' views of the value of the two
companies. These negotiations involved, at various times, senior management of
Nichols and Computer Sciences and their financial advisors and legal counsel.
On September 18, 1999, Nichols' board met at the Nichols offices in
Huntsville, Alabama to consider the proposed merger agreement, the merger and
related transactions. Weil, Gotshal & Manges summarized the material provisions
of the proposed merger agreement and the results of final negotiations on the
contractual terms and other related matters and responded to questions from
members of Nichols' board. Mr. Dunkel presented a summary of the due diligence
investigation of Computer Sciences. Each of Goldman Sachs and Robinson-Humphrey
made presentations regarding the businesses of both Nichols and Computer
Sciences, including financial matters, corporate structure, stock market
trading histories and stock ownership. They also reviewed, among other things,
the background of the proposed merger, presented their financial and valuation
analyses of the transaction and responded to questions from members of Nichols'
board. Representatives of Goldman Sachs and Robinson-Humphrey then rendered
oral opinions, subsequently confirmed by delivery of written opinions dated
September 19, 1999 and September 18, 1999, copies of which are attached as
Appendices B and C to this proxy statement/prospectus, to the effect that, as
of these dates, the exchange ratio as defined in the merger agreement was fair
to the Nichols stockholders from a financial point of view.
After a discussion of all of the relevant considerations and full
opportunity for each of the directors to ask questions, Nichols' board
unanimously:
. determined that the merger and the merger agreement were advisable and
fair to and in the best interests of Nichols and its stockholders;
. approved the merger and merger agreement and authorized the execution and
delivery of the merger agreement; and
THE MERGER
27
<PAGE>
. resolved to recommend that the Nichols stockholders adopt the merger
agreement.
On September 19, 1999, the Computer Sciences' board approved the transaction
and Computer Sciences informed Nichols that it was prepared to enter into the
merger agreement.
Nichols and Computer Sciences signed the merger agreement on September 19,
1999 and issued a joint press release announcing the merger agreement and the
proposed transaction prior to the opening of business on September 20, 1999.
Reasons for the Merger
Nichols' board has determined that the merger and the merger agreement are
advisable and fair to, and in the best interests of, Nichols and its
stockholders. At a meeting held on September 18, 1999, Nichols' board
unanimously approved the merger and the merger agreement and resolved to
recommend that the stockholders of Nichols vote for adoption of the merger
agreement.
In reaching its conclusion, Nichols' board considered the factors listed
below, which, in the view of the board, supported its determination. The
following discussion of factors considered by Nichols' board is not intended to
be exhaustive but summarizes the material factors considered.
. The merger represents a 9.8% premium over the closing price of Nichols
common stock ($25.50) on The Nasdaq Stock Market on September 17, 1999,
the last trading day prior to the announcement of the proposed merger,
based on the merger consideration of $28.00 per share, which is the
midpoint between the maximum merger consideration of $30.80 per Nichols'
share and the $25.20 value below which Nichols has a walk-away right
under the merger agreement. Nichols' board evaluated the premium in light
of the public speculation before and after Nichols announced on September
3, 1999 that it had retained Goldman Sachs to advise it in evaluating
strategic alternatives. In particular, Nichols' board noted that the
merger represents a 28.0% premium over the closing price of Nichols'
stock ($21.88) on August 23, 1999, the date on which Computer Sciences
made its preliminary proposal to Nichols, based on the midpoint per share
consideration of $28.00.
. There is a larger trading market for Computer Sciences common stock which
will give Nichols stockholders a more liquid security than Nichols stock.
. Computer Sciences common stock has greater potential for appreciation and
growth than Nichols common stock, on both a short- and long-term basis.
. The merger will give Nichols stockholders the opportunity to participate
in the ownership of a larger, more diversified company than Nichols.
. As a result of consolidation in the information technology services
industry in which Nichols competes, many of Nichols' competitors are
substantially larger than Nichols, with greater financial, personnel and
other resources, making it more difficult for Nichols to compete. The
merger will provide Nichols access to greater resources to enable it to
compete more effectively in its industry.
. Nichols' strategic and marketing position will be stronger as a part of
Computer Sciences than as a stand-alone company.
. The merger will be treated as a tax-free reorganization for federal
income tax purposes.
THE MERGER
28
<PAGE>
. Nichols' board received the opinions of Goldman Sachs and Robinson-
Humphrey, to the effect that, as of September 19, 1999 and September 18,
1999, respectively, the exchange ratio was fair to Nichols' stockholders
from a financial point of view.
. Nichols may terminate the merger agreement if the average closing price
of Computer Sciences stock during a specified period is below $52.9552 or
if an event occurs having a material adverse effect on Computer Sciences'
business or which impairs Computer Sciences' ability to complete the
merger. The specified period is fifteen days selected at random from the
twenty trading days ending on November 10, 1999.
. The merger agreement does not preclude Nichols' board from withdrawing or
modifying its recommendation to stockholders and/or providing information
to and negotiating with third parties that have made an unsolicited
written acquisition proposal if Nichols' board determines in good faith,
after consulting with its financial and legal counsel, that the third-
party proposal, if completed, would be more favorable to Nichols'
stockholders than the merger, that the third-party proposal is reasonably
capable of being completed in accordance with its terms and that the
board is required to do so in order to comply with its fiduciary duties.
Nichols' board noted that this could allow flexibility in considering
other written offers, were any received, although this flexibility is
limited as discussed below under "The Merger Agreement--No Solicitation
of Transactions" on page 58.
. The merger is expected to be accounted for as a pooling-of-interests
under generally accepted accounting principles.
. Nichols and its advisors had undertaken an extensive process over a six
month period to solicit proposals for business combinations involving
Nichols. Although the sale process was interrupted when Nichols decided
to pursue the Nichols TXEN initial public offering, the sale process was
resumed when the initial public offering was postponed and each of the
parties that had expressed a preliminary interest, as well as other
parties, were contacted.
In the course of its deliberations, Nichols' board reviewed with Nichols'
management and its financial advisors a number of additional factors,
including:
. historical information on Computer Sciences' and Nichols' businesses,
financial performance and conditions, operations, technologies,
management and competitive positions, including recent public filings for
each company filed with the Securities and Exchange Commission;
. current financial market conditions and historical market prices,
volatility and trading information with respect to Computer Sciences
common stock and Nichols common stock;
. the consideration to be received by Nichols stockholders in the merger
and an analysis of the market value of the Computer Sciences common stock
to be issued in exchange for each share of Nichols common stock in light
of comparable merger transactions;
. the likelihood that the merger would be completed, the conditions to
completion of the merger, including the likelihood of obtaining the
regulatory approvals required, and the risks to Nichols if the merger is
not completed; and
THE MERGER
29
<PAGE>
. reports from management and financial advisors on the result of their due
diligence investigation of Computer Sciences.
Nichols' board also considered:
. the risk that the merger would not be consummated;
. the substantial management time and effort that would be required to
consummate the merger and integrate the operations of the two companies;
and
. other matters described under "Risk Factors."
In the judgment of Nichols' board, the potential benefits of the merger
outweighed these considerations.
The members of Nichols' board evaluated the merger in light of their
knowledge of the business, financial condition and prospects of Nichols and
Computer Sciences, and based on the advice of financial advisors and legal
counsel. Nichols' board also considered the continued operation of Nichols as
an independent company, but in light of the favorable factors set forth above,
it decided that the merger provided a better alternative. In view of the
variety of factors considered in its evaluation of the merger, Nichols' board
did not find it practicable to, and did not, quantify or otherwise assign
relative weights to the specific factors considered in reaching its
determination. In addition, individual members of Nichols' board may have given
different weight to different factors. For a discussion of the interests of
members of Nichols' board in the merger, see "--Interests of Nichols' Directors
and Officers in the Merger" on page 50. Nichols' board recognized these
interests and determined that they neither supported nor detracted from the
advisability of the merger to Nichols stockholders.
The Exchange Ratio
As a result of the merger, all outstanding shares of Nichols common stock
will be exchanged for Computer Sciences common stock, except for fractional
shares, which will be converted into cash. The following is a summary of the
exchange ratio.
The exchange ratio is the fraction of a share of Computer Sciences common
stock that stockholders will receive in the merger for each share of Nichols
common stock they own. Because the market value of Computer Sciences common
stock will fluctuate for any number of reasons, including those specific to
Computer Sciences and those that influence the trading prices of equity
securities generally, Computer Sciences and Nichols have agreed to calculate
the exchange ratio based on the average closing price of Computer Sciences
common stock for fifteen days selected at random out of the twenty trading days
ending on November 10, 1999. Because the exchange ratio is calculated using
Computer Sciences common stock prices from shortly before the merger, the
actual market value of the Computer Sciences common stock you will receive when
the merger is completed may be higher or lower than the value used to calculate
the exchange ratio. We intend to issue a press release several days before the
special meeting that will disclose the average closing price of Computer
Sciences common stock for the fifteen days selected and the corresponding
exchange ratio.
THE MERGER
30
<PAGE>
The following summarizes how the exchange ratio will be determined. You can
also find below a table that gives examples of the average closing price of
Computer Sciences common stock, the corresponding exchange ratios, and the
corresponding values of the fractional Computer Sciences share to be received
for each Nichols share.
. If the average closing price of Computer Sciences common stock is between
$59.5746 and $72.8134, the exchange ratio will be 0.423 shares of
Computer Sciences common stock for each share of Nichols common stock,
corresponding to a value between $25.20 and $30.80, based on the average
closing price of Computer Sciences common stock.
. If the average closing price is above $72.8134, the exchange ratio will
be set so that the Computer Sciences average closing price times the
exchange ratio equals $30.80.
. If the average closing price is between $52.9552 and $59.5746, the
exchange ratio will be set so that the Computer Sciences average closing
price times the exchange ratio equals $25.20.
. If the average closing price is less than $52.9552, the exchange ratio
will be fixed at 0.476 shares of Computer Sciences common stock for each
share of Nichols common stock. In this case, Nichols has the right to
terminate the merger agreement. However, if Nichols does not terminate
the merger agreement, you will receive 0.476 Computer Sciences shares,
which may have a market value below $25.20.
The columns in the table present the following information:
(a) examples of average closing prices of Computer Sciences common stock
between $84.00 to $48.00 per share,
(b) the corresponding exchange ratio, showing the fraction of a share of
Computer Sciences common stock that would be issued for one share of Nichols
common stock at each of the average closing prices presented in the table, and
(c) the corresponding value of the Computer Sciences common stock issued for
each Nichols share in the merger. These numbers are determined by multiplying
each of the average closing prices presented in the table by the corresponding
exchange ratio.
THE MERGER
31
<PAGE>
Table of Examples of Computer Sciences Average Closing Stock Prices, Exchange
Ratios and Value of Computer Sciences Common Stock to Be Received.
<TABLE>
<CAPTION>
(a) (b) (c)
Value of Computer
Computer Sciences Sciences common stock
average closing Exchange received per share of
stock price Ratio Nichols common stock
----------------- -------- ---------------------
<S> <C> <C>
$84.00 0.367 $30.80
82.00 0.376 30.80
78.00 0.395 30.80
74.00 0.416 30.80
72.81 0.423 30.80
70.00 0.423 29.61
68.00 0.423 28.76
66.00 0.423 27.92
64.00 0.423 27.07
62.00 0.423 26.23
59.57 0.423 25.20
58.00 0.434 25.20
54.00 0.467 25.20
52.96 0.476 25.20
50.00* 0.476 23.80
48.00* 0.476 22.85
</TABLE>
- --------
* If the average stock price is less than $52.9552, Nichols may terminate the
merger agreement.
The values of Computer Sciences common stock are only examples and do not
represent the actual amounts per share of Nichols common stock that you will
realize on or after the date of the merger. The amount you realize if you sell
your new Computer Sciences common stock will depend on the market price of
Computer Sciences common stock at the time of the sale. That price will
fluctuate depending upon any number of reasons, including those specific to
Computer Sciences and those that influence the trading prices of equity
securities generally.
Opinion of Nichols' Financial Advisors
Goldman, Sachs & Co. Opinion
On September 18, 1999, Goldman Sachs delivered its oral opinion to Nichols'
board that, as of such date, the exchange ratio was fair from a financial point
of view to the holders of Nichols common stock. Goldman Sachs subsequently
confirmed its oral opinion by delivery of its written opinion dated September
19, 1999.
The full text of Goldman Sachs' written opinion dated September 19, 1999,
states the assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion. It is attached as Appendix B and is
incorporated by reference in this proxy statement/prospectus. You should read
the opinion in its entirety.
In connection with its opinion, Goldman Sachs reviewed, among other things,
. the merger agreement;
THE MERGER
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<PAGE>
. annual reports to stockholders and annual reports on Form 10-K of Nichols
for the five fiscal years ended August 31, 1998;
. annual reports to stockholders and annual reports on Form 10-K of
Computer Sciences for the five fiscal years ended April 2, 1999;
. interim reports to stockholders and quarterly reports on Form 10-Q of
Nichols and Computer Sciences;
. other communications from Nichols and Computer Sciences to their
respective stockholders; and
. internal financial analyses and forecasts for Nichols prepared by its
management.
Goldman Sachs also held discussions with members of the senior management of
Nichols and Computer Sciences regarding the strategic rationale for, and the
potential benefits of, the merger and the past and current business operations,
financial condition and future prospects of the companies. In addition, Goldman
Sachs:
. reviewed the reported price and trading activity for Nichols common stock
and Computer Sciences common stock;
. compared financial and stock market information for Nichols and Computer
Sciences with similar information for other publicly traded companies;
. reviewed the financial terms of recent business combinations in the
information technology services industry specifically and in other
industries generally; and
. performed other studies and analyses Goldman Sachs considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of rendering its opinion. Computer Sciences declined
to provide Goldman Sachs with its internal financial projections which Goldman
Sachs had requested. Goldman Sachs' review of Computer Sciences' estimated
future financial performance for the purpose of rendering Goldman Sachs'
opinion was limited to publicly available research analysts' estimates of
Computer Sciences' future financial performance. Computer Sciences confirmed to
Goldman Sachs that it was comfortable with the range of research analysts'
estimates for fiscal year 2000. Goldman Sachs neither made nor received an
independent evaluation or appraisal of the assets and liabilities of Nichols or
Computer Sciences or any of their subsidiaries.
Goldman Sachs has assumed, with the consent of Nichols' board, that the
merger will be accounted for as a pooling-of-interests under generally accepted
accounting principles. Goldman Sachs also assumed that all material
governmental, regulatory or other consents and approvals necessary to complete
the merger will be obtained without any adverse effect on Nichols or Computer
Sciences or on the contemplated benefits of the merger. The advisory services
and opinion of Goldman Sachs were provided for the information and assistance
of Nichols' board in connection with its consideration of the merger, and the
opinion does not constitute a recommendation as to how any holder of Nichols
common stock should vote with respect to the merger.
THE MERGER
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<PAGE>
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its opinion to Nichols' board of
directors.
The following summaries of financial analyses include information presented
in tables. You should read these tables together with the text of each summary.
(1) Historical Stock Trading Analysis. Goldman Sachs reviewed the historical
trading prices and volumes for Nichols common stock and Computer Sciences
common stock. Goldman Sachs also calculated the ratio of the average market
price of Nichols common stock to the average market price of Computer Sciences
common stock over selected periods ending on September 15, 1999 as follows:
<TABLE>
<CAPTION>
Period Average Exchange Ratio
------ ----------------------
<S> <C>
3 Months............................................ 0.318
6 Months............................................ 0.321
1 Year.............................................. 0.327
5 Years............................................. 0.465
</TABLE>
(2) Premium Analysis. Goldman Sachs analyzed the closing price of Nichols
common stock at different times during the past year in relation to the per
share consideration of $28.00, which is the midpoint between the maximum merger
consideration of $30.80 per Nichols' share and the $25.20 value below which
Nichols has a walk-away right under the merger agreement. This analysis
indicated that per share consideration of $28.00 would represent the following
premiums to recent market prices:
<TABLE>
<CAPTION>
Date Recent Closing Price Premium
---- -------------------- -------
<S> <C> <C>
September 17, 1999--Last trading day before
announcement of the merger................. $25.50 9.8%
August 23, 1999--The day Computer Sciences
made preliminary proposal to Nichols....... $21.88 28.0%
February 1, 1999--52 week high.............. $26.00 7.7%
March 9, 1999--52 week low.................. $15.63 79.2%
</TABLE>
(3) Selected Companies Analysis. Goldman Sachs reviewed and compared
selected financial information, ratios and public market multiples for Nichols
and Computer Sciences to corresponding financial information, ratios and public
market multiples for the following seven publicly-traded aerospace and defense
companies:
. The Boeing Company;
. General Dynamics Corporation;
. Litton Industries, Inc.;
. Lockheed Martin Corporation;
. L-3 Communications Corporation;
THE MERGER
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<PAGE>
. Northrop Grumman Corporation; and
. Raytheon Company;
and for the following four publicly-traded information technology companies:
. Affiliated Computer Services, Inc.;
. CACI International, Inc.;
. Electronic Data Systems Corporation; and
. Perot Systems Corporation.
The selected companies were chosen because they are publicly-traded
companies with operations that for purposes of analysis may be considered
similar to Nichols and Computer Sciences. Goldman Sachs calculated and compared
various financial multiples and ratios. The multiples and ratios were
calculated using the closing price for the common stock of Nichols and Computer
Sciences and each of the selected companies on September 17, 1999 and were
based on the most recent publicly available information. Goldman Sachs'
analyses of the selected companies compared the following to the results for
Nichols and Computer Sciences:
. closing share price on September 17, 1999 as a percentage of 52-week high
share price;
. levered market capitalization, which is the market value of common equity
plus the book value of debt less the book amount of cash, as a multiple
of latest 12 months revenue;
. levered market capitalization as a multiple of latest quarter annualized
revenues;
. levered market capitalization as a multiple of latest 12 months earnings
before interest and taxes, or EBIT;
. levered market capitalization as a multiple of latest quarter annualized
EBIT;
. levered market capitalization as a multiple of latest 12 months earnings
before interest, taxes, depreciation and amortization, or EBITDA; and
. levered market capitalization as a multiple of latest quarter annualized
EBITDA.
The results of these analyses are summarized as follows:
<TABLE>
<CAPTION>
Selected Publicly-
Traded Information
Technology Companies
Selected Publicly-Traded (Including
Percentage/ Multiple Aerospace and Defense Companies Computer Sciences)
- -------------------- ------------------------------------ ----------------------- Computer
Range Median Mean Range Median Mean Nichols Sciences
-------------- -------------------- ---------- ------ ---- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
September 17, 1999 share
price as a percentage
of 52-week high share
price.................. 60.7%-89.9% 78.2% 75.4% 21.7%-88.9% 82.5% 70.9% 98.1% 85.9%
Levered market
capitalization to
latest 12 months
revenue................ 0.8x-1.6x 1.0x 1.1x 0.8x-1.8x 1.6x 1.4x 0.8x 1.4x
Levered market
capitalization to
latest quarter
annualized revenue..... 0.8x-1.5x 1.0x 1.1x 0.6x-1.7x 1.4x 1.3x 0.7x 1.4x
</TABLE>
THE MERGER
35
<PAGE>
<TABLE>
<CAPTION>
Selected Publicly-Traded
Selected Publicly- Information Technology
Traded Aerospace and Companies (Including
Percentage/ Multiple Defense Companies Computer Sciences)
- -------------------- ----------------------- ------------------------ Computer
Range Median Mean Range Median Mean Nichols Sciences
---------- ------ ----- ----------- ------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Levered market
capitalization to
latest 12 months
EBIT.................. 9.0x-18.9x 13.2x 13.3x 12.6x-26.2x 19.9x 19.6x 13.7x 19.9x
Levered market
capitalization to
latest quarter
annualized EBIT....... 7.5x-47.0x 12.0x 16.7x 10.9x-22.4x 20.3x 17.9x 11.7x 22.4x
Levered market
capitalization to
latest 12 months
EBITDA................ 6.0x-11.6x 10.7x 9.5x 8.9x-16.1x 11.5x 11.9x 9.6x 11.0x
Levered market
capitalization to
latest quarter
annualized EBITDA..... 5.4x-17.0x 9.8x 9.7x 8.4x-15.7x 10.6x 11.3x 8.6x 11.7x
</TABLE>
Goldman Sachs also compared the selected companies' stock price as a
multiple of estimated calendar years 1999, 2000 and 2001 earnings per share, or
EPS, to the results for Nichols and Computer Sciences. The EPS estimates were
provided by Institutional Brokers Estimate System, or IBES. The results of
these analyses are summarized as follows:
<TABLE>
<CAPTION>
Selected Publicly-Traded
Selected Publicly-Traded Information Technology
Aerospace and Companies (Including
Defense Companies Computer Sciences)
------------------------ ------------------------ Computer
Multiple Range Median Mean Range Median Mean Nichols Sciences
- -------- ----------- ------ ----- ----------- ------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stock price to 1999
estimated EPS.......... 10.0x-23.0x 18.2x 17.4x 15.6x-32.7x 26.4x 25.2x 20.4x 26.4x
Stock price to 2000
estimated EPS.......... 9.2x-22.6x 16.0x 15.2x 13.6x-27.0x 22.3x 22.1x 17.6x 22.3x
Stock price to 2001
estimated EPS.......... 8.6x-17.2x 12.6x 12.9x 11.9x-21.5x 19.1x 17.6x 15.4x 19.1x
Goldman Sachs also compared the selected companies' compound annualized
growth rate of earnings per share, as estimated by IBES, and the quotient, for
calendar years 1999 and 2000, calculated by dividing the estimated price to
earnings ratio by the estimated five-year growth rate of earnings per share, to
the results for Nichols and Computer Sciences. The results of these analyses
are summarized as follows:
<CAPTION>
Selected Publicly-Traded
Selected Publicly-Traded Information Technology
Aerospace and Companies (Including
Defense Companies Computer Sciences)
------------------------ ------------------------ Computer
Multiple Range Median Mean Range Median Mean Nichols Sciences
- -------- ----------- ------ ----- ----------- ------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IBES estimated 5-year
compound annualized
growth rate............ 8.0%-20.0% 10.1% 12.0% 12.5%-24.0% 17.0% 17.7% 15.0% 17.0%
1999 estimated price to
earnings to growth
rate................... 0.9x-1.6x 1.2x 1.3x 0.9x-1.6x 1.1x 1.2x 1.2x 1.3x
2000 estimated price to
earnings to growth
rate................... 0.8x-1.5x 1.1x 1.1x 0.7x-1.4x 1.0x 1.0x 1.0x 1.1x
</TABLE>
THE MERGER
36
<PAGE>
(4) Discounted Cash Flow Analysis for Nichols. Goldman Sachs performed a
discounted cash flow analysis for Nichols using Nichols' management's
estimates. Goldman Sachs calculated the present value of estimated free cash
flows for the years 2000 through 2002 using discount rates ranging from 10.0%
to 14.0%. Goldman Sachs calculated Nichols' terminal value in the year 2002
based on multiples of estimated 2002 EBITDA ranging from 6.0x to 10.0x. This
terminal value was then discounted to present value using discount rates from
10% to 14%. This analysis produced implied enterprise values ranging from $311
million to $540 million and implied equity values per share of Nichols common
stock ranging from $21.18 to $35.72.
(5) Sensitivity Analysis. Goldman Sachs considered the impact of changes in
EBIT margin and sales growth on free cash flows and on Nichols' terminal value.
In connection with this sensitivity analysis, Goldman Sachs assumed a terminal
multiple of 8.0 times estimated 2002 EBITDA and a 12.0% discount rate. Goldman
Sachs considered changes relative to Nichols' management estimates of EBIT
margin ranging from -2.0% to +2.0% and changes relative to Nichols' management
estimates of sales growth ranging from -5.0% to +5.0%. This analysis produced
implied enterprise values ranging from $306 million to $560 million and implied
equity values per share ranging from $20.89 to $36.99.
(6) Selected Transactions Analysis. Goldman Sachs analyzed information
relating to 9 selected merger or acquisition transactions in the information
technology industry since 1996, including:
. transaction consideration as a multiple of current year sales of the
company being acquired;
. transaction consideration as a multiple of current year EBITDA of the
company being acquired; and
. transaction consideration as a multiple of current year EBIT of the
company being acquired.
The results of these analyses are summarized below:
<TABLE>
<CAPTION>
Current Year Multiple Range Mean Median
--------------------- ----------- ----- ------
<S> <C> <C> <C>
Sales............................................. 0.59x-4.90x 1.45x 1.01x
EBITDA............................................ 8.0x-21.4x 12.8x 12.5x
EBIT.............................................. 10.9x-23.9x 16.7x 17.0x
</TABLE>
(7) Analysis at Various Prices. Goldman Sachs calculated information
relating to the merger based on each of the walk-away price of $25.20 per
Nichols share, the maximum possible price of $30.80 per Nichols share and the
mid-point of these two prices, $28.00 per Nichols share, including:
. consideration as a multiple of the latest 12-months sales;
. consideration as a multiple of the latest 12-months EBITDA; and
. consideration as a multiple of the latest 12-months EBIT.
The results of these calculations are summarized below:
<TABLE>
<CAPTION>
Price per share of
Nichols common stock
--------------------
Multiple of Latest 12-months $25.20 $28.00 $30.80
---------------------------- ------ ------ ------
<S> <C> <C> <C>
Sales................................................. 0.82x 0.92x 1.02x
EBITDA................................................ 9.5x 10.6x 11.7x
EBIT.................................................. 13.6x 15.2x 16.8x
</TABLE>
THE MERGER
37
<PAGE>
(8) Contribution Analysis. Goldman Sachs analyzed the relative contribution
of Computer Sciences and Nichols to the combined company resulting from the
merger based on selected historical and estimated future operating and
financial information for Nichols, Computer Sciences and the combined company
based on Goldman Sachs' research and Nichols' management's forecasts. The
results of these analyses are summarized as follows:
<TABLE>
<CAPTION>
Computer Sciences' Nichols'
Contribution to Contribution to
Combined Company Combined Company
------------------ ----------------
<S> <C> <C>
Latest 12 months EBITDA.................... 96.3% 3.7%
Fiscal year 2000 estimated EBITDA.......... 96.2% 3.8%
Fiscal year 2001 estimated EBITDA.......... 96.2% 3.8%
Latest 12 months EBIT...................... 95.3% 4.7%
Fiscal year 2000 estimated EBIT............ 95.4% 4.6%
Fiscal year 2001 estimated EBIT............ 95.3% 4.7%
Latest 12 months net income................ 95.5% 4.5%
Fiscal year 2000 estimated net income...... 95.6% 4.4%
Fiscal year 2001 estimated net income...... 95.8% 4.2%
Latest 12 months sales..................... 94.6% 5.4%
Fiscal year 2000 estimated sales........... 95.1% 4.9%
Fiscal year 2001 estimated sales........... 95.2% 4.8%
Pre-merger equity market capitalization
based on September 17, 1999 prices........ 96.6% 3.4%
Post-merger equity market capitalization
assuming merger price of $28.00 per
Nichols share............................. 96.4% 3.6%
Post-merger equity market capitalization
assuming merger price of $25.20 per
Nichols share............................. 96.4% 3.6%
Post-merger equity market capitalization
assuming merger price of $30.80 per
Nichols share............................. 96.4% 3.6%
Pre-merger enterprise value................ 96.8% 3.2%
Post-merger enterprise value assuming
merger price of $28.00 per
Nichols shares............................ 96.4% 3.6%
</TABLE>
(9) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma analyses of
the financial impact of the merger using Institutional Brokers Estimate System
values for each of Nichols and Computer Sciences. For the years 2000, 2001 and
2002, Goldman Sachs compared the earnings per share of Computer Sciences common
stock on a standalone basis to the earnings per share of the common stock of
the combined company on a pro forma basis. Goldman Sachs performed this
analysis excluding any of the possible benefits that may be realized following
the merger as well as using estimated annual after-tax benefits of $6 million
after the merger. Based on such analyses, the merger would increase earnings
per share of Computer Sciences common stock in each of 2000, 2001 and 2002.
(10) Stockholder Value Sensitivity Analysis. Goldman Sachs considered the
impact of changes in the fiscal year 2000 estimated price to earnings ratio of
Computer Sciences on the value of the Computer Sciences common stock Nichols
stockholders will receive in the merger. In connection with this sensitivity
analysis, Goldman Sachs considered Computer Sciences' price to earnings ratio
at the time of the transaction ranging from 20.8x to 31.1x and variations in
the year 2000 price to earnings ratio ranging from -2.0x to +2.0x. This
analysis produced implied per share values to Nichols' stockholders ranging
from $22.83 to $33.17.
THE MERGER
38
<PAGE>
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all its analyses. No company or
transaction used in the above analyses as a comparison is directly comparable
to Nichols or Computer Sciences or the contemplated merger.
The analyses were prepared solely for purposes of providing an opinion to
Nichols' board as to the fairness from a financial point of view to Nichols
stockholders of the exchange ratio. The analyses do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based on forecasts of future results are not
necessarily indicative of actual future results, which may be significantly
more or less favorable than suggested by such analyses. Because such analyses
are inherently subject to uncertainty, being based on numerous factors or
events beyond the control of the parties or their advisors, none of Nichols,
Computer Sciences, Goldman Sachs or any other person assumes responsibility if
future results are materially different from those forecast.
As described above, Goldman Sachs' opinion to Nichols' board of directors
was one of many factors taken into consideration by Nichols' board of directors
in making its determination to approve the merger. The foregoing summary does
not purport to be a complete description of the analyses performed by Goldman
Sachs but contains a description of all material analyses performed by Goldman
Sachs.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Nichols because Goldman Sachs is one of Nichols' financial
advisors in connection with the merger, and Goldman Sachs participated in some
of the negotiations leading to the merger agreement.
Goldman Sachs also has provided investment banking services to Computer
Sciences from time to time, including having acted as co-manager of a public
offering of $200 million aggregate principal amount of 6.25% Notes due 2009 in
March 1999, as co-manager of a public offering of $150 million aggregate
principal amount of 6.5% Notes due 2001 in December 1996, as financial advisor
to Computer Sciences in connection with Computer Sciences' acquisition of The
Continuum Company, Inc. in 1996 and as financial advisor to Computer Sciences
in connection with the defense of Computer Sciences from an unsolicited tender
offer made by Computer Associates International Incorporated in 1998. As of
September 20, 1999, Goldman Sachs accumulated a long position of 110,687 shares
of Computer Sciences common stock against which Goldman Sachs is short
27,248 shares of Computer Sciences common stock and also held $6,850,000
aggregate principal amount of Computer Sciences' 6.25% Notes.
Goldman Sachs provides a full range of financial advisory and securities
services and, in the course of its normal trading activities, may from time to
time effect transactions and hold securities, including derivative securities,
of Nichols or Computer Sciences for its own account and for the accounts of
customers. Goldman Sachs may provide investment banking services to Computer
Sciences and its subsidiaries in the future.
THE MERGER
39
<PAGE>
By letter agreement dated April 6, 1999, Nichols engaged Goldman Sachs to
act as its financial advisor in connection with the possible sale of, or a
business combination involving, all or a portion of the stock or assets of
Nichols. Pursuant to the terms of this letter agreement, Nichols has agreed to
pay Goldman Sachs a fee of 1% of the aggregate consideration paid in the
merger. Nichols also agreed to reimburse Goldman Sachs for its reasonable out-
of-pocket expenses, including attorneys' fees, and to indemnify Goldman Sachs
against certain liabilities, including certain liabilities under the federal
securities laws.
The Robinson-Humphrey Company, LLC Opinion
Nichols retained The Robinson-Humphrey Company, LLC to deliver its opinion
as to the fairness, from a financial point of view, of the consideration to be
received by Nichols stockholders in the merger. At the September 18, 1999
meeting of Nichols' board held to evaluate the merger agreement, Robinson-
Humphrey rendered its opinion to Nichols' board to the effect that, as of the
date of that opinion and based upon and subject to the matters stated in the
opinion, the consideration to be received by Nichols stockholders in the merger
is fair, from a financial point of view, to Nichols stockholders.
In the opinion of Nichols, no significant events or changes in information
have occurred since the date of the Robinson-Humphrey opinion that would alter
the factual basis for that opinion. However, if a significant event or change
does occur, including an amendment to the merger agreement that materially
affects the financial terms of the merger agreement, Nichols may request a
revised fairness opinion.
The full text of the opinion of Robinson-Humphrey, which states the
assumptions made, matters considered and limitations on the review undertaken,
is attached to this proxy statement/prospectus as Appendix C and is
incorporated in this proxy statement/prospectus by this reference. You are
urged to read the opinion in its entirety.
The opinion of Robinson-Humphrey is directed to Nichols' board and relates
only to the fairness of the consideration to be received by Nichols
stockholders in the merger from a financial point of view. The Robinson-
Humphrey opinion does not address any other aspect of the merger and does not
constitute a recommendation to any stockholder as to how that stockholder
should vote on the merger. The consideration to be received by Nichols
stockholders in the merger was determined through negotiations between Nichols
and Computer Sciences and was approved by Nichols' board.
In arriving at its opinion, Robinson-Humphrey took the following actions:
. reviewed a draft of the merger agreement;
. reviewed publicly available financial and other information concerning
Nichols and Computer Sciences which Robinson-Humphrey believed to be
relevant to its inquiry;
. reviewed financial and operating information on the business, operations
and prospects of Nichols furnished to Robinson-Humphrey by Nichols;
. compared the historical financial results and present financial condition
of each of Nichols and Computer Sciences with those of other companies
that Robinson-Humphrey deemed relevant;
. reviewed recent trading histories of Nichols common stock and Computer
Sciences common stock;
THE MERGER
40
<PAGE>
. compared the financial terms of the merger with the financial terms of
other transactions that Robinson-Humphrey deemed relevant;
. had discussions with the management of Nichols and Computer Sciences
concerning their businesses, operations, assets, present conditions and
future prospects; and
. undertook other studies, analyses and investigations that it deemed
appropriate.
In rendering its opinion, Robinson-Humphrey assumed and relied on the
accuracy and completeness of all information it reviewed for the purposes of
its opinion. Robinson-Humphrey did not independently verify this information.
Robinson-Humphrey did not make or obtain an independent evaluation, appraisal
or physical inspection of any assets or liabilities of Nichols or Computer
Sciences. In addition, Robinson-Humphrey did not solicit indications of
interest from third parties with respect to the purchase of all or a part of
Nichols' business.
Robinson-Humphrey assumed that:
. the financial forecast information provided by Nichols was reasonably
prepared and reflected the best currently available estimates and
judgment of Nichols' management as to the expected future financial
performance of Nichols;
. the final form of the merger agreement would be substantially similar to
the last draft reviewed by Robinson-Humphrey; and
. in the course of obtaining the necessary consents or approvals,
contractual or otherwise, for the merger, no restrictions, including any
divestiture requirements or amendments or modifications, would be imposed
that would significantly reduce the value of the Computer Sciences stock
you will receive in the merger.
Although Computer Sciences did not make any internal financial projections
available to Robinson-Humphrey, Computer Sciences indicated that it was
comfortable with the range of research analysts' estimates for fiscal year
2000. Robinson-Humphrey relied on publicly available research analysts'
estimates of Computer Sciences' future performance. The Robinson-Humphrey
opinion is necessarily based on market, economic and other conditions as they
existed and could be evaluated on, and on the information made available to
Robinson-Humphrey as of the date of its opinion.
At the September 18, 1999 meeting of Nichols' board, Robinson-Humphrey
presented financial analyses accompanied by written materials in connection
with the delivery of its fairness opinion. In preparing its opinion, Robinson-
Humphrey performed a variety of financial and comparative analyses, including
those described below. Although this summary of these analyses is not a
complete description of the analyses performed by Robinson-Humphrey's, this
summary describes all material analyses underlying Robinson-Humphrey's opinion.
The preparation of a fairness opinion is a complex analytic process
involving many determinations of the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances. As a result, a fairness opinion is not readily susceptible to
summary description. Accordingly, Robinson-Humphrey believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
factors, without considering all analyses and factors, could create a
misleading or incomplete view of the processes underlying such analyses and
opinion.
THE MERGER
41
<PAGE>
In its analyses, Robinson-Humphrey made numerous assumptions about Nichols,
Computer Sciences, industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Nichols and Computer Sciences. The estimates contained in these analyses and
the valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by these
analyses. In addition, analyses relating to the value of businesses or
securities are not appraisals and do not reflect the prices at which businesses
or securities actually may be sold. Accordingly, Robinson-Humphrey's analyses
and estimates are inherently subject to substantial uncertainty. Robinson-
Humphrey's opinion and analyses were only one of several factors considered by
Nichols' board in its evaluation of the merger and should not be viewed as
having determined the views of Nichols' board or Nichols' management on the
consideration to be received by Nichols stockholders in the merger. The
following is a summary of the material financial and comparative analyses
performed by Robinson-Humphrey in arriving at the Robinson-Humphrey opinion.
(1) Analysis of Selected Publicly Traded Reference Companies. Using publicly
available information concerning historical and projected financial
performance, including published historical financial information and earnings
estimates reported by First Call Corporation, a data service that monitors and
publishes compilations of earnings estimates by selected research analysts
regarding companies of interest to institutional investors, Robinson-Humphrey
analyzed, among other things, the market values and trading multiples of
Nichols and selected publicly-traded reference companies in the following
industry groups:
. the government and defense information technology consulting industry;
. the healthcare information technology consulting industry; and
. the commercial information technology consulting industry.
We refer to these three groups as the Nichols' reference companies:
<TABLE>
<S> <C>
Government Reference Companies Commercial Reference Companies
. Advanced Communications Systems, Inc. .Affiliated Computer Services, Inc.
. BTG, Inc. .Analysts International, Inc.
. CACI International, Inc. .CIBER, Inc.
. Computer Sciences Corporation .Complete Business Solutions, Inc.
. GRC International, Inc. .Computer Associates, Inc.
. SCB Computer Technology, Inc. .Computer Horizons Corporation
. TRW, Inc. .Computer Sciences Corporation
.Cotelligent, Inc.
Healthcare Reference Companies .Electronic Data Systems
. DAOU Systems, Inc. .Intelligroup, Inc.
. Eclypsis Corporation .Keane, Inc.
. First Consulting Group .Metamor Worldwide, Inc.
. IDX Systems Corporation .Metro Information Services, Inc.
. InfoCure Corporation .Modis Professional Services, Inc.
. Medical Manager Corporation .Renaissance Worldwide, Inc.
. Medquist, Inc. .SPR, Inc.
. Quadramed Corporation .Syntel, Inc.
. Shared Medical Systems Corporation .The A Consulting Team, Inc.
. Superior Consultant Holdings
Corporation .Tier Technologies, Inc.
</TABLE>
THE MERGER
42
<PAGE>
Robinson-Humphrey also analyzed, among other things, the market values and
trading multiples of Computer Sciences and the following publicly-traded
reference companies:
<TABLE>
<S> <C>
. Affiliated Computer Services, Inc. .Electronic Data Systems, Inc.
. American Management Systems, Inc. .Perot Systems Corporation
. Computer Associates, Inc. .SunGard Data Systems, Inc.
. DST Systems, Inc.
</TABLE>
Robinson-Humphrey compared, among other things, implied equity values per
Nichols share based on firm values as a multiple of latest twelve months
revenues; latest twelve months earnings before interest, taxes, depreciation
and amortization, or EBITDA; latest twelve months earnings before interest and
taxes, or EBIT; and stock price as a multiple of latest twelve months earnings
per share, or EPS, estimated calendar 1999 EPS, and estimated calendar 2000 EPS
for the Nichols reference companies. All multiples were based on closing stock
prices as of September 16, 1999. Revenue, EBITDA and EBIT estimates for the
Nichols reference companies were based on historical financial information
available in their public filings. EPS estimates were based on the First Call
consensus estimates as of September 16, 1999. Robinson-Humphrey analyzed the
Nichols reference companies using two methodologies:
(i) comparing the financial statistics of Nichols in the aggregate to
the relative valuation statistics of the government reference companies;
and
(ii) comparing the revenue and EBIT statistics of the three business
units of Nichols to each of the government reference companies, the
healthcare reference companies and the commercial reference companies, as
appropriate, and compiling an implied equity value per share using a
weighted average of the three numbers, referred to as the segment analysis.
The following table states the low, average, and high implied equity values
per share indicated by these analyses for the Nichols reference companies:
Value Based on Government Reference Company Multiples
<TABLE>
<CAPTION>
Low Average High
------ ------- ------
<S> <C> <C> <C>
Stock Price to:
Latest Twelve Months EPS............................ $11.26 $19.62 $34.71
Estimated Calendar 1999 EPS......................... 14.68 18.69 33.03
Estimated Calendar 2000 EPS......................... 12.08 18.58 32.06
Book Value.......................................... 23.14 34.17 52.19
Firm Value to:
Latest Twelve Months Revenue........................ $ 9.69 $27.12 $43.04
Latest Twelve Months EBITDA......................... 18.31 24.36 37.05
Latest Twelve Months EBIT........................... 20.58 23.73 29.13
</TABLE>
Value Based on Segment Analysis
<TABLE>
<CAPTION>
Low Average High
------ ------- ------
<S> <C> <C> <C>
Firm Value to:
Latest Twelve Months EBITDA......................... $11.10 $31.27 $59.63
Latest Twelve Months EBIT........................... 17.17 26.28 41.95
</TABLE>
- --------
These implied ranges of equity values per share were compared to $27.20 per
share to be received by the stockholders of Nichols in the merger based on the
Computer Sciences closing stock price of $64.31 on September 17, 1999.
THE MERGER
43
<PAGE>
The analysis also showed that as of September 16, 1999:
. Computer Sciences' firm value to latest twelve months revenue multiple
was 1.36x, compared to an average of 1.76x for the Computer Sciences
reference companies,
. Computer Sciences' firm value was 10.6 times latest twelve months EBITDA,
compared to an average of 11.4x for the Computer Sciences reference
companies, and
. Computer Sciences' firm value was 19.1 times latest twelve months EBIT,
which compared to an average multiple of 17.3x for the Computer Sciences
reference companies.
Computer Sciences' equity value as a multiple of latest twelve months EPS
was 29.1x, compared to an average multiple for the Computer Sciences reference
companies of 26.8x. The ratios of Computer Sciences' stock price to estimated
calendar 1999 and estimated calendar 2000 EPS were 26.4x and 22.1x, which
compared to averages of 24.3 times estimated calendar 1999 EPS and 20.4 times
estimated calendar 2000 EPS for the Computer Sciences reference companies,
respectively. Computer Sciences' three-year historical EPS growth rate was
33.2%, compared to an average of 36.4% for the Computer Sciences reference
companies. The five-year projected growth rate for Computer Sciences' earnings
per share was 16.0%, compared to an average of 19.7% for the Computer Sciences
reference companies.
An analysis of the results of the foregoing is not entirely mathematical;
rather, it involves complex considerations and judgments concerning differences
in financial and operating characteristics and other factors that could affect
the acquisition, public trading or other values of the Nichols reference
companies or the Computer Sciences reference companies or the business segment
or company to which they are being compared.
(2) Analysis of Selected Reference Merger and Acquisition Transactions.
Robinson-Humphrey reviewed the financial terms, to the extent publicly
available, of several proposed, pending or completed merger and acquisition
transactions deemed to be relevant by Robinson-Humphrey based on operating
characteristics of the target companies in the following industry groups:
. 10 transactions announced since January 1, 1995 in the government and
defense information technology consulting industry;
. 14 transactions announced since January 1, 1997 in the healthcare
information technology consulting industry; and
. 8 transactions announced since January 1, 1997 in the commercial
information technology consulting industry.
THE MERGER
44
<PAGE>
Robinson-Humphrey also analyzed all completed or pending transactions
announced since January 1, 1997 with enterprise values between $300 million and
$500 million. We refer to all of these reviewed transactions as the reference
transactions. Robinson-Humphrey calculated a range of implied equity values per
share based on various financial multiples generated by publicly available
information for each of the reference transactions and compared them to
corresponding financial statistics for Nichols, based on the consideration to
be received by Nichols stockholders in the merger. The transactions reviewed
were:
<TABLE>
<CAPTION>
Announcement
Date Target Acquiror
------------ ------ --------
<C> <S> <C>
Government Reference Transactions
10/2/95 AEL Industries Inc. Tracor Inc.
12/13/95 PRC Inc. Litton Industries Inc.
4/2/96 Advanced Marine Enterprises Nichols Research Corp.
5/5/97 Logicon Inc. Northrop Grumman Corp.
9/21/97 Computer Data Systems Inc. Affiliated Computer Services
10/17/97 ATC Group Services, Inc. Weiss Peck & Greer and Mgmt
11/21/97 BDM International Inc. TRW Inc.
4/21/98 Tracor, Inc. General Electric Co. PLC
7/1/98 LECG Inc. Navigant Consulting Inc.
9/2/99 Management Consulting & Research (MCR) GRC International
Healthcare Reference Transactions
7/31/97 National Health Enhancement Systems HBO & Company
8/7/97 Healthcare Data Interchange ENVOY Corporation
3/14/97 Source Informatics, Inc. National Data Corporation
9/5/97 Medic Computer Systems, Inc. Misys, PLC
10/14/97 Physician Support Systems, Inc. National Data Corporation
11/9/97 Medicus Systems Corp. QuadraMed Corporation
2/23/98 Pyramid Health Group QuadraMed Corporation
2/5/98 ActaMed Corp. Healtheon Corp.
5/28/98 Successful Solutions Medirisk, Inc.
6/30/98 Sweetwater Health Enterprises Medirisk, Inc.
9/18/98 Reynolds & Reynolds Healthcare Systems Division InfoCure Corp.
1/27/99 Unitron Medical Communications (d/b/a Moon Sabratek Corp.
Communications)
2/8/99 OMSystems, Inc. InfoCure Corp.
8/12/99 HCIA, Inc. VS&A Communications Partners III, L.P.
Commercial Reference Transactions
2/2/98 Source Services Corp. Romac International Inc.
4/9/98 Claremont Technology Group, Inc. Complete Business Solutions, Inc.
9/9/98 Integrated Systems Consulting First Consulting Group Inc.
2/8/98 Computer Management Sciences Computer Associates Intl Inc.
3/25/99 Norrell Corporation Interim Service Inc.
6/24/99 Data Processing Resource Corp. Compuware Corp.
6/24/99 Think New Ideas Inc. AnswerThink Consulting Group
8/10/99 International Razorfish Inc.
</TABLE>
Robinson-Humphrey compared, among other things, implied equity values per
Nichols share based on firm values as a multiple of latest twelve months
revenues, latest twelve months EBITDA, and latest twelve months EBIT for the
reference transactions. Revenue, EBITDA and EBIT estimates
THE MERGER
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<PAGE>
for the reference transactions were based on historical financial information
available in public filings of the target companies in the reference
transactions. Robinson-Humphrey analyzed the reference transactions utilizing
two methodologies:
. comparing the financial statistics of Nichols in aggregate to the
relative valuation statistics of the government reference transactions,
and
. using a segment analysis to compare the revenue and EBIT statistics of
the three business units of Nichols to each of the weighted average low,
average and high valuation multiples generated by the government
reference transactions, the healthcare reference transactions and the
commercial reference transactions, as appropriate.
The following table states the low, average, and high implied equity values
per Nichols share indicated by these analyses:
Value Based on Government Reference Transaction Multiples
<TABLE>
<CAPTION>
Low Average High
------ ------- ------
<S> <C> <C> <C>
Price to:
Latest twelve months Net Income....................... $17.49 $36.84 $52.27
Book Value............................................ 17.91 40.33 61.22
Market Price Premium One Day Prior to Announcement.... 23.92 28.83 31.86
Firm Value to:
Latest twelve months Revenue.......................... $14.96 $30.35 $53.18
Latest twelve months EBITDA........................... 17.23 31.37 44.46
Latest twelve months EBIT............................. 17.44 34.46 51.72
Segment Analysis
<CAPTION>
Low Average High
------ ------- ------
<S> <C> <C> <C>
Firm Value to:
Latest twelve months EBITDA........................... $15.03 $38.72 $70.98
Latest twelve months EBIT............................. 18.81 33.50 49.83
Premiums Paid Analysis
<CAPTION>
Average
-------
<S> <C> <C> <C>
Firm Value to:
One Day Prior to Announcement......................... $27.85
One Week Prior to Announcement........................ 27.92
Four Weeks Prior to Announcement...................... 26.98
</TABLE>
No company that was included in the reference transactions as a comparison
is identical to Nichols. All multiples for the reference transactions were
based on public information available at the time of announcement of the
transaction, without taking into account differing market and other conditions
for the period during which the reference transactions occurred.
(3) Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted
cash flow analysis of Nichols based upon management's projections of its free
cash flow from the fiscal year ended August 31, 1999 through the fiscal year
ending August 31, 2002, inclusive, using discount rates ranging from 15% to 19%
and terminal value multiples of estimated calendar year 2002 EBITDA ranging
from 8.0x to 10.0x. A discounted cash flow analysis is an analysis of the
present value of the projected cash flows for the periods using the discount
rates indicated. Free cash flow
THE MERGER
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<PAGE>
means earnings before interest and after taxes plus depreciation and
amortization expense minus capital expenditures and increases in working
capital. The analysis indicated the following per share equity valuations of
Nichols:
<TABLE>
<CAPTION>
Discounted Equity
Value Per Share
Using Terminal Values of:
Discount ---------------------------
Rate 8.0x 9.0x 10.0x
-------- -------- -------- ---------
<S> <C> <C> <C>
15%........................................... $ 27.33 $ 30.32 $ 33.32
17%........................................... 26.00 28.84 31.68
19%........................................... 24.75 27.45 30.16
</TABLE>
(4) Other Factors and Comparative Analyses. In rendering its opinion,
Robinson-Humphrey considered other factors and conducted other comparative
analyses. These other factors and analyses included, among other things, a
review of the historical and projected financial results of Nichols and
Computer Sciences, the history of trading prices and volume of shares of
Nichols common stock and Computer Sciences common stock and the relationship of
movements of Nichols and Computer Sciences common stock and movements of the
common stock of other information technology consulting companies.
(5) Miscellaneous. Nichols' board selected Robinson-Humphrey to render a
fairness opinion because Robinson-Humphrey is a nationally recognized
investment banking firm with substantial experience in transactions similar to
the merger, and because Robinson-Humphrey is familiar with Nichols and its
business. Robinson-Humphrey is continually engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
leveraged buyouts, negotiated underwritings, secondary distributions of listed
and unlisted securities and private placements.
By letter agreement dated August 30, 1999, Nichols agreed to pay Robinson-
Humphrey an opinion fee equal to $300,000, payable upon delivery of the
fairness opinion. The amount of the fees paid or payable to Robinson-Humphrey
does not depend on the contents of Robinson-Humphrey's opinion. In addition,
Nichols has agreed to reimburse Robinson-Humphrey for its reasonable out-of-
pocket expenses, subject to specified limitations, and to indemnify Robinson-
Humphrey and related persons against liabilities arising out of or in
conjunction with its rendering of services under its engagement, including
liabilities under the federal securities laws.
In the ordinary course of its business, Robinson-Humphrey may actively trade
in the securities of Nichols and Computer Sciences 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. During the past two years, Robinson-Humphrey
has served as a financial advisor to Nichols in connection with the
acquisitions of TXEN, Mnemonic Systems, inc., Murray & West, Inc. and Trans-
Link USA. Robinson-Humphrey may in the future provide investment banking,
financial advisory and other services to Nichols for which it will receive
customary compensation.
Independent Consultant
Nichols retained Mark Dunkel in April 1999 to serve as a consultant to
assist Nichols in considering strategic alternatives. Mr. Dunkel's contract
provides for monthly payments to him of $5,000 for twelve months. Under his
contract, Mr. Dunkel also is entitled to be paid a fee of $250,000 upon the
completion of the merger.
THE MERGER
47
<PAGE>
Regulatory Approvals Required for the Merger
General. Computer Sciences and Nichols have agreed to use all reasonable
efforts to do all things reasonably necessary under applicable laws to complete
the merger. These things include:
. obtaining consents of all third parties and governmental authorities
necessary to complete the merger; and
. contesting any legal action relating to the merger.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the accompanying rules, we may not complete the merger until we
have filed the required notifications with the Federal Trade Commission and the
Antitrust Division of the U.S. Department of Justice, and have waited a
specified period of time. On October 12, 1999, Computer Sciences and Nichols
filed the notifications required under the Hart-Scott-Rodino Act. The waiting
period under the Hart-Scott-Rodino Act in this transaction is 30 days, and will
expire at 11:59 p.m. on November 11, 1999 unless terminated prior to that time
by the FTC and the Justice Department. Until the waiting period expires or is
terminated, we may not complete the merger. Either the FTC or the Justice
Department may extend the waiting period by requesting additional information.
The FTC and the Justice Department could take action under the antitrust laws
that they deem necessary to prevent harm to competition. This action could
include seeking to enjoin the merger or seeking Computer Sciences' divestiture
of certain businesses. Private parties, state antitrust agencies, and foreign
governmental authorities may also take legal action under the antitrust laws.
Based on information available to us, we believe that the merger will comply
with all significant federal, state and foreign antitrust laws. We cannot
assure you, however, that there will not be a challenge to the merger on
antitrust grounds or that, if this type of challenge were made, we would
prevail.
Filings with the Secretary of State of the State of Delaware. A certificate
of merger must be filed with the Secretary of State of the State of Delaware to
complete the merger.
Computer Sciences and Nichols are not aware of any other regulatory
approvals or actions that are required for the merger. If any additional
governmental approvals or actions are required, we intend to try to obtain
them. We cannot assure you, however, that we will be able to obtain any
additional approvals or actions.
Material Federal Income Tax Consequences of the Merger
The following is a general discussion of the material federal income tax
consequences of the merger to the holders of Nichols common stock, and to
Computer Sciences, Nevada Acquisition and Nichols, and is based on the opinions
of Weil, Gotshal & Manges LLP, counsel to Nichols, and Gibson, Dunn & Crutcher
LLP, counsel to Computer Sciences. The discussion is based on current
provisions of the Internal Revenue Code, existing regulations promulgated under
the Internal Revenue Code and current administrative rulings and court
decisions, all of which are subject to change, possibly with retroactive
effect. No attempt has been made to comment on all federal income tax
consequences of the merger that may be relevant to particular holders,
including holders that are subject to special tax rules. Some examples of
holders that are subject to special tax rules are:
. dealers in securities,
. foreign persons,
THE MERGER
48
<PAGE>
. banks,
. mutual funds,
. insurance companies,
. tax-exempt entities,
. holders who do not hold their shares as capital assets,
. holders who acquired their shares through stock option or stock purchase
programs or otherwise as compensation,
. holders who are subject to alternative minimum tax, or
. holders who hold their shares as part of a hedge, straddle or other risk
reduction transaction.
Holders of Nichols common stock are advised to consult their own tax
advisors regarding the federal income tax consequences of the merger in light
of their personal circumstances and the consequences under applicable state,
local and foreign tax laws.
Nichols has received from its counsel, Weil, Gotshal & Manges LLP, and
Computer Sciences has received from its counsel, Gibson, Dunn & Crutcher LLP,
opinions to the effect that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. In rendering their opinions, Weil, Gotshal & Manges LLP
and Gibson, Dunn & Crutcher LLP have relied upon representations made by
Computer Sciences, Nichols and Nevada Acquisition, and certain stockholders of
Nichols.
Assuming the merger is treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code:
. no gain or loss will be recognized for federal income tax purposes by
Computer Sciences, Nevada Acquisition or Nichols as a result of the
merger;
. except as described below with respect to cash received by holders of
Nichols common stock instead of fractional shares, a holder of Nichols
common stock will not recognize gain or loss on the exchange of shares of
Nichols common stock for Computer Sciences common stock in the merger;
. the aggregate tax basis of the Computer Sciences common stock received,
including any fractional share deemed received, by a holder of Nichols
common stock will be the same as the aggregate tax basis of the Nichols
common stock exchanged for the Computer Sciences common stock; and
. the holding period of the Computer Sciences common stock, including any
fractional share deemed received, will include the holding period of the
Nichols common stock exchanged for the Computer Sciences common stock,
but only if the shares of Nichols common stock are held as capital assets
at the time of the merger.
Cash Instead of a Fractional Share. Cash received by a holder of Nichols
common stock instead of a fractional share of Computer Sciences common stock
will be treated as received in exchange for that fractional share interest, and
gain or loss will be recognized for federal income tax purposes, measured by
the difference between the amount of cash received and the portion of the basis
of the Nichols common stock allocable to the fractional share interest. The
gain or loss will be capital gain or loss, provided that the shares of Nichols
common stock were held as capital assets,
THE MERGER
49
<PAGE>
and will be long term capital gain or loss if the Nichols common stock had been
held for more than one year at the time of the merger.
Backup Withholding. Under the Internal Revenue Code, a holder of Nichols
common stock may be subject, under some circumstances, to backup withholding at
a rate of 31% on the amount of cash received instead of fractional share
interests unless the holder provides proof of an applicable exemption or a
correct taxpayer identification number and otherwise complies with applicable
requirements of the backup withholding rules. Any amounts withheld under the
backup withholding rules are not an additional tax and may be refunded or
credited against the holder's federal income tax liability, provided the
required information is furnished to the Internal Revenue Service.
Accounting Treatment
We believe that the merger will be accounted for as a pooling-of-interests
transaction under generally accepted accounting principles. Under this method
of accounting, the book value of the assets, liabilities and stockholders'
equity of each of Computer Sciences and Nichols, as reported on its
consolidated balance sheet, will be carried over to the consolidated balance
sheet of the combined company, and no goodwill will be created. The combined
company will be able to include in its consolidated income the consolidated
income of both companies for the entire fiscal year in which the merger occurs.
Interests of Nichols' Directors and Officers in the Merger
As you consider the recommendations of Nichols' board of directors, you
should be aware that some directors and officers have interests in the merger
that are different from, or in addition to, the interests of Nichols
stockholders generally. Nichols' board was aware of these interests and
considered them, among other matters, in approving the merger agreement. These
interests are described below.
Severance Agreements. Nichols has entered into severance agreements with
Chris Horgen, its chairman and chief executive officer, Charles Leader, its
president, and five other executive officers, Allen Dillard, Patsy Hattox,
Michael Solley, Paul Reaves and Grey Wood. The severance agreements for Mr.
Horgen and Mr. Leader provide that each will receive a severance payment on the
date of the merger equal to twice his annual base salary, but only if he still
is employed by Nichols through such date. The severance agreements for the
other five executive officers provide that the officer will receive one times
his annual base salary in the case of Messrs. Reaves and Wood, and two times
his or her annual base salary in the case of the three remaining executive
officers, as a severance payment if Nichols terminates the officer's employment
without cause or if the officer resigns for good reason, in each case within
twelve months after the date of the merger.
We estimate that the aggregate severance payments required to be paid to
Nichols' officers, if they all were terminated after the merger, would be
approximately $2,760,000.
Indemnification; Directors' and Officers' Insurance. Computer Sciences has
agreed to maintain directors' and officers' liability insurance covering
Nichols' current directors and officers on terms no less favorable than
Nichols' present insurance policy for a period of six years after the merger.
Computer Sciences will not, however, be required to pay more than 200% of the
annual premium currently paid by Nichols for this coverage. After the merger,
Nichols will indemnify all of its current and former directors, officers and
employees against all liabilities or any claim arising out
THE MERGER
50
<PAGE>
of their positions at Nichols and all liabilities based on the merger to the
fullest extent required or permitted under Delaware law, Nichols' certificate
of incorporation and by-laws.
Stock-Based Rights. The merger agreement provides that, when the merger
occurs, each outstanding and unexercised stock option to acquire shares of
Nichols common stock granted under the Nichols stock plans will be converted
into a stock option to buy Computer Sciences common stock. The conversion of
options will include those held by Nichols' directors and officers.
Restrictions on Resales by Affiliates
Computer Sciences has registered the shares of Computer Sciences common
stock issuable to Nichols stockholders in the merger under the Securities Act
of 1933. Consequently, these shares of Computer Sciences common stock may be
traded freely and without restriction by those Nichols stockholders who are not
affiliates of Nichols, as that term is defined under the Securities Act. An
affiliate of Nichols is a person who controls, is controlled by, or is under
common control with, Nichols.
Any post-merger sale of shares received in the merger by a Nichols affiliate
will require:
. the further registration under the Securities Act of the Computer
Sciences common stock to be transferred;
. compliance with the resale provisions of Rule 145 under the Securities
Act; or
. the availability of another exemption from registration.
In addition to the Securities Act's restrictions, the SEC's guidelines for
the pooling-of-interests method of accounting limit sales of shares of Nichols
and Computer Sciences common stock by affiliates of either company for
specified periods before and after the merger. Nichols and Computer Sciences
have obtained a letter agreement from each of their affiliates intended to
ensure the affiliate's compliance with the Securities Act and preservation of
the merger's pooling-of-interests accounting treatment.
THE MERGER
51
<PAGE>
THE MERGER AGREEMENT
The following is a summary of the material terms and provisions of the
merger agreement. The merger agreement is attached as Appendix A to this proxy
statement/prospectus, which is incorporated in this proxy statement/prospectus
by reference. We urge you to read the merger agreement carefully and in its
entirety.
Structure of the Merger
Under the merger agreement, Nevada Acquisition will merge into Nichols with
Nichols continuing as the surviving corporation. Nichols will then be a wholly
owned subsidiary of Computer Sciences, and you will be Computer Sciences
stockholders.
Closing
Computer Sciences and Nichols currently anticipate that the merger will
close on or about November 16, 1999. A delay in obtaining any required
governmental approval, however, may delay the closing of the merger. We cannot
assure you that these approvals will be obtained or when they will be obtained
or that the merger will, in fact, be completed. If the merger does not occur on
or before February 29, 2000, the merger agreement may be terminated by either
Computer Sciences or Nichols, unless the failure to complete the merger by that
date is due to the failure of the party seeking to terminate the merger
agreement to perform or observe its covenants and agreements in the merger
agreement. See "--Conditions to Completing the Merger" on page 59.
Treatment of Nichols Stock Options and Other Stock Rights
Each outstanding stock option to acquire Nichols common stock granted under
Nichols' stock option and incentive plans, which we refer to as the Nichols
stock plans, will be converted automatically in the merger into a stock option
to acquire Computer Sciences common stock. The terms of each new Computer
Sciences option will be the same as the corresponding Nichols option. The
number of shares of Computer Sciences common stock subject to the new Computer
Sciences options will be equal to the number of shares of Computer Sciences
common stock, rounded to the nearest whole number, that the holder of the
option would have been entitled to receive in the merger if the holder had
exercised the option to acquire Nichols' common stock in full immediately
before the merger occurred. The exercise price will be a price per share equal
to the aggregate exercise price for the Nichols option before the merger
divided by the product of the exchange ratio times the number of shares of
Nichols common stock purchasable under the Nichols option. However, these
adjustments with respect to any Nichols' options that are "incentive stock
options" will be made to comply with Section 424(a) of the Internal Revenue
Code. After we complete the merger, Computer Sciences will deliver to the
holders of Nichols stock options notices stating these adjustments.
For example, assuming that 0.423 of a share of Computer Sciences common
stock will be issued for each Nichols share in the merger, an option to
purchase 100 shares of Nichols common stock with an exercise price per share
before the merger of $20 per share would be converted into an option to
purchase 42 shares of Computer Sciences common stock at an exercise price of
$47.28 per share.
THE MERGER AGREEMENT
52
<PAGE>
Fractional Shares
Upon surrender of the certificates representing Nichols common stock after
the merger, you will be paid cash instead of any fractional share of Computer
Sciences common stock you would otherwise receive. The amount of cash you
receive instead of a fractional share will be equal to:
. the fraction of a share you would otherwise receive, times
. the closing price of Computer Sciences common stock, as reported on the
New York Stock Exchange Composite Transactions reporting system for the
business day five days before the merger.
Exchange of Certificates
Computer Sciences will deliver to its designated exchange agent certificates
representing the shares of Computer Sciences common stock to be exchanged for
the outstanding shares of Nichols common stock, and cash to be paid instead of
any fractional shares that would otherwise be issued to Nichols stockholders
under the merger agreement.
As soon as practicable after the merger occurs, the exchange agent will mail
to Nichols stockholders a form of transmittal letter. The form of transmittal
letter will contain instructions for the surrender of certificates representing
Nichols common stock in exchange for Computer Sciences common stock.
Please do not return Nichols common stock certificates with the enclosed
proxy and do not forward your certificates to the exchange agent unless and
until you receive a letter of transmittal following the merger.
If a certificate for Nichols common stock has been lost, stolen or
destroyed, the exchange agent will issue your shares of Computer Sciences
common stock and any cash instead of a fractional share only after you have
delivered an affidavit as to the loss, theft or destruction of the certificate
and as to your ownership of the stock represented by the certificate. Computer
Sciences or the exchange agent may require you to post bond in an amount that
Computer Sciences or the exchange agent may determine is necessary as an
indemnity against any claim that may be made against Computer Sciences with
respect to the lost, stolen or destroyed certificate.
Dividends and Distributions
No dividends or other distributions declared on Computer Sciences common
stock, if any, with a record date after the date of the merger, will be paid to
you until you have surrendered your Nichols stock certificates. No cash payment
instead of fractional shares will be paid to you until you surrender your
Nichols stock certificates.
Following your surrender of any Nichols stock certificates, as a record
holder of certificates representing whole shares of Computer Sciences common
stock, you will be paid, without interest:
. the amount of any cash payable instead of a fractional share of Computer
Sciences common stock to which you are entitled;
. the amount of dividends or other distributions, if any, with a record
date after the date we complete the merger, already paid with respect to
the whole shares of Computer Sciences common stock to which you are
entitled; and
THE MERGER AGREEMENT
53
<PAGE>
. at the appropriate payment date, the amount of dividends or other
distributions, if any, with a record date after the date we complete the
merger but prior to your surrendering your Nichols' certificates and with a
payment date subsequent to your surrendering your Nichols' certificates,
payable with respect to the whole shares of Computer Sciences common stock
to which you are entitled.
No Transfers
As soon as we complete the merger, the stock transfer books of Nichols will
be closed, and there will be no further registrations of transfers of Nichols
common stock.
Termination of Exchange Fund
At its request, Computer Sciences will receive any portion of Computer
Sciences common stock or cash that remains undistributed to Nichols
stockholders twelve months after the date we complete the merger. Any Nichols
stockholder who has not previously complied with the exchange procedures may
then look only to Computer Sciences for payment.
No Liability
Neither Nichols nor Computer Sciences will be liable to any Nichols
stockholder for any undistributed Computer Sciences common stock or cash that
is delivered to a public official under any applicable abandoned property or
similar laws.
No Interest
No interest will be paid or accrued on cash paid to Nichols stockholders
instead of fractional shares. In addition, no interest will be paid or accrued
on unpaid dividends and distributions, if any, that may be payable upon
surrender of Nichols stock certificates.
Representations and Warranties
The merger agreement contains representations and warranties of Nichols,
Computer Sciences and Nevada Acquisition. These include:
. organization, existence, good standing and qualification to do business;
. charters and by-laws;
. capitalization;
. authority relative to the merger agreement;
. receipt of board of director approval;
. financial statements and filings with the Securities and Exchange
Commission;
. accuracy of the information provided for inclusion in this proxy
statement/prospectus;
. receipt of consents and approvals for the merger;
. no defaults or violation of their governing documents or material
contracts;
. absence of undisclosed liabilities and absence of material changes or
events;
THE MERGER AGREEMENT
54
<PAGE>
. absence of material litigation;
. compliance with applicable law;
. employee benefit plans;
. labor matters;
. environmental laws and regulations;
. tax matters;
. leased and owned property;
. intellectual property, software, and Year 2000 compliance;
. insurance;
. tax and accounting treatment of the merger;
. affiliates;
. business practices;
. absence of insider interests;
. absence of broker's fees; and
. accurate disclosure.
The merger agreement contains additional representations and warranties of
Nichols. These include:
. receipt of fairness opinion of Goldman Sachs and Robinson-Humphrey,
Nichols' financial advisors;
. absence of continuing merger negotiations with parties other than
Computer Sciences;
. inapplicability of restrictions on business combinations stated in
Section 203 of the Delaware General Corporation Law or other states'
laws;
. government contracts, licenses and governmental authorizations;
. research grants;
. investigative proceedings; and
. compliance with health care laws.
The merger agreement also contains an additional representation and warranty
by Computer Sciences, that Nevada Acquisition has no obligations, other than
the merger agreement, and no business operations.
Covenants
Each of Computer Sciences and Nichols has undertaken covenants in the merger
agreement. The following summarizes the principal covenants.
THE MERGER AGREEMENT
55
<PAGE>
Computer Sciences and Nichols have each agreed, among other things, to:
. promptly notify the other party of any events or circumstances that would
cause any representations or warranties by the party giving notice to
become substantially untrue or any obligations to not be substantially
fulfilled;
. use all reasonable efforts to take all actions and to do all things
reasonably necessary under applicable law to complete the merger,
including cooperating to make all filings, obtaining consents of all
third parties and governmental authorities necessary to complete the
merger, and contesting any legal proceedings relating to the merger; and
. consult with each other before issuing press releases or public
statements regarding the merger.
Computer Sciences has also agreed to use its best efforts to list the
Computer Sciences shares to be issued to Nichols stockholders in the merger on
the New York Stock Exchange.
Conduct of Business Pending the Merger
Computer Sciences and Nichols have each agreed to do several things before
the merger occurs. These include:
. conducting its business in the ordinary course;
. seeking to preserve intact its current business;
. keeping available the services of its current officers and employees;
. preserving its relationships with customers, suppliers and others having
business dealings with it; and
. not taking any action that would make any of their representations or
warranties contained in the merger agreement untrue or incorrect.
Nichols has agreed that neither it nor any of its subsidiaries will, without
the prior written consent of Computer Sciences:
. amend its charter documents;
. issue or agree to issue any stock of any class or any other securities or
equity equivalents, except for shares of Nichols common stock issued
under options granted before September 19, 1999 and the grant of up to
275,000 options relating to compensation awards made in the ordinary
course of business;
. split, combine or reclassify any shares of its capital stock;
. declare, set aside or pay any dividend or other distribution in respect
of its capital stock, or make any other actual, constructive or deemed
distribution in respect of its capital stock;
. redeem or otherwise acquire any of its securities or any securities of
any of its subsidiaries;
. adopt a plan of complete or partial liquidation, dissolution, merger, or
other reorganization other than the merger with Computer Sciences;
. alter any subsidiary's corporate structure or ownership;
. incur, assume or issue any debt, except for borrowings under existing
lines of credit in the ordinary course of business;
THE MERGER AGREEMENT
56
<PAGE>
. become liable or responsible for the obligations of any other person,
except in the ordinary course of business consistent with past practice
and except for obligations of subsidiaries incurred in the ordinary
course of business;
. make any loans, advances or capital contributions to or investments in
any other person, other than to subsidiaries or customary loans or
advances to employees, in each case in the ordinary course of business
consistent with past practice;
. encumber its shares of capital stock;
. mortgage or pledge any of its material assets or create any material lien
thereupon;
. unless required by law, adopt, amend or terminate any employee
compensation, benefit or similar plan or increase any compensation or
fringe benefits of any director, officer or employee, except that Nichols
may sign employment or severance agreements with new employees or
increase annual compensation or bonus arrangements, in each case in the
ordinary course of year-end compensation reviews and consistent with past
practice;
. acquire, sell, lease or otherwise dispose of any assets in any single
transaction or series of related transactions having a fair market value
in excess of $1 million;
. change any of its accounting principles or practices, unless required by
a change in law or in generally accepted accounting principles;
. revalue in any significant way any of its assets, other than in the
ordinary course of business and in accordance with generally accepted
accounting principles;
. acquire any business entity or any equity interest in a business entity;
. enter into any significant agreement, other than in the ordinary course
of business consistent with past practices;
. authorize new capital expenditures that individually exceed $1 million,
or in the aggregate exceed $5 million, except for capital expenditures
required under existing customer contracts;
. make any material tax election or settle or compromise any material
income tax liability;
. settle or compromise any legal action that relates to the merger or would
significantly harm Nichols;
. begin or terminate any significant software development project, unless
required under existing customer contracts; or
. take any action that accelerates the vesting of any stock options issued
by Nichols or any of its subsidiaries.
Computer Sciences has agreed that neither it nor any of its subsidiaries
will, without the advance written consent of Nichols:
. knowingly take any action that would cause Computer Sciences common stock
to stop being listed on the New York Stock Exchange;
. declare, set aside or pay any non-stock dividend or other distribution on
its capital stock, or acquire any of its own securities;
. acquire any business entity, or agree to be acquired, or buy any assets
or sell any significant portion of its assets, but only if, in each case,
the transaction would prevent or delay the merger for more than thirty
days; or
. propose to adopt any amendments to its charter documents that would have
a negative impact on the merger.
THE MERGER AGREEMENT
57
<PAGE>
No Solicitation of Transactions
The merger agreement prohibits Nichols from providing confidential
information to or having discussions or negotiations with anyone other than
Computer Sciences for any third party acquisition, unless:
. the third party submits an unsolicited bona fide written proposal to
acquire more than 50% of Nichols' outstanding stock or a substantial
portion of Nichols' consolidated assets;
. Nichols' board decides in good faith, after consulting with financial and
legal advisors, that the proposal is a superior proposal, by which we
mean that
-- the proposal, if completed, would be more favorable than the merger to
Nichols stockholders, from a financial point of view and
-- the proposal is reasonably capable of being completed in accordance
with its terms; and
. Nichols' board decides in good faith, based on the advice of its
independent legal counsel, that the board's fiduciary duty requires the
board to supply confidential information to and/or negotiate with the
third party about its proposal.
Nichols has agreed that it will promptly provide Computer Sciences with a copy
of any superior proposal and keep Computer Sciences advised concerning any
superior proposal.
We use the term third party acquisition to mean any of the following:
. an acquisition of Nichols by a party other than Computer Sciences;
. the acquisition of more than 30% of Nichols' consolidated assets by
someone other than Computer Sciences;
. beneficial ownership, by one party or a group of parties acting together,
of 20% or more of the outstanding shares of Nichols common stock, except
that the mutual fund now having beneficial ownership of more than 11% of
Nichols' outstanding common stock may have beneficial ownership of up to
30% of Nichols' common stock without that holding being deemed a third
party acquisition;
. Nichols' adoption of a plan of liquidation or declaration or payment of
an extraordinary dividend;
. Nichols' repurchase of more than 15% of its outstanding shares; or
. Nichols' acquisition of any interest or investment in any business whose
annual revenue, net income or assets is equal to or greater than 40% of
the annual revenue, net income or assets of Nichols.
Nichols' board may not withdraw or modify its recommendation of the merger
or approve or recommend any third party acquisition, or cause Nichols to enter
into any agreement for a third party acquisition unless:
. Nichols' board decides in its good faith judgment, after consultation
with and based upon the advice of its legal counsel, that it is required
to do so in order to comply with its fiduciary duties;
. Nichols' board has received a superior proposal;
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. Nichols gives Computer Sciences written notice that Nichols has received
a superior proposal, and the notice specifies the significant terms and
conditions of and identifies the person making the proposal;
. Computer Sciences does not within five business days of receipt of the
notice make an offer that Nichols' board decides in good faith, after
consultation with its financial advisors and legal counsel, to be at
least as favorable to Nichols stockholders as the superior proposal; and
. Nichols terminates the merger agreement and pays $16.5 million to
Computer Sciences. See "--Termination of the Merger Agreement--
Termination Fee and Expenses" on page 61.
The merger agreement does not, however, prohibit the Nichols' board of
directors from taking and disclosing to Nichols' stockholders a position
contemplated by Rules 14d-9 and 14e-2 under the Securities Exchange Act of 1934
with regard to a tender or exchange offer made by someone other than Computer
Sciences.
Conditions to Completing the Merger
The obligations of Computer Sciences and Nichols to complete the merger
depend on the following conditions being fulfilled:
. Nichols stockholders have approved and adopted the merger agreement;
. there is no law or order by any United States court or governmental
authority that prohibits, restrains or enjoins the completion of the
merger;
. any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 has terminated and any other governmental
notices or approvals necessary to complete the merger have been filed or
received;
. the registration statement containing this proxy statement/prospectus is
not subject to any stop order or proceedings seeking a stop order by the
Securities and Exchange Commission, and Computer Sciences has received
all state securities law permits and authorizations necessary to issue
shares of Computer Sciences common stock in exchange for shares of
Nichols common stock in the merger;
. Nichols has received a letter at the merger closing from Ernst & Young
LLP confirming that Nichols is eligible to be a party to a merger
accounted for as a pooling-of-interests, and that Ernst & Young is not
aware of any matters that prohibit the use of pooling-of-interest
accounting; and
. Computer Sciences has received at the merger closing from Deloitte &
Touche LLP a written opinion that the merger will be accounted for as a
pooling-of-interests.
Nichols' obligation to complete the merger also depends on the following
conditions being fulfilled:
. except for insignificant defects, Computer Sciences' representations and
warranties in the merger agreement are true on the closing date of the
merger;
. Computer Sciences has performed in all significant respects each of its
agreements under the merger agreement to be performed before the merger;
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. the Computer Sciences common stock issuable to Nichols stockholders in
the merger has been authorized for listing on the New York Stock
Exchange;
. Nichols has received an opinion from Weil, Gotshal & Manges LLP and
Computer Sciences has received an opinion from Gibson, Dunn & Crutcher
LLP, a copy of which has been provided to Nichols, in each case stating
that the merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code; and
. there has been no material adverse event regarding Computer Sciences.
Computer Sciences' obligation to complete the merger also depends on the
following conditions being fulfilled:
. except for insignificant defects, Nichols' representations and warranties
contained in the merger agreement are true on the closing date of the
merger;
. Nichols has performed in all significant respects each of its agreements
under the merger agreement to be performed before the merger;
. Computer Sciences has received letters from each of Nichols' and Computer
Sciences' affiliates intended to ensure the affiliate's compliance with
the Securities Act and preservation of the merger's pooling-of-interests
accounting treatment;
. Nichols has received the consent or approval of each person required to
permit Nichols to retain its rights, interests and obligations under
Nichols' significant contracts, leases, notes and instruments, except for
specified credit facility agreements;
. Computer Sciences has received an opinion from Gibson, Dunn & Crutcher
LLP stating that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code; and
. there has been no material adverse event regarding Nichols.
Termination of the Merger Agreement
Termination. The merger agreement may be terminated before the merger's
completion whether before or after adoption of the merger agreement by Nichols
stockholders:
. by the mutual written consent of Computer Sciences and Nichols;
. by either Computer Sciences or Nichols:
-- if Nichols' stockholders fail to approve the merger agreement;
-- if the merger is not completed by February 29, 2000 unless the party
seeking to terminate has caused the delay;
-- if the nonterminating party breaches any of its representations or
warranties in the merger agreement so that at least one of the
conditions of the terminating party to complete the merger is not
satisfied, as long as the terminating party has not breached any of
its obligations under the merger agreement;
-- if the nonterminating party breaches any of its covenants or
agreements in the merger agreement that materially harms the
nonterminating party or materially harms or delays the merger and the
nonterminating party does not rectify the breach within twenty
THE MERGER AGREEMENT
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business days, as long as the terminating party had not breached any
of its obligations under the merger agreement;
-- if there have been events causing material harm to the nonterminating
party; or
-- if a U.S. court or other governmental authority issues a non-
appealable, final ruling prohibiting the merger.
. by Nichols:
-- if Nichols' board recommends to its stockholders a superior proposal
but only if Nichols complies with the merger agreement's provisions
relating to potential acquirors' superior proposals and has paid the
$16.5 million termination fee to Computer Sciences;
-- if Nichols' board withdraws, modifies or changes its recommendation of
the merger agreement or merger or fails to call or convene a
stockholders' meeting to vote on the merger, but only if Nichols
complies with the merger agreement's provisions relating to other
potential acquirors' superior proposals and has paid the $16.5 million
termination fee to Computer Sciences; or
-- if the average closing price of Computer Sciences' common stock,
calculated over fifteen days selected at random from the twenty
trading days ending November 10, 1999, is less than $52.9552.
. by Computer Sciences:
-- if Nichols' board recommends to its stockholders a superior proposal;
or
-- if Nichols' board withdraws, modifies or changes its recommendation of
the merger agreement or merger or fails to call or convene a
stockholders' meeting to vote on the merger.
Effect of Termination. Termination of the merger agreement by the parties
as described above will void the agreement without any liability or
obligations to Computer Sciences or Nichols, other than
. any liability for breach of the merger agreement;
. the obligation of the parties to keep confidential all nonpublic
information furnished in connection with the merger; and
. the termination fee and expense provisions described below.
Termination Fee and Expenses. Nichols has agreed to pay Computer Sciences a
termination fee of $16.5 million if the merger agreement is terminated:
. by Nichols if Nichols' board recommends a superior proposal, withdraws,
changes or modifies its recommendation of the merger or fails to call or
convene a meeting of Nichols' stockholders to vote on the merger, and
Nichols otherwise complies with the merger agreement's provisions
relating to other potential acquirors' superior proposals;
. by Computer Sciences because:
-- Nichols' board recommends a superior proposal to its stockholders;
-- Nichols' board withdraws, changes or modifies its recommendation of
the merger agreement or the merger or fails to call or convene a
stockholders' meeting to vote on the merger; or
THE MERGER AGREEMENT
61
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-- Nichols materially breaches any of its representations or warranties
in the merger agreement and those breaches cannot be cured by February
29, 2000, or Nichols breaches any of its covenants or agreements in
the merger agreement, which breaches materially harm Nichols or
materially harm or delay the merger and Nichols has not cured the
breaches within twenty business days of notice from Computer Sciences
and, within twelve months after termination, Nichols enters into
another acquisition agreement with a third party that Nichols was
dealing with concerning a third party acquisition after September 19,
1999 and before the termination, but only if Computer Sciences has not
breached any of its obligations under the merger agreement.
. by Nichols or Computer Sciences because Nichols stockholders have failed
to approve the merger and, at the same time, there was outstanding a
third party acquisition proposal or a third party publicly reported that
it beneficially owned 20% or more of Nichols' outstanding common stock.
In addition, Nichols has agreed to reimburse Computer Sciences for up to $5
million of its out-of-pocket fees and expenses incurred in connection with of
the merger, which amount will be credited against any termination fee payable,
if the merger agreement is terminated:
. by either Nichols or Computer Sciences because Nichols stockholders fail
to approve the merger agreement at a convened stockholders' meeting;
. by Nichols because the average closing price of the Computer Sciences
common stock, calculated over fifteen days selected at random from the
twenty trading days ending November 10, 1999, is less than $52.9552;
. by Computer Sciences because:
-- Nichols breaches any of its representations or warranties in the
merger agreement and those breaches cannot be cured by February 29,
2000, but only if Computer Sciences has not breached any of its
obligations under the merger agreement; or
-- Nichols breaches any of its covenants or agreements in the merger
agreement, those breaches materially harm Nichols or materially harm
or delay the merger and Nichols has not cured the breach within twenty
business days, but only if Computer Sciences has not breached any of
its obligations under the merger agreement.
Computer Sciences has agreed to reimburse Nichols for up to $5 million of
its out-of-pocket fees and expenses incurred in connection with of the merger
agreement, if the merger agreement is terminated:
. by Nichols because:
-- Computer Sciences breaches any of its representations or warranties in
the merger agreement and those breaches cannot be cured by February
29, 2000, but only if Nichols has not breached any of its obligations
under the merger agreement; or
-- Computer Sciences breaches any of its covenants or agreements in the
merger agreement, those breaches materially harm Computer Sciences or
materially harm or materially delay the merger and Computer Sciences
has not cured the breach within twenty business days, but only if
Nichols has not breached any of its obligations under the merger
agreement.
THE MERGER AGREEMENT
62
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Except for the termination fee and expense reimbursements described above,
each party will pay its own expenses in connection with the merger agreement.
Extension, Waiver and Amendment of the Merger Agreement
Extension and Waiver. At any time before the merger occurs, we may agree to:
. extend the time for the performance of any of the obligations or other
acts of the other party;
. waive any inaccuracies in the other's representations and warranties; or
. waive the other's compliance with any of the agreements or conditions in
the merger agreement.
Amendment. The merger agreement may be changed by us at any time before or
after Nichols stockholders approve the merger. Any change after the
stockholders approve the merger that by law requires the approval of Nichols
stockholders, however, will require their subsequent approval to be effective.
Employee Benefits and Plans
On or before the merger, Nichols will terminate the following retirement
plans:
. Nichols Research Corporation Retirement Plan,
. The Welkins Associates Ltd. Money Purchase Plan,
. the PRISM Simplified Employee Pension Plan and
. the Murray & West, Inc. 401(k) Plan.
These terminations will become effective on or before the merger. For the
purposes of eligibility to participate and vesting in Computer Sciences' 401(k)
plan, known as the Computer Sciences Matched Asset Plan, Nichols employees will
be given credit for service performed for Nichols or any of its affiliates
before the merger. Each outstanding option to purchase shares of Nichols common
stock under Nichols' 1988 employees' stock purchase plan will be exercised
automatically on a day that is at least three days before the merger. This
stock purchase plan will be terminated right after the exercise of these
options. After the merger, Nichols' employee benefit plans, arrangements and
agreements, in effect immediately before the merger, other than the terminated
plans, will remain in effect for Nichols' employees and dependents covered by
them until Computer Sciences modifies or terminates these plans.
Management After the Merger
Boards of Directors. Computer Sciences' board of directors will not change
as a result of the merger.
Management. The composition of Computer Sciences' management will not change
as a result of the merger. Key staff positions within the surviving corporation
have not yet been finally determined. From time to time before the merger,
decisions may be made with respect to the management and operations of Nichols
after the merger.
Information about current Computer Sciences directors and executive officers
can be found in Computer Sciences' proxy statement and in its annual report on
Form 10-K/A for the fiscal year ended April 2, 1999, which are incorporated by
reference into this proxy statement/prospectus. See "Where You Can Find More
Information."
THE MERGER AGREEMENT
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INFORMATION ABOUT THE COMPANIES
Computer Sciences
General
Computer Sciences is one of the world leaders in the information technology
services industry. Since 1959, Computer Sciences has helped clients use
information technology more efficiently, thus improving their operations and
profitability. Computer Sciences does not have exclusive agreements with
hardware or software providers. This vendor neutrality enables it to better
identify and manage solutions specifically tailored to each client's needs.
Computer Sciences offers a broad array of professional services to industry
and government. These services include:
. Outsourcing--operating all or a portion of a customer's technology
infrastructure, including systems analysis, applications development,
network operations, desktop computing and data center management.
Computer Sciences also provides business process outsourcing, which is
the management of a client's non-core business functions, such as claims
processing, credit checking, or customer call centers.
. System integration--designing, developing, implementing and integrating
complete information systems.
. Information technology and management consulting and other professional
services--advising clients on the strategic acquisition and utilization
of information technology, and on business strategy, operations, change
management and business process reengineering.
Computer Sciences' service offerings are focused primarily on the U.S.
federal government and on global commercial industries including:
<TABLE>
<S> <C>
. aerospace; . media;
. automotive; . public sector;
. chemical and energy; . retail/distribution;
. consumer goods; . telecommunications;
. financial services; . traffic and transportation;
. healthcare; . travel and hospitality; and;
. manufacturing; . utilities.
</TABLE>
Because of the size of its offerings within the financial services,
healthcare, and chemical and energy industries, Computer Sciences has formed
vertical industry groups to better deliver integrated solutions to clients in
these industries.
The Computer Sciences Market
For four decades, Computer Sciences has provided information technology
services to the U.S. federal government. For most of this time, U.S. federal
contracts have represented the majority of Computer Sciences' revenues. In
fiscal 1986, when U.S. federal contracts represented 70% of revenues, Computer
Sciences decided to devote substantial resources to further develop global
commercial business. Computer Sciences sought to accelerate its growth and take
advantage of the expertise gained as a leader in the federal sector. As a
result of this strategy, Computer Sciences has
INFORMATION ABOUT THE COMPANIES
64
<PAGE>
increased its penetration of the global commercial market and diversified its
business. In fiscal 1999, commercial contracts accounted for 77% of revenues,
with federal contracts representing 23% of revenues. Computer Sciences is now a
major provider of outsourcing, consulting and technical services to U.S. and
international commercial clients, with offices throughout the United States and
in the United Kingdom, France, Germany, Belgium, the Netherlands, Denmark,
Italy, Australia and Singapore.
Additional Information
Information relating to executive compensation, various benefit plans,
including stock option plans, voting securities and their principal holders,
relationships and related transactions between Computer Sciences and its
management or major stockholders and other related matters as to Computer
Sciences is stated in Computer Sciences' annual report on Form 10-K/A for the
fiscal year ended April 2, 1999, and proxy statement on Form 14A filed with the
SEC on July 1, 1999. These documents are incorporated in this proxy
statement/prospectus by reference. Nichols stockholders desiring copies of
these documents may contact Computer Sciences at its address or telephone
number listed under "Where You Can Find More Information."
Nichols
Nichols is a premier provider of high-performance technology-based solutions
and services where information access, movement, and evaluation are mission
critical to an organization's success. Nichols provides these services to a
wide range of clients in three markets:
. government;
. commercial information technology; and
. healthcare information technology.
Nichols' substantial expertise and capabilities in a wide range of
technologies have been built over a 22-year period of providing advanced
development, scientific and application services to U.S. military programs.
These activities have allowed Nichols to build and maintain a foundation of
advanced skills in:
. systems engineering;
. command, control, communication, computers and intelligence systems;
. virtual reality-based training systems;
. naval architecture;
. high performance systems integration;
. information systems support;
. network and computer facility outsourcing and management software and
systems development;
. data warehousing and mining; and
. systems security.
INFORMATION ABOUT THE COMPANIES
65
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Nichols' advanced technical capabilities gained while performing services
for United States federal projects have provided Nichols with the technological
competence that Nichols is implementing in the commercial sector. Nichols today
addresses the technology needs of a diverse customer base by applying its
state-of-the-art technical capabilities in commercial systems integration,
simulation, software development and client-server architectures. Nichols has
expanded the market for its services by offering innovative technical solutions
to customers' needs and, as a result, non-military markets for Nichols'
services represented approximately 45% of revenues in fiscal year 1998.
Nevada Acquisition Corporation
Nevada Acquisition Corporation is a wholly owned subsidiary of Computer
Sciences. It was incorporated in Delaware solely for use in the merger and has
never conducted any other business.
INFORMATION ABOUT THE COMPANIES
66
<PAGE>
DESCRIPTION OF CAPITAL STOCK
When we complete the merger, Nichols stockholders will become Computer
Sciences stockholders. The following is a description of Computer Sciences
common stock to be issued in the merger.
Computer Sciences Capital Stock
The authorized capital stock of Computer Sciences consists of 275,000,000
shares of common stock, $1.00 par value, and 1,000,000 shares of preferred
stock, $1.00 par value. No shares of preferred stock are presently outstanding.
Computer Sciences' restated articles of incorporation, as amended, do not
authorize any other classes of capital stock. The issued and outstanding shares
of Computer Sciences common stock are, and the shares issuable in connection
with the merger, when issued will be, duly authorized, validly issued, fully
paid and nonassessable.
Computer Sciences Common Stock. As of October 8, 1999, there were
approximately 160,313,765 shares of Computer Sciences common stock outstanding
held of record by approximately 8,843 persons. Computer Sciences common stock
is listed on the New York Stock Exchange under the symbol "CSC." Holders of
Computer Sciences common stock are entitled to one vote per share on all
matters to be voted upon by Computer Sciences stockholders and may cumulate
votes for the election of directors. The holders of Computer Sciences common
stock are entitled to receive ratably dividends, if any, that are declared by
Computer Sciences' board out of funds legally available for the payment of
dividends. In the event of a liquidation, dissolution or winding up of Computer
Sciences, after all liabilities and the holders of each series of preferred
stock have been paid in full, the holders of Computer Sciences common stock are
entitled to share ratably in all remaining assets. The Computer Sciences common
stock has no preemptive or conversion rights or other subscription rights.
There are no redemption or sinking fund provisions applicable to the Computer
Sciences common stock. Each outstanding share of Computer Sciences common stock
is accompanied by a preferred stock purchase right. See "Comparison of
Stockholders Rights--Rights Plans."
ChaseMellon Shareholder Services L.L.C. is the Transfer Agent and Registrar
for the shares of Computer Sciences common stock.
Computer Sciences Preferred Stock. Computer Sciences' board may issue up to
1,000,000 shares of preferred stock in one or more series and, subject to
Nevada corporation law, may
. fix the rights, preferences, privileges and restrictions of the preferred
stock,
. fix the number of shares and designation of any series of preferred
stock, and
. increase or decrease the number of shares of any series but not below the
number of outstanding shares.
At the date of this proxy statement/prospectus, no shares of Computer
Sciences preferred stock were outstanding. Although Computer Sciences presently
does not intend to do so, its board has the power to issue Computer Sciences
preferred stock with voting and conversion rights that could negatively affect
the voting power or other rights of the Computer Sciences common stockholders,
and the board could take that action without stockholder approval. The issuance
of Computer Sciences preferred stock could delay or prevent a change in control
of Computer Sciences.
DESCRIPTION OF CAPITAL STOCK
67
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Computer Sciences' amended articles of incorporation designate 200,000
shares of preferred stock as series A junior participating preferred stock in
connection with Computer Sciences' stockholder rights plan, as described below.
We refer to Computer Sciences' series A junior participating preferred stock as
the series A preferred shares.
Nichols Capital Stock
Nichols capital stock is described in its registration statement on Form 8-
A/A, filed August 18, 1989, and is incorporated by reference into this proxy
statement/prospectus.
DESCRIPTION OF CAPITAL STOCK
68
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COMPARISON OF STOCKHOLDERS RIGHTS
Upon consummation of the merger, the stockholders of Nichols, a Delaware
corporation, will become stockholders of Computer Sciences, a Nevada
corporation, and the rights of former Nichols stockholders will be governed by
Nevada law and by Computer Sciences' articles of incorporation and bylaws. The
rights of the former Nichols stockholders under Nevada law and Computer
Sciences' articles of incorporation and bylaws will differ in several respects
from the rights of Nichols stockholders under Delaware law and Nichols'
certificate of incorporation and bylaws. The following is a summary of the
material differences between the current rights of Nichols stockholders and
those of Computer Sciences stockholders following the merger. We encourage you
to read the relevant provisions of Delaware and Nevada law, Computer Sciences'
articles of incorporation and bylaws and Nichols' certificate of incorporation
and bylaws. Computer Sciences' articles of incorporation and bylaws are
exhibits to documents that are incorporated by reference in the registration
statement of which this proxy statement/prospectus is a part.
Size of Board of Directors
Delaware law permits the board of directors of a Delaware corporation to
change the authorized number of directors by amendment to the corporation's
bylaws or in the manner provided in the bylaws, unless the number of directors
is fixed in the corporation's certificate of incorporation, in which case a
change in the number of directors may be made only by amendment to the
certificate of incorporation. The Nichols bylaws provide that the authorized
number of directors constituting the Nichols' board shall not be less than five
or more than thirteen, as established from time to time by action of the
directors. The number of directors presently authorized is thirteen.
Under Nevada law, although changes in the number of directors must in
general be approved by the stockholders, a Nevada corporation may fix the exact
number of directors within a range stated in the corporation's articles of
incorporation or bylaws. Computer Sciences' articles of incorporation and
bylaws provide that the authorized number of directors shall not be less than
three nor more than fifteen, as established from time to time by action of the
directors. Computer Sciences' board has currently fixed the number of directors
at nine.
Classified Board of Directors
A classified board of directors is one in which some, but not all, of the
directors are elected on a rotating basis each year. Delaware law permits, but
does not require a Delaware corporation to provide in its certificate of
incorporation for a classified board of directors, dividing the board into up
to three classes of directors with staggered terms of office, with only one
class of directors to be elected each year for a maximum term of three years.
Nichols' certificate of incorporation does not provide for a classified board
of directors.
Although Nevada law allows directors to be divided into separate classes
with staggered terms of office, neither Computer Sciences' articles of
incorporation nor bylaws provides for classification of directors.
Cumulative Voting
In an election of directors under cumulative voting, each share of stock
normally having one vote is entitled to a number of votes equal to the number
of directors to be elected. A stockholder may then cast all of his or her votes
for a single candidate or may allocate them among as many
COMPARISON OF STOCKHOLDERS RIGHTS
69
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candidates as the stockholder may choose, up to the number of directors to be
elected. Without cumulative voting, the holders of a majority of the shares
present at an annual meeting or any special meeting held to elect directors
have the power to elect all the directors to be elected at that meeting, and no
person could be elected without the support of holders of a majority of the
shares voting at the meeting.
Under Delaware law, cumulative voting in the election of directors is not
available unless specifically provided for in a corporation's certificate of
incorporation. Nichols' certificate of incorporation does not provide for
cumulative voting.
Under Nevada law, cumulative voting in the election of directors is only
available if the corporation's articles of incorporation provide for such an
election. Computer Sciences' articles of incorporation do provide for
cumulative voting but a stockholder must demand cumulative voting in advance of
the meeting in order for cumulative voting to apply at the meeting.
Stockholder Power to Call Special Stockholders' Meeting
Under Delaware law, a special meeting of stockholders may be called by the
board of directors or any other person authorized to do so in the corporation's
certificate of incorporation or bylaws. Nichols' bylaws provide that special
meetings of stockholders may be called by the chief executive officer,
president or a majority of the board of directors.
Nevada law does not specifically address who may call special meetings of
stockholders. Computer Sciences' bylaws provide that special meetings of
stockholders may be called by the chairman of the board, the board of
directors, or by the president, except that if Computer Sciences has not held
its annual meeting of stockholders for a period of 18 months from the most
recent annual meeting at which directors were elected or if the annual meeting
was held within 18 months but directors were not elected at the annual meeting,
the president or the secretary must call a special meeting to elect directors,
on written request of a majority of the board of directors or of stockholders
owning not less than 50% of the outstanding voting shares.
Dissolution
Under Delaware law, a dissolution must be approved by stockholders holding
100% of the total voting power or the dissolution must be initiated by the
board of directors and approved by the holders of a majority of the outstanding
voting shares of the corporation. Under Nevada law, stockholders holding 50% or
more of the total voting power may authorize a corporation's dissolution, and
this right may not be modified by its articles of incorporation.
Removal of Directors
Under Delaware law, any director or the entire board of directors may be
removed with or without cause by the holders of a majority of the shares
entitled to vote unless the certificate of incorporation provides otherwise.
Nichols' bylaws provide that any director may be removed with or without cause
by a majority of shares entitled to vote.
Under Nevada law a director may be removed by the vote of the holders of not
less than two-thirds of the voting stock, subject to specific provisions
concerning the vote needed to remove individual directors of a Nevada
corporation having cumulative voting.
COMPARISON OF STOCKHOLDERS RIGHTS
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Nevada law has recently been changed to provide that the holders of two-thirds
of the voting stock may remove the entire board, even if the corporation has
cumulative voting. Computer Sciences intends to amend its bylaws accordingly.
Filling Vacancies on the Board of Directors
Under Delaware law, vacancies on the board of directors and newly created
directorships may be filled by a majority of the directors then in office, even
though less than a quorum, unless otherwise provided in the certificate of
incorporation or bylaws of the corporation. Nichols' bylaws provide that the
directors may fill the place of any director that has become vacant before the
expiration of the director's term by a vote of the majority of remaining
directors, even though less than a quorum, with the director so elected to
serve for the remainder of the term of the departed director. Any vacancy that
occurs by reason of an increase in the number of directors is filled by
election at an annual meeting or special meeting of stockholders called for
that purpose.
Under Nevada law, all vacancies, including those caused by an increase in
the number of directors, may be filled by a majority of the remaining
directors, even though less than a quorum, unless otherwise provided in the
articles of incorporation. Computer Sciences' bylaws provide that Computer
Sciences' board may fill all vacancies created by reason of death, resignation,
an increase in the number of directors or otherwise, by a majority vote of the
remaining directors, although less than a quorum, with the director so elected
to serve for the remainder of the term of the departed director. All directors
continue in office until the election and qualification of their successors in
office.
Voting Requirements to Amend Charter and Bylaws
Unless otherwise specified in a Delaware corporation's certificate of
incorporation, an amendment to the certificate of incorporation requires the
affirmative vote of a majority of the outstanding stock entitled to vote.
Unless the certificate confers power on the board of directors to adopt, amend
or repeal bylaws, only the stockholders have those powers as to the bylaws.
Nichols' certificate of incorporation does not contain any provision modifying
the statute.
Under Nevada law, unless the articles of incorporation or bylaws provide
otherwise, amendments to the articles of incorporation generally require the
approval of the holders of a majority of the outstanding stock entitled to
vote. Nevada law also provides that the board of directors may amend the bylaws
if the bylaws so provide. Even if the bylaws confer this power on the board of
directors, the stockholders also have the power to amend the bylaws.
The Computer Sciences articles of incorporation provide that Computer
Sciences' board of directors has the power to make, alter or amend the bylaws,
and Computer Sciences' bylaws provide that Computer Sciences' board may adopt,
amend or repeal the bylaws. Computer Sciences' bylaws may also be adopted,
amended or repealed by the affirmative vote of more than eighty percent of the
outstanding voting shares of Computer Sciences.
Inspection of Stockholders List
Delaware law allows any stockholder to inspect the stock ledger and the
other books and records of a corporation for a purpose reasonably related to
that person's interest as a stockholder.
COMPARISON OF STOCKHOLDERS RIGHTS
71
<PAGE>
Under Nevada law, any person who has been a stockholder of record of a
corporation for at least six months, or any person holding or representing at
least five percent of its outstanding shares, upon at least five days written
demand, may inspect its stock ledger and make copies from it. A corporation
must allow stockholders of record who own or represent at least fifteen percent
of a corporation's shares the right, upon at least five days written demand, to
inspect the books of account and financial records of the corporation, to make
copies from them and to conduct an audit of those records, except that any
corporation listed and traded on any recognized stock exchange or any
corporation that furnishes to its stockholders a detailed, annual financial
statement is exempt from this requirement.
Dividends
Subject to any restrictions contained in a corporation's certificate of
incorporation, Delaware law generally provides that a corporation may declare
and pay dividends out of surplus or, when no surplus exists, out of net profits
for the fiscal year in which the dividend is declared and/or for the preceding
fiscal year. Surplus is defined as net assets minus stated capital. Dividends
may not be paid out of net profits if the capital of the corporation is less
than the amount of capital represented by the issued and outstanding stock of
all classes having a preference upon the distribution of assets. Nichols'
certificate of incorporation contains no restrictions on the declaration or
payment of dividends.
Except as otherwise provided in the corporation's articles of incorporation,
Nevada law authorizes the corporation to make distributions to its
stockholders, unless
. the corporation would not be able to pay its debts as they become due in
the usual course of business, or
. the corporation's total assets would be less than the sum of its total
liabilities plus any amount owed if the corporation were dissolved at the
time of distribution, to stockholders with preferential rights superior
to those receiving the distribution.
Computer Sciences' articles of incorporation contain no restrictions on the
declaration or payment of dividends.
Transactions Involving Officers or Directors
A Delaware corporation may lend money to, or guarantee any obligation
incurred by, its officers or directors if, in the judgment of the board of
directors, the loan or guarantee may reasonably be expected to benefit the
corporation. Any other contract or transaction between the corporation and one
or more of its directors or officers is neither void nor voidable solely
because the interested director or officer was present, participates or votes
at the board or board committee meeting that authorizes the contract or
transaction, if either:
. the director's or officer's interest is made known to the disinterested
directors or the stockholders of the corporation, who thereafter approve
the transaction in good faith, or
. the contract or transaction is fair to the corporation as of the time it
is approved or ratified by either the board of directors, a committee
thereof, or the stockholders.
Under Nevada law, there is no corresponding specific provision concerning
loans or guarantees. Under Nevada law, a contract or transaction between a
corporation and one or more of its directors
COMPARISON OF STOCKHOLDERS RIGHTS
72
<PAGE>
or officers, or between a corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, is not void
or voidable solely for that reason, or solely because the interested director
or officer was present, participates or votes at the board or board committee
meeting that authorizes the contract or transaction, if the director's or
officer's interest in the contract or transaction is known to the board of
directors or stockholders, and the contract or transaction is fair to the
corporation at the time it is authorized or approved.
Limitation of Liability of Directors and Indemnification
Under Delaware law, a corporation may include in its certificate of
incorporation a provision that would, subject to the limitations described
below, eliminate or limit directors' liability for monetary damages for
breaches of their fiduciary duty of care. Under Delaware law, a director's
liability cannot be eliminated or limited:
. for breaches of the duty of loyalty,
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law,
. for the payment of unlawful dividends or expenditure of funds for
unlawful stock purchases or redemptions, or
. for transactions from which such director derived an improper personal
benefit.
The Nichols certificate of incorporation contains provisions limiting a
director's liability to the fullest extent permitted by Delaware law.
Under Section 145 of the Delaware General Corporation Law, Nichols also has
broad powers to indemnify its directors and officers against liabilities
incurred in these capacities. Nichols' bylaws provide that Nichols will
indemnify its directors and executive officers and may indemnify other officers
to the fullest extent permitted by law. Nichols' bylaws also allow Nichols to
advance litigation expenses in the case of stockholder derivative actions or
other actions, against an undertaking by the indemnified party to repay any
advances if it is ultimately determined that the indemnified party is not
entitled to indemnification.
Nevada law allows a corporation, through its articles of incorporation, to
limit or eliminate the personal liability of directors and officers to the
corporation and its stockholders for damages for breach of fiduciary duty.
However, this provision excludes any liability for acts or omissions that
involve intentional misconduct, fraud or a knowing violation of law or the
payment of distributions in violation of Section 78.300 of the Nevada Revised
Statutes.
Section 78.751 of the Nevada Revised Statutes gives a corporation board
powers to indemnify its officers and directors against liabilities incurred in
these capacities. Expenses incurred by an officer or director, or other
employee or agent in defending civil or criminal proceedings may be paid by the
corporation in advance of the final disposition of the proceeding upon receipt
of an undertaking by or on behalf of that person to repay the amount advanced
if it is ultimately determined that that person is not entitled to be
indemnified by the corporation. To indemnify a party, the corporation must
determine that the party met the applicable standards of conduct.
Computer Sciences' articles of incorporation and bylaws provide for
limitation of liability and indemnification to the fullest extent possible
under Nevada law.
COMPARISON OF STOCKHOLDERS RIGHTS
73
<PAGE>
Business Combinations/Reorganizations
A provision of Delaware law prohibits some business combinations between a
Delaware corporation and an "interested stockholder." An "interested
stockholder" for purposes of this provision is a stockholder that is directly
or indirectly a beneficial owner of 15% or more of the voting power of the
outstanding voting stock of a Delaware corporation, or its affiliate or
associate. This provision prohibits business combinations between an interested
stockholder and the corporation for a period of three years after the date the
interested stockholder acquired its stock unless:
. the business combination is approved by the corporation's board of
directors prior to the stock acquisition date;
. the interested stockholder acquired at least 85% of the voting stock of
the corporation in the transaction in which that stockholder became an
interested stockholder; or
. the business combination is approved by a majority of the board of
directors and the affirmative vote of two-thirds of disinterested
stockholders.
Sections 78.411 to 78.444 of the Nevada Revised Statutes, restrict the
ability of a domestic corporation to engage in any combination with an
interested stockholder for three years after the interested stockholder's date
of acquiring the shares that cause the stockholder to become an interested
stockholder, unless the business combination or the purchase of shares by the
interested stockholder is approved by the board of directors before that date.
If the business combination was not previously approved, the interested
stockholder may effect the combination after the three-year period only if that
stockholder receives approval from a majority of the disinterested shares or
the offer meets various fair price criteria. An "interested stockholder" means
any person who is:
. the beneficial owner, directly or indirectly, of 10% or more of the
voting power of the corporation; or
. an affiliate or associate of the corporation who 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
corporation.
The above provisions do not apply to any business combination involving a
corporation:
. whose original articles of incorporation expressly elect not to be
governed by such provisions;
. which does not, as of the date of acquiring shares, have a class of
voting shares registered with the SEC under Section 12 of the Securities
Exchange Act, unless the corporation's articles of incorporation provide
otherwise;
. whose articles of incorporation were amended to provide that the
corporation is subject to the above provisions and which did not have a
class of voting shares registered with the SEC under Section 12 of the
Securities Act on the effective date of that amendment, if the
combination is with an interested stockholder whose date of acquiring
shares is before the effective date of such amendment; or
. that amends its articles of incorporation, as approved by a majority of
the disinterested shares, to expressly elect not to be governed by the
above provisions. This type of amendment, however, would not become
effective until 18 months after its passage and would apply only to stock
acquisitions occurring after the effective date of the amendment.
The Computer Sciences articles of incorporation do not exempt Computer Sciences
from the restrictions imposed by those provisions.
COMPARISON OF STOCKHOLDERS RIGHTS
74
<PAGE>
Sections 78.378 to 78.3793 of the Nevada Revised Statutes restrict the
voting power of shares held by a party, or group of parties acting together,
that has acquired or offered to acquire a controlling interest in a
corporation. Statutes of this sort are often called control share statutes.
Computer Sciences opted out of this statute by adopting an appropriate bylaw in
1998.
Rights Plan
Under both Delaware and Nevada law, every corporation may create and issue
rights entitling the holders of the rights to purchase from the corporation
shares of its capital stock of any class or classes, subject to provisions in
its charter documents. The price and terms of these shares must be stated in
the charter documents or in a resolution adopted by the board of directors for
the creation or issuance of the rights. Nichols does not have a stockholder
rights plan.
Computer Sciences has a stockholder rights plan, under which each share of
common stock is accompanied by the right, under specified circumstances, to
purchase one four-hundredth of a share of Computer Sciences series A preferred
stock or Computer Sciences common stock or common stock of a successor company
at an initial price of $250.00 for each one four-hundredth of a share. The
terms of the Computer Sciences stockholder rights are fully described in
Computer Sciences' rights plan dated February 18, 1998 which is incorporated in
this proxy statement/prospectus by reference. See "Where You Can Find More
Information."
The Computer Sciences stockholder rights could prevent or delay a takeover
of Computer Sciences by causing substantial dilution to a person or group that
attempts to acquire Computer Sciences on terms not approved by Computer
Sciences' board of directors. The Computer Sciences stockholder rights should
not interfere with any merger or other business combination approved by the
Computer Sciences board of directors, since the Computer Sciences stockholder
rights may be redeemed by Computer Sciences for a price of $.0005 per right.
COMPARISON OF STOCKHOLDERS RIGHTS
75
<PAGE>
ADDITIONAL INFORMATION
Dissenters' Appraisal Rights
Under Delaware law, the holders of Nichols common stock are not entitled to
any appraisal rights with respect to the merger.
Legal Matters
Gibson, Dunn & Crutcher LLP, Los Angeles, California will pass upon the
validity of the Computer Sciences common stock to be issued in the merger.
Experts
The consolidated financial statements of Computer Sciences Corporation and
the related consolidated financial statement schedule incorporated in this
proxy statement/prospectus by reference from Computer Sciences' Annual Report
on Form 10-K/A for the fiscal year ended April 2, 1999, have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which
is incorporated in this proxy statement/prospectus by reference, and have been
so incorporated in reliance upon the report of such firm given their authority
as experts in accounting and auditing.
The consolidated financial statements of Nichols Research Corporation
incorporated by reference in Nichols Research Corporation's Annual Report on
Form 10-K/A for the year ended August 31, 1998, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon
incorporated by reference therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing. Members of Ernst & Young LLP, Nichols' independent
public accountants, are expected to attend the special meeting, will have the
opportunity to make a statement at the meeting if they so desire and are
expected to be available to respond to appropriate questions.
Stockholder Proposals
Nichols will hold a 2000 annual meeting of stockholders only if the merger
is not completed before the time of the 2000 annual meeting. In the event that
a meeting is held, any proposals of Nichols stockholders intended to be
presented at the 2000 annual meeting must have been received by the secretary
of Nichols no later than August 9, 1999 in order to be considered for inclusion
in Nichols' proxy materials relating to the 2000 annual meeting.
Other Matters
As of the date of this proxy statement/prospectus, Nichols' board and
Computer Sciences' board know of no matters that will be presented for
consideration at the Nichols special meeting other than as described in this
proxy statement/prospectus. If any other matters properly come before the
Nichols special meeting or any adjournment or postponement of the special
meeting and are voted upon, the enclosed proxies will be deemed to confer
discretionary authority on the individuals named as proxies in the enclosed
proxies to vote the shares represented by those proxies as to any such matters.
The individuals named as proxies intend to vote or not to vote in accordance
with the recommendation of the management of Nichols.
ADDITIONAL INFORMATION
76
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Computer Sciences has filed with the Securities and Exchange Commission a
registration statement under the Securities Act on Form S-4 that registers the
distribution to Nichols' stockholders of the shares of Computer Sciences common
stock to be issued in connection with the merger. The registration statement,
including the attached exhibits and schedules, contains additional relevant
information about Computer Sciences and Computer Sciences common stock. The
rules and regulations of the Securities and Exchange Commission allow us to
omit some information included in the registration statement from this proxy
statement/prospectus.
In addition, Computer Sciences and Nichols file annual, quarterly and
special reports, proxy statements and other information with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended. You
may read and copy any of these filings at the following locations of the
Securities and Exchange Commission:
<TABLE>
<S> <C> <C>
Public
Reference
Room New York Regional Office Chicago Regional Office
450 Fifth 7 World Trade Center 500 West Madison Street
Street, Suite 1300 Suite 1400
N.W. New York, New York 10048 Chicago, Illinois 60661-2511
Room 1024
Washington,
D.C. 20549
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. You may obtain
information regarding the operation of the Public Reference Room at 1-800-SEC-
0330.
The Securities and Exchange Commission also maintains an Internet site that
contains reports, proxy statements and other information about issuers, like
Computer Sciences and Nichols, who file electronically with the Securities and
Exchange Commission. The address of that site is http://www.sec.gov.
The Securities and Exchange Commission allows Computer Sciences and Nichols
to incorporate by reference information into this proxy statement/prospectus.
This means that the companies can disclose important business and financial
information to you by referring you to another document filed separately with
the Securities and Exchange Commission. The information incorporated by
reference is considered to be a part of this proxy statement/prospectus, except
for any information that is superseded by information that is included directly
in this document.
WHERE YOU CAN FIND MORE INFORMATION
77
<PAGE>
This proxy statement/prospectus incorporates by reference the documents
listed below that Computer Sciences and Nichols have previously filed with the
Securities and Exchange Commission. They contain important information about
our companies and their financial condition.
<TABLE>
<CAPTION>
Computer Sciences SEC Filings Period
----------------------------- ------
<S> <C>
Annual Report on Form 10-K, as amended....... Year ended April 2, 1999, as
first amended on Form 10-K/A,
filed June 25, 1999, and as
second amended on Form 10-K/A,
filed July 7, 1999
Quarterly Report on Form 10-Q................ Quarter ended July 2, 1999
The description of Computer Sciences' rights
plan set forth in Computer Sciences'
Registration Statement on Form 8-A.......... Filed: March 2, 1998
Definitive Notice and Proxy Statement on Form Filed: July 1, 1999
14A.........................................
Current Report on Form 8-K................... Filed: September 20, 1999
</TABLE>
<TABLE>
<CAPTION>
Nichols SEC Filings Period
------------------- ------
<S> <C>
Annual Report on Form 10-K, as amended.... Year ended August 31, 1998, as
amended on Form 10-K/A, filed
January 13, 1999
Quarterly Report on Form 10-Q............. As first amended for Quarter
ended May 31, 1998; Quarter ended
November 30, 1998; Quarter ended
February 28, 1999; and Quarter
ended May 31, 1999
The description of Nichols common stock
set forth in Nichols' Registration Filed: January 14, 1987, as
Statement on Form 8-A, as amended........ amended on
Form 8-A/A, filed August 18, 1989
Definitive Notice and Proxy Statement on Filed: December 7, 1998
Form 14A.................................
Current Reports on Form 8-K............... Filed: January 15, 1999; February
5, 1999; September 20, 1999
</TABLE>
Computer Sciences and Nichols incorporate by reference additional documents
that either company may file with the Securities and Exchange Commission
between the date of this proxy statement/prospectus and the date of the Nichols
special meeting. These documents include periodic reports, such as annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K, as well as proxy statements.
Computer Sciences has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to Computer Sciences,
Nichols has supplied all information relating to Nichols, and both companies
have supplied the pro forma financial information.
You can obtain any of the documents incorporated by reference in this
document through Computer Sciences or from the Securities and Exchange
Commission through the Securities and Exchange Commission's web site at the
address given above. Documents incorporated by reference are available from the
companies without charge, excluding any exhibits to those documents unless the
exhibit is specifically incorporated by reference as an exhibit in this proxy
statement/prospectus. See "Reference To Additional Information" on page 3.
WHERE YOU CAN FIND MORE INFORMATION
78
<PAGE>
If you request any incorporated documents from Computer Sciences or Nichols,
we will mail them to you by first class mail, or another equally prompt means,
within one business day after we receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that is different from, or in
addition to, that contained in this proxy statement/prospectus or in any of the
materials that we have incorporated into this document. Therefore, if anyone
does give you information of this sort, you should not rely on it. If you are
in a jurisdiction where offers to exchange or sell, or solicitations of offers
to exchange or purchase, the securities offered by this proxy
statement/prospectus or the solicitation of proxies is unlawful, or if you are
a person to whom it is unlawful to direct these types of activities, then the
offer presented in this document does not extend to you. The information
contained in this document speaks only as of the date of this document unless
the information specifically indicates that another date applies.
WHERE YOU CAN FIND MORE INFORMATION
79
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
Agreement And Plan Of Merger
Dated As Of September 19, 1999
Among
Nichols Research Corporation,
Computer Sciences Corporation
And
Nevada Acquisition Corporation
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE 1 THE MERGER................................................ A-1
Section 1.1. The Merger............................................ A-1
Section 1.2. Effective Time........................................ A-1
Section 1.3. Closing of the Merger................................. A-1
Section 1.4. Effects of the Merger................................. A-2
Section 1.5. Certificate of Incorporation and Bylaws............... A-2
Section 1.6. Directors............................................. A-2
Section 1.7. Officers.............................................. A-2
Section 1.8. Conversion of Shares.................................. A-2
Section 1.9. No Appraisal Rights................................... A-3
Section 1.10. Exchange of Certificates.............................. A-3
Section 1.11. Stock Options......................................... A-5
Section 1.12. Confidentiality Agreement............................. A-6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. A-6
Section 2.1. Organization and Qualification; Subsidiaries.......... A-6
Section 2.2. Capitalization of the Company and its Subsidiaries.... A-6
Section 2.3. Authority Relative to this Agreement; Recommendation.. A-7
Section 2.4. SEC Reports; Financial Statements..................... A-8
Section 2.5. Information Supplied.................................. A-8
Section 2.6. Consents and Approvals; No Violations................. A-8
Section 2.7. No Default............................................ A-9
Section 2.8. No Undisclosed Liabilities; Absence of Changes........ A-9
Section 2.9. Litigation............................................ A-10
Section 2.10. Compliance with Applicable Law........................ A-10
Section 2.11. Employee Benefit Plans; Labor Matters................. A-10
Section 2.12. Environmental Laws and Regulations.................... A-12
Section 2.13. Taxes................................................. A-13
Section 2.14. Leased and Owned Property............................. A-15
Section 2.15. Intellectual Property; Software....................... A-15
Section 2.16. Insurance............................................. A-19
Section 2.17. Tax Treatment; Pooling................................ A-19
Section 2.18. Affiliates............................................ A-19
Section 2.19. Certain Business Practices............................ A-19
Section 2.20. Insider Interests..................................... A-20
Section 2.21. Opinion of Financial Adviser.......................... A-20
Section 2.22. Brokers............................................... A-20
Section 2.23. Disclosure............................................ A-20
Section 2.24. No Existing Discussions............................... A-20
Section 2.25. Section 203 of the DGCL; Other Takeover Laws.......... A-20
Section 2.26. Government Contracts.................................. A-20
Section 2.27. No Research Grants.................................... A-22
Section 2.28. Investigative Proceedings............................. A-22
Section 2.29. Health Care Business.................................. A-22
Section 2.30. Licenses and Governmental Authorizations.............. A-22
Section 2.31. Year 2000 Compliance.................................. A-23
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION.. A-23
Section 3.1. Organization.......................................... A-23
Section 3.2. Capitalization of Parent and its Subsidiaries......... A-24
</TABLE>
A-i
<PAGE>
TABLE OF CONTENTS--(Continued)
<TABLE>
<CAPTION>
Page
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<C> <S> <C> <C>
Section 3.3. Authority Relative to this Agreement; Recommendation. A-24
Section 3.4. SEC Reports; Financial Statements.................... A-25
Section 3.5. Information Supplied................................. A-25
Section 3.6. Consents and Approvals; No Violations................ A-25
Section 3.7. No Default........................................... A-26
Section 3.8. No Undisclosed Liabilities; Absence of Changes....... A-26
Section 3.9. Litigation........................................... A-27
Section 3.10. Compliance with Applicable Law....................... A-27
Section 3.11. Employee Benefit Plans; Labor Matters................ A-27
Section 3.12. Environmental Laws and Regulations................... A-28
Section 3.13. Tax Matters.......................................... A-28
Section 3.14. Title to Property.................................... A-28
Section 3.15. Intellectual Property; Software...................... A-28
Section 3.16. Insurance............................................ A-29
Section 3.17. No Prior Activities of Acquisition................... A-29
Section 3.18. Tax Treatment; Pooling............................... A-29
Section 3.19. Affiliates........................................... A-29
Section 3.20. Certain Business Practices........................... A-29
Section 3.21. Insider Interests.................................... A-29
Section 3.22. Disclosure........................................... A-29
Section 3.23. Brokers.............................................. A-30
Section 3.24. Year 2000 Compliance................................. A-30
ARTICLE 4 COVENANTS................................................. A-30
Section 4.1. Conduct of Business of the Company................... A-30
Section 4.2. Conduct of Business of Parent........................ A-32
Section 4.3. Preparation of S-4 and the Proxy Statement........... A-33
Section 4.4. Other Potential Acquirers............................ A-33
Section 4.5. Comfort Letters...................................... A-34
Section 4.6. Meeting of Company Stockholders...................... A-35
Section 4.7. Stock Exchange Listing............................... A-35
Section 4.8. Access to Information................................ A-35
Section 4.9. Additional Agreements; Reasonable Efforts............ A-36
Section 4.10. Public Announcements................................. A-36
Section 4.11. Directors' and Officers' Insurance; Indemnification.. A-36
Section 4.12. Notification of Certain Matters...................... A-37
Section 4.13. Affiliates; Pooling; Tax Free Reorganization......... A-37
Section 4.14. State Takeover Laws.................................. A-38
Section 4.15. Employee Benefits.................................... A-38
ARTICLE 5 CONDITIONS TO CONSUMMATION OF THE MERGER.................. A-38
Section 5.1. Conditions to Each Party's Obligations to Effect the
Merger............................................... A-38
Section 5.2. Conditions to the Obligations of the Party........... A-39
Section 5.3. Conditions to the Obligations of Parent and
Acquisition.......................................... A-40
ARTICLE 6 TERMINATION; AMENDMENT; WAIVER............................ A-40
Section 6.1. Termination.......................................... A-40
Section 6.2. Effect of Termination................................ A-42
Section 6.3. Fees and Expenses.................................... A-42
Section 6.4. Amendment............................................ A-43
Section 6.5. Extension; Waiver.................................... A-43
</TABLE>
A-ii
<PAGE>
TABLE OF CONTENTS--(Continued)
<TABLE>
<CAPTION>
Page
----
<C> <S> <C> <C>
ARTICLE 7 MISCELLANEOUS............................................... A-43
Section 7.1. Nonsurvival of Representations and Warranties.......... A-43
Section 7.2. Entire Agreement; Assignment........................... A-43
Section 7.3. Validity............................................... A-43
Section 7.4. Notices................................................ A-44
Section 7.5. Governing Law.......................................... A-44
Section 7.6. Descriptive Headings................................... A-44
Section 7.7. Parties in Interest.................................... A-44
Section 7.8. Certain Definitions.................................... A-44
Section 7.9. Personal Liability..................................... A-45
Section 7.10. Specific Performance................................... A-45
Section 7.11. Counterparts........................................... A-45
</TABLE>
A-iii
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
Cross Reference
Term in Agreement Page
- ---- --------------- ----
<S> <C> <C>
Acquisition.............................................. Preamble................ 1
affiliate................................................ Section 7.8(a).......... 54
Agreement................................................ Preamble................ 1
business combination..................................... Section 2.25............ 25
business day............................................. Section 7.8(c).......... 55
capital stock............................................ Section 7.8(d).......... 55
Certificates............................................. Section 1.10(b)......... 4
Closing Date............................................. Section 1.3............. 2
Closing.................................................. Section 1.3............. 2
Code..................................................... Preamble................ 1
Company Affiliates....................................... Section 2.18............ 24
Company Board............................................ Section 2.3(a).......... 9
Company Disclosure Schedule.............................. Article 2............... 7
Company Financial Advisor................................ Section 2.21............ 24
Company Permits.......................................... Section 2.10............ 12
Company Plans............................................ Section 1.11(a)......... 6
Company.................................................. Preamble................ 1
Company SEC Reports...................................... Section 2.4(a).......... 10
Company Securities....................................... Section 2.2(a).......... 8
Company Stock Option..................................... Section 1.11(a)......... 6
Company Stock Options.................................... Section 1.11(a)......... 6
Confidentiality Agreement................................ Section 1.12............ 7
Copyrights............................................... Section 2.15(a)......... 19
Designated Software Agreements........................... Section 2.15(i)......... 23
DGCL..................................................... Section 1.1............. 1
Effective Time........................................... Section 1.2............. 2
Employee Plans........................................... Section 2.11(a)......... 13
Environmental Claim...................................... Section 2.12(b)......... 16
Environmental Laws....................................... Section 2.12(a)......... 15
ERISA Affiliate.......................................... Section 2.11(a)......... 13
ERISA.................................................... Section 2.11(a)......... 12
Exchange Act............................................. Section 2.2(c).......... 9
Exchange Agent........................................... Section 1.10(a)......... 4
Exchange Fund............................................ Section 1.10(a)......... 4
FCPA..................................................... Section 2.19............ 24
Governmental Entity...................................... Section 2.6............. 11
group health plan........................................ Section 2.11(b)......... 14
HSR Act.................................................. Section 2.6............. 10
Incentive Stock Options.................................. Section 1.11(a)......... 6
Indemnified Liabilities.................................. Section 4.11............ 45
Indemnified Persons...................................... Section 4.11............ 44
Intellectual Property.................................... Section 2.15(a)......... 19
interested stockholder................................... Section 2.25............ 25
IRS...................................................... Section 2.11(a)......... 13
ISO...................................................... Section 1.11(a)......... 6
knowledge................................................ Section 7.8(e).......... 55
known.................................................... Section 7.8(e).......... 55
Licensed Software........................................ Section 2.15(g)......... 22
</TABLE>
A-iv
<PAGE>
TABLE OF DEFINED TERMS--(Continued)
<TABLE>
<CAPTION>
Cross Reference
Term in Agreement Page
- ---- --------------- ----
<S> <C> <C>
Licensed Software Agreements............................. Section 2.15(h)......... 22
Licensed Technology Agreements........................... Section 2.15(h)......... 22
Lien..................................................... Section 2.2(b).......... 9
Marks.................................................... Section 2.15(a)......... 19
Material Adverse Effect.................................. Section 2.1(a).......... 7
Material Adverse Effect.................................. Section 3.1(a).......... 29
Merger Certificate....................................... Section 1.2............. 1
Merger Consideration..................................... Section 1.8(a).......... 3
Merger................................................... Section 1.1............. 1
multi-employer plan...................................... Section 2.11(b)......... 13
multiple employer plan................................... Section 2.11(b)......... 13
Notice of Change......................................... Section 4.4(b).......... 41
NYSE..................................................... Section 1.10(f)......... 6
Other Licensed Technology Agreements..................... Section 2.15(h)......... 22
Owned Software........................................... Section 2.15(g)......... 22
Parent Affiliates........................................ Section 3.19............ 35
Parent Common Stock...................................... Section 1.8(a).......... 3
Parent Intellectual Property Rights...................... Section 3.15(a)......... 35
Parent Permits........................................... Section 3.10............ 33
Parent................................................... Preamble................ 1
Parent Rights Agreement.................................. Section 3.2(a).......... 29
Parent Rights............................................ Section 3.2(a).......... 29
Parent SEC Reports....................................... Section 3.4(a).......... 30
Parent Securities........................................ Section 3.2(a).......... 30
Patents.................................................. Section 2.15(a)......... 19
Payor.................................................... Section 2.30............ 28
person................................................... Section 7.8(f).......... 55
Pooling Transaction...................................... Section 2.17............ 24
Proxy Statement.......................................... Section 2.5............. 10
S-4...................................................... Section 2.5............. 10
SEC...................................................... Section 2.4(a).......... 9
Securities Act........................................... Section 2.4(a).......... 9
Shares................................................... Section 1.8(a).......... 2
Software................................................. Section 2.15(a)......... 19
subsidiaries............................................. Section 7.8(g).......... 55
subsidiary............................................... Section 7.8(g).......... 55
Superior Proposal........................................ Section 4.4(c).......... 42
Surviving Corporation.................................... Section 1.1............. 1
Tax Return............................................... Section 2.13(a)......... 16
Tax...................................................... Section 2.13(a)......... 16
tax-exempt use property.................................. Section 2.13(k)......... 18
Third Party Acquisition.................................. Section 4.4(c).......... 41
Third Party.............................................. Section 4.4(c).......... 41
Trade Secrets............................................ Section 2.15(a)......... 19
</TABLE>
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 19, 1999, is among NICHOLS RESEARCH CORPORATION, a Delaware
corporation (the "Company"), COMPUTER SCIENCES CORPORATION, a Nevada
corporation ("Parent"), and NEVADA ACQUISITION CORPORATION, a Delaware
corporation and a direct wholly owned subsidiary of Parent ("Acquisition").
WHEREAS, the Boards of Directors of the Company, Parent and Acquisition each
has, in light of and subject to the terms and conditions set forth herein, (i)
determined that the Merger (as defined below) is advisable, is fair to their
respective stockholders and in the best interests of such stockholders and (ii)
approved the Merger in accordance with this Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Merger is intended to be treated as a "pooling of interests"
for financial accounting purposes.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the Company, Parent and Acquisition hereby agree as
follows:
ARTICLE 1
THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined below) and upon
the terms and subject to the conditions of this Agreement and in accordance
with the Delaware General Corporation Law (the "DGCL"), Acquisition shall be
merged with and into the Company (the "Merger"). Following the Merger, the
Company shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Acquisition shall cease.
The Merger is intended to qualify as a tax-free reorganization under Section
368(a) of the Code.
Section 1.2. Effective Time. Subject to the terms and conditions set forth
in this Agreement, a Certificate of Merger (the "Merger Certificate") shall be
duly executed and acknowledged by the Company and thereafter delivered to the
Secretary of State of the State of Delaware for filing pursuant to the DGCL on
the Closing Date (as defined in Section 1.3). The Merger shall become effective
at such time as a properly executed and certified copy of the Merger
Certificate is duly filed by the Secretary of State of the State of Delaware in
accordance with the DGCL or such later time as Parent and the Company may agree
upon and set forth in the Merger Certificate (the time the Merger becomes
effective being referred to herein as the "Effective Time").
Section 1.3. Closing of the Merger. The closing of the Merger (the
"Closing") will take place at 10:00 a.m., Los Angeles time, on November 29,
1999, unless on such date one or more of the conditions set forth in Article 5
hereof has not been satisfied or waived, in which event the Closing will take
place on a date and time to be specified by the parties, which shall be no
later than the second business day after satisfaction of the latest to occur of
the conditions set forth in Article 5 (the "Closing Date"), at the offices of
Gibson, Dunn & Crutcher, 333 South Grand Avenue, Los Angeles, California 90071,
unless another place is agreed to in writing by the parties hereto.
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Section 1.4. Effects of the Merger. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Acquisition shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 1.5. Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of the Company in effect at the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until amended in
accordance with applicable law; provided, however, that Article IV of the
Certificate of Incorporation of the Company shall be amended in its entirety to
read as follows: "The aggregate number of shares which the Corporation shall
have the authority to issue is one thousand (1,000), $.01 par value per share,
to be designated 'Common Stock'." The Bylaws of the Company in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until amended
in accordance with applicable law.
Section 1.6. Directors. The directors of Acquisition at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
Section 1.7. Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
Section 1.8. Conversion of Shares.
(a) At the Effective Time, each share of common stock, par value $.01 per
share, of the Company (individually a "Share" and collectively the "Shares")
issued and outstanding immediately prior to the Effective Time (other than (i)
Shares held in the Company's treasury and (ii) each Share held by Parent or
Acquisition) shall, by virtue of the Merger and without any action on the part
of Parent, Acquisition, the Company or the holder thereof, be converted into
and shall become a fraction of a fully paid and nonassessable share of common
stock, $1.00 par value per share, of Parent ("Parent Common Stock") equal to
the Exchange Ratio, as defined below. Unless the context otherwise requires,
each reference in this Agreement to shares of Parent Common Stock shall include
the associated Parent Rights (as such term is defined in Section 3.2(a)
hereof). Notwithstanding the foregoing, if between the date of this Agreement
and the Effective Time the outstanding shares of Parent Common Stock or the
Shares shall have been changed into a different number of shares or a different
class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, then the exchange
ratio contemplated by the Merger shall be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(b) For all purposes of this Agreement, the following definitions shall
apply:
(i) "Initial Parent Price" means $66.194 per share.
(ii) "Final Parent Price" means the average closing price of Parent
Common Stock on the New York Stock Exchange for fifteen trading days
selected by lot out of the twenty consecutive trading days next preceding
the third trading day prior to the date of the meeting of stockholders of
the Company set forth in the Proxy Statement (as defined below) initially
sent to holders of Shares.
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(iii) "Exchange Ratio" means a fraction:
(A) the numerator of which is $28.00 and the denominator of which is
the Initial Parent Price, if the difference (positive or negative)
between the Final Parent Price and the Initial Parent Price equals a
number that is less than or equal to ten percent (10%) of the Initial
Parent Price;
(B) the numerator of which is $30.80 and the denominator of which is
the Final Parent Price, if the Final Parent Price exceeds the Initial
Parent Price by an amount in excess of ten percent (10%) of the Initial
Parent Price;
(C) the numerator of which is $25.20 and the denominator of which is
the Final Parent Price if the Initial Parent Price exceeds the Final
Parent Price by an amount in excess of ten percent (10%) of the Initial
Parent Price but less than or equal to 20% of the Initial Parent Price;
and
(D) the numerator of which is $25.20 and the denominator of which is
80% of the Initial Parent Price if the Initial Parent Price exceeds the
Final Parent Price by an amount in excess of 20% of the Initial Parent
Price.
(c) At the Effective Time, each outstanding share of the common stock, par
value $.01 per share, of Acquisition shall be converted into one share of
common stock, par value $.01 per share, of the Surviving Corporation.
(d) At the Effective Time, each Share held in the treasury of the Company
and each Share held by Parent or Acquisition immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part of
Parent, Acquisition or the Company, be canceled, retired and cease to exist and
no payment shall be made with respect thereto.
Section 1.9. No Appraisal Rights. Neither the holders of Shares nor the
holders of shares of Parent Common Stock shall be entitled to appraisal rights.
Section 1.10. Exchange of Certificates.
(a) As of the Effective Time, Parent shall deposit with ChaseMellon
Shareholder Services, L.L.C., or, following consultation with the Company, such
other agent or agents (the "Exchange Agent") as may be appointed by Parent and
Acquisition, for the benefit of the holders of Shares, for exchange in
accordance with this Article 1, through the Exchange Agent: (i) certificates
representing the appropriate number of shares of Parent Common Stock and (ii)
cash to be paid in lieu of fractional shares of Parent Common Stock (such
shares of Parent Common Stock and such cash are hereinafter referred to as the
"Exchange Fund") issuable pursuant to Section 1.8 in exchange for outstanding
Shares.
(b) As soon as reasonably practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented outstanding Shares
(the "Certificates") whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 1.8: (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock. Upon surrender of
a Certificate to the Exchange Agent, together with such
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letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of Parent Common Stock and, if applicable, a check representing
the cash consideration to which such holder may be entitled on account of a
fractional share of Parent Common Stock, which such holder has the right to
receive pursuant to the provisions of this Article 1, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Company, a certificate representing the proper number of shares of Parent
Common Stock may be issued to a transferee if the Certificate representing such
Shares is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 1.10, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the certificate representing shares of Parent Common Stock and cash
in lieu of any fractional shares of Parent Common Stock as contemplated by this
Section 1.10.
(c) No dividends or other distributions declared or made after the Effective
Time with respect to Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock represented thereby and no cash payment in
lieu of fractional shares shall be paid to any such holder pursuant to
Section 1.10(f) until the holder of record of such Certificate shall surrender
such Certificate. Subject to the effect of applicable laws, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Parent Common Stock
to which such holder is entitled pursuant to Section 1.10(f) and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Parent Common Stock.
(d) In the event that any Certificate for Shares shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange therefor, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Parent Common Stock and cash in lieu of fractional shares, if any, as may be
required pursuant to this Agreement; provided, however, that Parent or the
Exchange Agent, may, in its discretion, require the delivery of a suitable bond
and/or indemnity.
(e) All shares of Parent Common Stock issued upon the surrender for exchange
of Shares in accordance with the terms hereof (including any cash paid pursuant
to Section 1.10(c) or 1.10(f)) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by the Company on such Shares in accordance with the
terms of this Agreement or prior to the date hereof and which remain unpaid at
the Effective Time, and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 1.
(f) No fractions of a share of Parent Common Stock shall be issued in the
Merger, but in lieu thereof each holder of Shares otherwise entitled to a
fraction of a share of Parent Common Stock
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shall, upon surrender of his or her Certificate or Certificates, be entitled to
receive an amount of cash (without interest) determined by multiplying the
closing price for Parent Common Stock as reported on the New York Stock
Exchange (the "NYSE") Composite Transactions on the business day five days
prior to the Effective Time by the fractional share interest to which such
holder would otherwise be entitled. The parties acknowledge that payment of the
cash consideration in lieu of issuing fractional shares was not separately
bargained for consideration but merely represents a mechanical rounding off for
purposes of simplifying the corporate and accounting complexities which would
otherwise be caused by the issuance of fractional shares.
(g) Any portion of the Exchange Fund which remains undistributed to the
stockholders of the Company for twelve months after the Effective Time shall be
delivered to Parent, upon demand, and any stockholders of the Company who have
not theretofore complied with this Article 1 shall thereafter look only to
Parent for payment of their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any applicable dividends or
distributions with respect to Parent Common Stock, as the case may be.
(h) Neither Parent nor the Company shall be liable to any holder of Shares,
or Parent Common Stock, as the case may be, for such shares (or dividends or
distributions with respect thereto) or cash from the Exchange Fund delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 1.11. Stock Options.
(a) At the Effective Time, each outstanding option to purchase Shares (a
"Company Stock Option" or collectively "Company Stock Options") issued pursuant
to the plans set forth on Section 1.11(a) of the Company Disclosure Schedule,
whether vested or unvested, shall be assumed by Parent (all plans or agreements
described above pursuant to which any Company Stock Option has been issued are
referred to collectively as the "Company Plans"). Each Company Stock Option
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Company Stock Option, the same number
of shares of Parent Common Stock, rounded to the nearest whole number, as the
holder of such Company Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time, at a price per share equal to (y) the
aggregate exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Company Stock Option divided by (z) the product of
the number of shares of Company Common Stock otherwise purchasable pursuant to
such Company Stock Option times the Exchange Ratio; provided, however, that in
the case of any option to which Section 421 of the Code applies by reason of
its qualification under Section 422 of the Code ("incentive stock options" or
"ISOs"), the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, Parent shall deliver to
the holders of Company Stock Options appropriate notices setting forth such
holders' rights pursuant to the respective Company Plans, and the agreements
evidencing the grants of such Company Stock Options shall continue in effect on
the same terms and conditions (subject to the adjustments required by this
Section 1.11 after giving effect to the Merger).
(c) Parent shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery upon exercise
of Company Stock Options assumed in accordance with this Section 1.11. As soon
as practicable after the Effective Time, Parent shall file a
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registration statement on Form S-8 (or any successor or other appropriate form)
with respect to the shares of Parent Common Stock subject to any Company Stock
Options held by persons who are or were directors, officers or employees of the
Company or its subsidiaries and shall use its best efforts to maintain the
effectiveness of such registration statement (and maintain the current status
of the prospectus contained therein) for so long as such Company Stock Options
remain outstanding.
Section 1.12. Confidentiality Agreement. The Company and Parent have entered
into a confidentiality agreement, dated as of August 26, 1999 (the
"Confidentiality Agreement"), a copy of which is attached hereto as Exhibit D.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the appropriately numbered and lettered Section of
the Disclosure Schedule previously delivered by the Company to Parent (the
"Company Disclosure Schedule"), the Company hereby represents and warrants to
each of Parent and Acquisition as follows:
Section 2.1. Organization and Qualification; Subsidiaries.
(a) Each of the Company and each of its subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power and authority would not have a Material Adverse
Effect (as defined below) on the Company. When used in connection with the
Company or its subsidiaries, the term "Material Adverse Effect" means any
change or effect that (i) is or is reasonably likely to be materially adverse
to the business, results of operations, condition (financial or otherwise) or
prospects of the Company and its subsidiaries, taken as whole, other than any
change or effect arising out of general economic conditions unrelated to any
business in which the Company and its subsidiaries are engaged, or (ii) impairs
or is reasonably likely to impair the ability of the Company to consummate the
transactions contemplated hereby.
(b) The Company has heretofore delivered to Parent accurate and complete
copies of the Certificate of Incorporation and Bylaws (or similar governing
documents), as currently in effect, of the Company and all of its subsidiaries.
Each of the Company and each of its subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
Section 2.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of: 30,000,000
Shares, of which, as of August 31, 1999, 14,209,179 Shares were issued and
outstanding and 168,500 Shares were held in the Company's treasury. All of the
outstanding Shares have been validly issued, and are fully paid, nonassessable
and free of preemptive rights. As of August 31, 1999, 1,522,870 Shares were
reserved for issuance and issuable upon or otherwise deliverable in connection
with the exercise of outstanding Company Stock Options. Between August 31, 1999
and the date hereof, no shares of the
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Company's capital stock have been issued other than pursuant to Company Stock
Options already in existence on August 31, 1999, and, between August 31, 1999
and the date hereof, no stock options have been granted. Except as set forth
above, as of the date hereof, there are outstanding (i) no shares of capital
stock or other voting securities of the Company, (ii) no securities of the
Company or its subsidiaries convertible into or exercisable or exchangeable for
shares of capital stock or voting securities of the Company, (iii) no options
or other rights to acquire from the Company or its subsidiaries, and, except as
described in the Company SEC Reports (as defined below), no obligations of the
Company or its subsidiaries to issue, any capital stock, voting securities or
securities convertible into or exercisable or exchangeable for capital stock or
voting securities of the Company, and (iv) no equity equivalents, interests in
the ownership or earnings of the Company or its subsidiaries or other similar
rights (collectively "Company Securities"). As of the date hereof there are no
outstanding obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities. There are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of the Company.
(b) Section 2.2(b) of the Company Disclosure Schedule identifies each
subsidiary of the Company as of the date hereof and shows the jurisdiction of
incorporation or organization of each such subsidiary. All of the outstanding
capital stock of the Company's subsidiaries (other than directors' qualifying
shares in the case of certain foreign subsidiaries) is owned by the Company,
directly or indirectly, free and clear of any Lien (as defined below) or any
other limitation or restriction (including any restriction on the right to vote
or sell the same, except as may be provided as a matter of law). There are no
securities of the Company or its subsidiaries convertible into or exercisable
or exchangeable for, no options or other rights to acquire from the Company or
its subsidiaries, and no other contract, understanding, arrangement or
obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of, any capital stock or other ownership interests in,
or any other securities of, any subsidiary of the Company. There are no
outstanding contractual obligations of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any outstanding shares of capital
stock or other ownership interests in any subsidiary of the Company. For
purposes of this Agreement, "Lien" means, with respect to any asset (including,
without limitation, any security) any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset or any agreement
to grant any of the foregoing.
(c) The Shares (including the associated Company Rights) constitute the only
class of equity securities of the Company or its subsidiaries registered or
required to be registered under the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
Section 2.3. Authority Relative to this Agreement; Recommendation.
(a) The Company has all necessary corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of the Company (the "Company Board") and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby, except,
with respect to consummation of the Merger, the adoption of this Agreement by
the holders of a majority of the then outstanding Shares. This Agreement has
been duly and validly executed and delivered by the Company and constitutes a
valid, legal and binding agreement of the Company, enforceable against the
Company in accordance with its terms.
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(b) The Company Board has resolved to recommend that the stockholders of the
Company approve and adopt this Agreement.
Section 2.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents with the
Securities and Exchange Commission (the "SEC") since August 31, 1996, each of
which, as amended, has complied in all material respects with all applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act, each as in effect on the dates such forms, reports and
documents were filed. The Company has heretofore delivered or promptly will
deliver to Parent, in the form filed with the SEC (including any amendments
thereto and all exhibits), (i) its Annual Reports on Form 10-K for each of the
fiscal years ended August 31, 1996, 1997 and 1998, (ii) all definitive proxy
statements relating to the Company's meetings of stockholders (whether annual
or special) held since August 31, 1996 and (iii) all other reports or
registration statements filed by the Company with the SEC since August 31, 1996
(all of the foregoing, collectively, the "Company SEC Reports"). None of such
Company SEC Reports, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, contained, when filed,
or, if amended, to the extent amended on the date of filing of such amendment,
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The audited consolidated financial statements
of the Company included in the Company SEC Reports, as amended therein, fairly
present, in conformity with generally accepted accounting principles applied on
a consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and changes in financial position for the periods then ended.
(b) The Company has heretofore made available or promptly will make
available to Parent a complete and correct copy of any amendments or
modifications, which are or will be required to be filed with the SEC but have
not yet been filed with the SEC, to agreements, documents or other instruments
which previously have been filed by the Company with the SEC pursuant to the
Exchange Act.
Section 2.5. Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Merger
(the "S-4") will, at the time the S-4 is filed with the SEC or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and (ii) the proxy
statement relating to the meeting of the Company's stockholders to be held in
connection with the Merger (the "Proxy Statement") will, at the date mailed to
stockholders of the Company and at the times of the meeting or meetings of
stockholders of the Company to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The Proxy Statement, insofar as it relates to the
meeting of the Company's stockholders to vote on the Merger, will comply as to
form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
Section 2.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements
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of, the Securities Act, the Exchange Act, state securities or blue sky laws,
and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and except for certain foreign governmental approvals and the
filing and recordation of the Merger Certificate as required by the DGCL, no
filing with or notice to, and no permit, authorization, consent or approval of,
any court or tribunal or administrative, governmental or regulatory body,
agency or authority, whether domestic or foreign (a "Governmental Entity"), is
necessary for the execution and delivery by the Company of this Agreement or
the consummation by the Company of the transactions contemplated hereby, except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notices would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Neither the
execution, delivery and performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will
(i) conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or Bylaws (or similar governing documents) of the
Company or any of its subsidiaries, (ii) result in a material violation or
material breach of, or constitute (with or without notice or lapse of time or
both) a material default (or give rise to any right of termination, amendment,
cancellation or acceleration or any Lien) under, any of the terms, conditions
or provisions of any material note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which the Company or
any of its subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound, or (iii) violate any order, writ,
injunction, decree, or (in any material respect) any material law, statute,
rule or regulation applicable to the Company or any of its subsidiaries or any
of their respective properties or assets.
Section 2.7. No Default. None of the Company or any of its subsidiaries is
in breach, default or violation (and no event has occurred which with notice or
the lapse of time or both would constitute a material breach, default or
violation) of any term, condition or provision of (i) its Certificate of
Incorporation or Bylaws (or similar governing documents), (ii) any material
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which any of them or any of their respective properties or assets
may be bound, in any material respect or (iii) any order, writ, injunction,
decree, or (in any material respect) any material law, statute, rule or
regulation applicable to the Company, any of its subsidiaries or any of their
respective properties or assets. Each material note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its subsidiaries is a party or by which any of them or
any of their respective properties or assets may be bound is in full force and
effect and is not subject to any material default thereunder of which the
Company is aware by any party obligated to the Company or any subsidiary
thereunder.
Section 2.8. No Undisclosed Liabilities; Absence of Changes. Except as and
to the extent publicly disclosed by the Company in the Company SEC Reports,
since August 31, 1998, none of the Company or any of its subsidiaries has had
any material liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet of the
Company (including the notes thereto) or which, individually or in the
aggregate, has or has had a Material Adverse Effect on the Company. Since
August 31, 1998, none of the Company or any of its subsidiaries has incurred
any liabilities of any nature, whether or not accrued, contingent or otherwise,
having, and there have been no events, changes or effects with respect to the
Company or any of its subsidiaries having, individually or in the aggregate, a
Material Adverse Effect on the Company. Except as and to the extent publicly
disclosed by the Company in the Company SEC Reports, since August 31, 1998,
there has not been any action or event that would have required the consent of
Parent pursuant to
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Section 4.1 of this Agreement had such action or event occurred after the date
of this Agreement. Section 2.8 of the Company Disclosure Schedule sets forth a
detailed list of all "earn-out" or similar obligations (of whatever form, name
or description, related to the past, present or future performance of the
Company, any of its subsidiaries or any portions of any of their respective
businesses) of the Company or any of its subsidiaries, arising out of or
related to acquisitions of persons (whether by merger, stock purchase, share
exchange, asset purchase, or otherwise) by the Company or any of its
subsidiaries and which obligations either have not expired by their own terms
or with respect to which there exist as of the date hereof or may exist in the
future any liabilities of the Company or any of its subsidiaries to any person,
whether fixed or contingent, liquidated or unliquidated, accrued or unaccrued.
Section 2.9. Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties or
assets having, individually or in the aggregate, a Material Adverse Effect on
the Company. None of the Company or any of its subsidiaries is subject to any
outstanding order, writ, injunction or decree having, individually or in the
aggregate, a Material Adverse Effect on the Company.
Section 2.10. Compliance with Applicable Law. The Company and each of its
subsidiaries hold all material permits, licenses, variances, exemptions, orders
and approvals of all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"). The Company and each of
its subsidiaries are in material compliance with the terms of the Company
Permits. The businesses of the Company and each of its subsidiaries are not
being conducted in material violation of any material law, ordinance, rule or
regulation of any Governmental Entity. No investigation or review by any
Governmental Entity with respect to the Company or any of its subsidiaries is
pending or, to the knowledge of the Company, threatened, nor, to the knowledge
of the Company, has any Governmental Entity indicated an intention to conduct
the same.
Section 2.11. Employee Benefit Plans; Labor Matters.
(a) Section 2.11(a) of the Company Disclosure Schedule lists all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), and all bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, programs or arrangements,
and any severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee or director of the Company, any
trade or business (whether or not incorporated) which is a member of a
controlled group including the Company or which is under common control with
the Company (an "ERISA Affiliate") within the meaning of Section 414 of the
Code, as well as each plan with respect to which the Company or an ERISA
Affiliate could incur liability under Section 4069 (if such plan has been or
were terminated) or Section 4212(c) of ERISA (together, the "Employee Plans").
The Company has delivered to Parent, if applicable, a copy of (i) the three (3)
most recent annual reports on Form 5500 filed with the Internal Revenue Service
(the "IRS") for each disclosed Employee Plan, including any actuarial and
auditor reports required to be filed with the annual reports, (ii) the most
recent plan documents and related trust documents, adoption agreements,
nondiscrimination test reports for the last 3 years, and all amendments thereto
for each such Employee Plan (other than those referred to in Section 4(b)(4) of
ERISA), including, in the case of any Employee Plan not set forth in writing, a
written description thereof, (iii) the most recent summary plan descriptions
for each Employee Plan, (iv) the most recent favorable IRS determination letter
and antecedent application materials, and (v) the most recent funding and
service agreements and most current insurance policies or contracts with
respect to the Employee Plans.
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(b) (i) the Company and its Subsidiaries do not maintain or have an
obligation to contribute to retiree health plans which provide for continuing
benefits or coverage for current or former officers or employees of the Company
or any of its Subsidiaries except (1) for coverage that expires on the last day
of the calendar month in which the employee's termination takes place, (2) as
may be required under Part 6 of Title I of ERISA and at the sole expense of the
participant or the participant's beneficiary or (3) a medical expense
reimbursement account plan pursuant to Section 125 of the Code; (ii) none of
the Employee Plans is a "multi-employer plan" as such term is defined in
Section 3(37) of ERISA, a "multiple employer plan" as such term is defined in
Section 4063 or 4064 of ERISA, or subject to Title IV of ERISA; (ii) no
officer, director or employee of the Company has committed a material breach of
any responsibility or obligation imposed upon fiduciaries by Title I of ERISA
with respect to any Employee Plan; (iii) all Employee Plans are in compliance
in all material respects both with their terms and in operation with the
requirements prescribed by all applicable statutes (including ERISA and the
Code), orders, or governmental rules and regulations currently in effect with
respect thereto, and the Company and each of its subsidiaries have performed
all material obligations required to be performed by them under, are not in any
material respect in default under or in violation of, and have no knowledge of
any default or violation by any other party to, any of the Employee Plans; (iv)
each Employee Plan intended to qualify under Section 401(a) of the Code and
each trust intended to qualify under Section 501(a) of the Code is so qualified
and no event has occurred and no condition or circumstance has existed or
exists which may reasonably be expected to result in the disqualification of
such Employee Plan; (v) all contributions required to be made to any Employee
Plan pursuant to Section 412 of the Code (without regard to any waivers of such
requirements) or the terms of the Employee Plan, have been made on or before
their due dates (including any contractual or statutory grace periods); (vi)
other than routine claims for benefits, there is no claim pending or to the
knowledge of the Company, threatened, involving any Employee Plan by any person
against such Employee Plan, the Company, any subsidiary of the Company or any
of their ERISA Affiliates; (vii) there is no pending or, to the knowledge of
the Company, threatened claim or investigation involving any Employee Plan by
the Department of Labor or any other governmental authority except where such
claim individually or in the aggregate shall not have or could not reasonably
be expected to have a Material Adverse Effect; (viii) each of the Employee
Plans which is an employee benefit plan within the meaning of Section 3(3) of
ERISA can be terminated upon 90 days notice with respect to benefit coverage
relating to employment after the date of termination of such plan (excluding
any benefit coverage relating to employment through the date of termination of
such plan, including, but not limited to, benefits accrued or incurred through
the date of termination of such plan), except where the inability to so
terminate would result in annual costs in excess of $2.0 million of incremental
annual costs beyond the costs of maintaining a generally applicable similar
plan of Parent and its affiliates (and the representations and warranties
contained in this clause (viii) shall be deemed to be qualified as to
materiality for all purposes of Section 5.3(a) of this Agreement); and (ix)
with respect to any Employee Plan which is a "group health plan" as such term
is defined in Section 5000(b)(i) of the Code, the Company, each subsidiary of
the Company and their ERISA Affiliates have complied in all respects with the
provisions of Part 6 of Title I of ERISA and Sections 4980B, 9801, 9802, 9811
and 9812 of the Code except where such failure to so comply individually or in
the aggregate shall not have or could not reasonably be expected to have a
Material Adverse Effect.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true and
complete list, as of the date of this Agreement, of each person who holds any
Company Stock Options or Company Restricted Stock, together with the number of
Shares which are subject thereto, the date of grant, the extent to which such
option or Company Restricted Stock is vested (or will become vested within
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six months from the date hereof, or as a result of the Merger, or upon
termination of employment following the Merger), the exercise price of such
option, the purchase price of such Company Restricted Stock, whether such
option is intended to qualify as an incentive stock option within the meaning
of Section 422 of the Code, and the expiration date of such option. Section
2.11(c) of the Company Disclosure Schedule also sets forth the total number of
such ISOs and such nonqualified options. Other than the automatic vesting of
Company Stock Options or Company Restricted Stock that may occur without any
action on the part of the Company or its officers or directors, the Company has
not taken any action that would result in any Company Stock Options or Company
Restricted Stock that are unvested becoming vested or their terms being
extended in connection with or as a result of the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
(d) The Company has made available to Parent (i) a schedule listing all
officers and members of senior management of the Company including each
individual's job title, current salary and target bonus; (ii) copies of all
employment agreements with officers and members of senior management of the
Company; (ii) copies of all agreements with any former employee of the Company
obligating the Company to make annual cash payments in an amount exceeding
$300,000; (iii) a schedule listing all officers and members of senior
management of the Company who have executed a non-competition agreement with
the Company; (iv) copies (or descriptions) of all current and proposed
severance agreements, programs and policies of the Company with or relating to
its employees; and (v) copies of all plans, programs, agreements and other
arrangements of the Company with or relating to its employees which contain
change in control provisions.
(e) There shall be no payment, accrual of additional benefits, acceleration
of payments, vesting, or term extension of any benefit under any Employee Plan
or any agreement or arrangement disclosed under this Section 2.11 solely by
reason of entering into or in connection with the transactions contemplated by
this Agreement.
(f) There are no actions, claims or investigations pending or, to the
knowledge of the Company or any of its subsidiaries, threatened between the
Company or any of its subsidiaries and any of their respective employees, which
would have had or could have, individually or in the aggregate, a Material
Adverse Effect on the Company. Neither the Company nor any of its subsidiaries
is a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or any of its subsidiaries,
except as disclosed in Section 2.11(f) of the Company Disclosure Schedule, nor
does the Company know of any activities or proceedings of any labor union to
organize any such employees. The Company has no knowledge of any strikes,
slowdowns, work stoppages, lockouts or threats thereof by or with respect to
any employees of the Company or any of its subsidiaries. The Company and its
subsidiaries have complied in all material respects with the provisions of the
Worker Adjustment and Retraining Notification Act ("WARN") and do not
reasonably expect to incur any material liabilities under WARN prior to the
consummation of the transactions contemplated by this Agreement.
(g) Neither the Company nor any ERISA Affiliate maintains or has an
obligation to contribute to any Employee Plan which is subject to any laws,
regulations, or jurisdiction outside the United States.
Section 2.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by the Company in the Company SEC Reports,
(i) each of the Company and each of its subsidiaries is in material compliance
with all applicable federal, state,
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local and foreign laws and regulations relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), which compliance includes, but is not limited to, the
possession by the Company and each of its subsidiaries of all material permits
and other governmental authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof; and (ii) to the
knowledge of the Company, there are no circumstances that are likely to prevent
or interfere with such material compliance in the future.
(b) Except as publicly disclosed by the Company in the Company SEC Reports,
there is no action, cause of action, claim, investigation, demand or notice by
any person or entity alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim") that are pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries or, to the knowledge of the Company, against any person or entity
whose liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law.
(c) The Company is not aware of any material spill, release or disposal of
any substance that is regulated by any Environmental Law on any real property
that is, or was, owned or leased by it or one of its subsidiaries or
predecessors.
Section 2.13. Taxes.
(a) Definitions. For purposes of this Agreement:
(i) the term "Tax" (including "Taxes") means (A) all federal, state,
local, foreign and other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts with
respect thereto, (B) any liability for payment of amounts described in
clause (A) whether as a result of transferee liability, of being a member
of an affiliated, consolidated, combined or unitary group for any period,
or otherwise through operation of law, and (C) any liability for the
payment of amounts described in clauses (A) or (B) as a result of any tax
sharing, tax indemnity or tax allocation agreement or any other express or
implied agreement to indemnify any other person; and
(ii) the term "Tax Return" means any return, declaration, report,
statement, information statement and other document required to be filed
with respect to Taxes.
(b) The Company and each of its subsidiaries have accurately prepared in all
material respects and timely filed all material Tax Returns they are required
to have filed. Such Tax Returns are accurate and correct in all material
respects.
(c) The Company and each of its subsidiaries have paid all Taxes shown as
due on all Tax Returns and have adequately provided for all Taxes they are
required to provide for.
(d) As of the date of this Agreement: (i) No claim has been made in writing
by any taxing authority in any jurisdiction where the Company and its
subsidiaries do not file Tax Returns that any of them is or may be subject to
Tax by that jurisdiction; and
(ii) no current extensions or waivers of statutes of limitations with
respect to any Tax Returns have been given by or requested in writing from
the Company or any of its subsidiaries.
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(e) As of the date of this Agreement, Section 2.13(e) of the Company
Disclosure Schedule sets forth with respect to federal and state income and
franchise Taxes:
(i) those taxable years for which examinations by taxing authorities are
presently being conducted;
(ii) those years for which written notice of pending or threatened
examination or adjustment has been received; and
(iii) those years for which required income Tax Returns have not yet
been filed.
(f) All deficiencies asserted or assessments made against the Company or any
subsidiary as a result of any examinations by any taxing authority have been
fully paid or are being contested in good faith.
(g) There are no Liens for Taxes (other than for current Taxes not yet due
and payable or for Taxes which are being contested in good faith) upon the
assets of the Company or any subsidiary.
(h) Neither the Company nor any of its subsidiaries is a party to or bound
by any tax indemnity, tax sharing or tax allocation agreement with any party
that is not a member of the Company's affiliated group, within the meaning of
Section 1504(a) of the Code, on the date hereof.
(i) Neither the Company nor any of its subsidiaries is a party to or bound
by any closing agreement or offer in compromise with any taxing authority.
(j) Neither the Company nor any of its subsidiaries:
(i) has been a member of an affiliated group of corporations, within the
meaning of Section 1504 of the Code, or a member of a combined,
consolidated or unitary group for state, local or foreign Tax purposes
(other than the group the common parent of which is the Company);
(ii) has filed a consent pursuant to the collapsible corporation
provisions of Section 341(f) of the Code (or any corresponding provision of
state, local or foreign income Tax law) or agreed to have Section 341(f)(2)
of the Code (or any corresponding provision of state, local or foreign
income Tax law) apply to any disposition of any asset owned by any of them.
(k) None of the assets of the Company or any of its subsidiaries is property
that the Company or any of its subsidiaries is required to treat as being owned
by any other person pursuant to the so-called "safe harbor lease" provisions of
former Section 168(f)(8) of the Internal Revenue Code of 1954, as amended; none
of the assets of the Company or any of its subsidiaries directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of
the Code; none of the assets of the Company or any of its subsidiaries is "tax-
exempt use property" within the meaning of Section 168(h) of the Code; and none
of the assets of the Company or any of its subsidiaries is required to be or is
being depreciated pursuant to the alternative depreciation system under
Section 168(g)(2) of the Code.
(l) Section 2.13(l) of the Company Disclosure Schedule sets forth all
foreign jurisdictions in which the Company or any subsidiary is subject to Tax,
is engaged in business or has a permanent establishment.
(m) The Company is not and has not been, a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(a) of the Code.
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Section 2.14. Leased and Owned Property. (a) The Company and its
subsidiaries presently own no real property and have no legal or equitable
interests in any real property other than leasehold interests.
(b) Section 2.14(b) of the Company Disclosure Schedule sets forth a complete
and correct list of all real property leases to which the Company or any of its
subsidiaries is a party, including the address of the property, the name and
address of the parties, the expiration date of the lease, the monthly rent as
of the Closing, and any additional rent currently payable under each such lease
(the "Real Property Leases").
(c) There is no material breach or event of default on the part of the
Company or any of its subsidiaries, or to the knowledge of the Company, the
landlord with respect to any of the Real Property Leases, and, to the knowledge
of the Company, there has been no event that, with the giving of notice or
lapse of time, or both, would constitute a material breach or event of default
by the Company, any of its subsidiaries or landlord under any of the Real
Property Leases. All the Real Property Leases are in full force and effect and
are valid and enforceable against the parties thereto in accordance with their
terms in all material respects. The Company is not aware of any material
expenditures which are required or are reasonably likely to be required under
the provisions of any Real Property Lease for any purpose other than payment of
rent or other charges due under such leases as provided therein.
(d) There are no pending or, to the knowledge of the Company, threatened
condemnation, eminent domain or similar proceedings with respect to any of the
premises leased under any of the Real Property Leases.
(e) The Company and each of its subsidiaries have good and marketable title
to all of their personal properties and assets, free and clear of all Liens
except liens for taxes not yet due and payable and such liens, if any, as do
not materially detract from the value of or interfere with the present use of
the personal property affected thereby and which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company; and, to the
Company's knowledge, all leases pursuant to which the Company or any of its
subsidiaries lease from others personal property are in good standing, valid
and enforceable in accordance with their respective terms, and there is not, to
the knowledge of the Company, under any of such leases, any existing material
default or event of default by any party thereto (or event which with notice or
lapse of time, or both, would constitute a material default) except where the
lack of such good standing, validity and enforceability, or the existence of
such default or event, would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
Section 2.15. Intellectual Property; Software.
(a) For all purposes of this Agreement,
(i) "Intellectual Property Rights" means intellectual property rights
arising from or in respect of the following, whether protected, created or
arising under the laws of the United States or any other jurisdiction: (A)
fictional business names, trade names, service names, registered and
unregistered trademarks and service marks and logos (including any Internet
domain names), and applications therefor (collectively, "Marks"); (B)
patents, patent rights and all applications therefor, including any and all
continuation, divisional, continuation-in-part, or reissue patent
applications or patents issuing thereon (collectively, "Patents");
(C) copyrights and all registrations and applications therefor
(collectively, "Copyrights"); and
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(D) know-how, trade secrets, inventions, discoveries, concepts, ideas,
methods, processes, designs, formulae, technical data, drawings,
specifications, data bases and other proprietary and confidential
information, including customer lists, in each case to the extent not
included in the foregoing clauses (B) or (C) (collectively, "Trade
Secrets"; Marks, Patents, Copyrights and Trade Secrets are, collectively,
"Intellectual Property").
(ii) "Software" means any and all (i) computer programs, including any
and all software implementations of algorithms, models and methodologies,
whether in source code or object code, (ii) databases and compilations,
including any and all data and collections of data, whether machine
readable or otherwise, (iii) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing,
and (iv) all documentation, including user manuals and training materials,
relating to any of the foregoing, in each case developed or licensed by the
Company or any of its subsidiaries, or used in or necessary for the conduct
of their business, specifically excluding those items prepared for
customers in the operation of the Company's and its subsidiaries' business
for which the customer contractually has vested title.
(b) Section 2.15(b) of the Company Disclosure Schedule sets forth a complete
and correct list of all material Intellectual Property Rights owned, licensed
or used by the Company or any of its subsidiaries in the conduct of their
businesses, together with a listing of all material licenses, franchises,
licensing agreements (whether as licensor or licensee) to which the Company or
any of its subsidiaries is a party, and any other arrangement with respect to
such Intellectual Property Rights. All Intellectual Property Rights owned,
licensed or used by the Company or any of its subsidiaries or used or exercised
in or necessary to the conduct of the Company's and its subsidiaries' business,
are referred to herein, collectively, as the "Company Intellectual Property
Assets."
(c) Neither the Company nor any of its subsidiaries has, during the three
years preceding the date of this Agreement, been a party to any Proceeding,
nor, to the knowledge of the Company and its subsidiaries, is any Proceeding
threatened, that involved or is likely to involve a claim of infringement or
misappropriation by any person (including any Governmental Entity) of any
Intellectual Property Right of such person. Except as disclosed in Sections
2.15(b), (c), (g) or (h) of the Company Disclosure Schedule, no Company
Intellectual Property Asset owned by the Company is subject to any outstanding
order, judgment, decree, or stipulation restricting in any material respect the
use thereof by the Company or any of its subsidiaries, or restricting in any
material respect the licensing thereof by the Company or any person. Except as
would not have a Material Adverse Effect on the Company, the current use and
exploitation of the Intellectual Property Assets by the Company and its
subsidiaries (including without limitation the licensing or other distribution
of Software to third parties by the Company or any of its subsidiaries) does
not infringe upon, violate or result in the misappropriation of Intellectual
Property Right of any person.
(d) (i) the Company or one of its subsidiaries owns all right, title and
interest in each of the Marks and Patents listed in Section 2.15(b) of the
Company Disclosure Schedule (collectively, the "Company Marks and Patents"),
and Company and its subsidiaries have not received any notice or claim (whether
written or oral) challenging Company's or the relevant subsidiary's exclusive
and complete ownership of any Company Marks and Patents or suggesting that any
other Person has any claim of legal or beneficial ownership or other claim or
interest with respect thereto;
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(ii) to the knowledge of the Company and its subsidiaries, the Company
Marks and Patents are legally valid and enforceable and the Company and its
subsidiaries have not received any notice or claim (whether written or
oral) challenging the validity or enforceability of any Company Marks and
Patents;
(iii) to the knowledge of the Company and its subsidiaries, the Company
has not taken any action (or failed to take any action), or used or
enforced (or failed to use or enforce) any of the material Company Marks
and Patents, in each case in a manner that would result in the abandonment,
cancellation, forfeiture, relinquishment, or unenforceability of any of the
material Company Marks and Patents or any of Company's rights therein;
(iv) Company has taken reasonable steps to protect Company's rights in
and to each of the Company Marks and Patents and to prevent the
unauthorized use thereof by any other Person, in each case in accordance
with standard industry practice, and has adequately policed (as determined
by the Company in its reasonable discretion) the Company Marks and Patents
against third party infringement of which it is aware;
(v) except as set forth in Sections 2.15(b), (c), (g) or (h) of the
Company Disclosure Schedule, the Company has not granted to any Person any
material right, license or permission to use any of the Company Marks and
Patents;
(vi) all maintenance fees, annuities, and the like due on Company Marks
and Patents have been timely paid, except as would not have a Material
Adverse Effect on the Company;
(vii) no Mark that constitutes a Company Mark and Patent has been or is
now involved in any opposition or cancellation proceeding and, to Company's
knowledge, no such action is threatened with the respect to any of the
Company Marks and Patents, except as would not have a Material Adverse
Effect on the Company; and
(ix) no Patent that constitutes a Company Mark and Patent has been or is
now involved in any interference, reissue, reexamination or opposition
proceeding or any other litigation or proceeding of any kind, except as
would not have a Material Adverse Effect on the Company.
(e) The Company has taken reasonable precautions (as determined by the
Company's management) to protect the secrecy of any of its Trade Secrets that
derive commercial value from not being generally known to the public. Except as
would not have a Material Adverse Effect on the Company, the Company and each
of its subsidiaries has the absolute and unrestricted right to use all of the
Trade Secrets. Neither the Company nor any of its subsidiaries has received any
notice or claim challenging the Company's absolute and unrestricted right to
use any of the Trade Secrets or suggesting that any other person has any claim
with respect thereto. To the knowledge of the Company and its subsidiaries,
none of the Trade Secrets has been, or is alleged to have been, misappropriated
from any other person. Except under appropriate confidentiality obligations,
there has been no disclosure by the Company of material confidential
information or other Trade Secrets that derive commercial value from not being
generally known to the public.
(f) The Company or its subsidiaries either owns the entire right, title and
interest in, to and under, or has acquired a license to use, any and all
Company Intellectual Property Assets which are material to the conduct of their
businesses in the manner that such businesses have heretofore been or is
presently being conducted or as contemplated to be conducted pursuant to the
Company's current business plan, and no other Intellectual Property Rights are
necessary for the unimpaired continued operation of such businesses after the
Effective Time in all material respects in the manner that such businesses have
heretofore been or are presently being conducted.
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(g) Section 2.15(g) of the Company Disclosure Schedule sets forth a complete
and accurate list of all of the material Software (excluding Software that is
available in consumer retail stores and subject to "shrink-wrap" agreements).
Section 2.15(g) of the Company Disclosure Schedule specifically identifies all
material Software that is owned exclusively by the Company or any of its
subsidiaries (the "Owned Software") and all material Software that is used by
the Company or any of its subsidiaries in the conduct of their business that is
not exclusively owned by the Company or any of its subsidiaries (excluding
software that is available in consumer retail stores and subject to "shrink-
wrap" agreements) (the "Licensed Software"). The Company or a subsidiary
thereof is the owner of all right, title and interest in and to all Owned
Software, including without limitation all Copyrights, Trade Secrets and other
Intellectual Property Rights relating thereto, and neither the Company nor any
of its subsidiaries has received any notice or claim (whether written, oral or
otherwise) challenging the Company's complete and exclusive ownership of all
Owned Software and all such Intellectual Property Rights relating thereto or
claiming that any other person has any claim of legal or beneficial ownership
with respect thereto. The Company has not assigned, licensed, transferred or
encumbered any of its rights in or to any Owned Software, including without
limitation any Copyrights, Trade Secrets or other Intellectual Property Rights
with respect thereto, to any person, excluding any non-exclusive licenses
granted to distributors or customers in the ordinary course of business. The
Company and its subsidiaries have lawfully acquired the right to use the
Licensed Software, as it is used in the conduct of their business as presently
conducted, and have not exercised any rights in respect of any Licensed
Software, including without limitation any reproduction, distribution or
derivative work rights, outside the scope of any license expressly granted by
the person from which the right to use such Licensed Software was obtained.
(h) Section 2.15(h) of the Company Disclosure Schedule contains a complete
and accurate specific list of all material agreements and arrangements
pertaining to the Licensed Software (excluding software that is available in
consumer retail stores and subject to "shrink-wrap" agreements) (collectively,
"Licensed Software Agreements") and a complete and accurate list of all
agreements and arrangements pertaining to any other technology used or
practiced by the Company as to which a person other than the Company or any of
its subsidiaries owns the applicable Intellectual Property Rights
(collectively, "Other Licensed Technology Agreements" and, together with
Licensed Software Agreements, the "Licensed Technology Agreements"). Section
2.15(h) of the Company Disclosure Schedule sets forth a complete and accurate
list of all royalty obligations of the Company and its subsidiaries under any
Licensed Technology Agreements. All Licensed Technology Agreements are in full
force and effect, and neither the Company nor any of its subsidiaries is in
material breach thereof, nor are they aware of any claim or information to the
contrary. All Licensed Technology Agreements will be maintained by the Company
and its subsidiaries in full force and effect through the Effective Time,
except as would not have a Material Adverse Effect on the Company. There are no
outstanding, and, to the Company's knowledge, no threatened disputes with
respect to any Licensed Technology Agreement. Except as would not have a
Material Adverse Effect on the Company, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will result in the impairment of any rights under, any Licensed Technology
Agreement.
(i) Section 2.15(i) of the Company Disclosure Schedule contains a complete
and accurate list of all agreements and arrangements involving the grant by the
Company or any subsidiary to any person of any right to distribute, prepare
derivative works based on, support or maintain or otherwise commercially
exploit any Software, including without limitation any value-added reseller
agreements, joint development or marketing agreements or strategic alliance
agreements involving any Software (collectively, "Designated Software
Agreements"). All Designated Software Agreements are in full
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force and effect, and neither the Company nor any of its subsidiaries is in
material breach thereof, nor are they aware of any claim or basis for a claim
to the contrary. Except as would not have a Material Adverse Effect on the
Company, all Designated Software Agreements will be maintained by the Company
and its subsidiaries in full force and effect through the Effective Time. There
are no outstanding and, to the Company's knowledge, no threatened disputes or
disagreements with respect to any Designated Software Agreement. Except as
would not have a Material Adverse Effect on the Company, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will result in any impairment of rights under any
Designated Software Agreement.
(j) To the knowledge of the Company, the Company has taken commercially
reasonable actions in accordance with industry practice to protect its
Intellectual Property Rights in relation to employees, independent contractors
and consultants including entering into agreements with such persons that
assign to the Company or such subsidiary all of the employee's, contractor's or
consultant's rights, including all Intellectual Property Rights, in any
Intellectual Property created or developed thereby that is used in connection
with, or that relates to, the business of the Company and its subsidiaries. To
the knowledge of the Company, no employee of the Company or any subsidiary has
entered into any contract or other agreement with any person (other than the
Company or the applicable subsidiary) that restricts or limits in any way the
scope or type of work in which the employee may be engaged for the Company or
such subsidiary or requires the employee to transfer, assign, or disclose
information concerning the employee's work with the Company or such subsidiary
to any other person.
Section 2.16. Insurance. The Company and its subsidiaries maintain general
liability and other business insurance that the Company believes to be prudent
for its business. Section 2.16 of the Company Disclosure Schedule lists all
insurance policies covering the Company or any of its subsidiaries or employees
where the annual premiums are in excess of fifty thousand dollars ($50,000).
Section 2.17. Tax Treatment; Pooling. Neither the Company nor any of its
subsidiaries nor, to the Company's knowledge, any of its other affiliates, has
taken or agreed to take action that would prevent the Merger from (a)
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code or (b) being treated for financial accounting purposes as a pooling
of interests in accordance with generally accepted accounting principles and
the published rules, regulations and interpretations of the SEC (a "Pooling
Transaction").
Section 2.18. Affiliates. Except for the directors and executive officers of
the Company, each of whom is listed in Section 2.18 of the Company Disclosure
Schedule, there are no persons who may be deemed to be affiliates of the
Company under Rule 145 of the Securities Act ("Company Affiliates").
Section 2.19. Certain Business Practices. None of the Company, any of its
subsidiaries or, to the Company's knowledge, any directors, officers, agents or
employees of the Company or any of its subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended (the "FCPA"), or (iii) made any other unlawful payment.
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Section 2.20. Insider Interests. No officer or director of the Company has
any fiduciary or other ownership interest in any material property, real or
personal, tangible or intangible, including without limitation, any computer
software or Company Intellectual Property Rights, used in or pertaining to the
business of the Company or any subsidiary.
Section 2.21. Opinion of Financial Adviser. Each of Goldman, Sachs & Co. and
The Robinson-Humphrey Company LLC (the "Company Financial Advisers") has
delivered to the Company Board its opinion, to the effect that, as of such
date, the Exchange Ratio is fair to the holders of Shares from a financial
point of view, and written opinions to such effect shall be delivered by the
Company Financial Advisers within three days of the date hereof.
Section 2.22. Brokers. No broker, finder or investment banker (other than
the Company Financial Advisers and Mr. Mark Dunkel, true and correct copies of
whose engagement agreements have been provided to Parent is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
Section 2.23. Disclosure. No representation or warranty of the Company in
this Agreement or any certificate, schedule, document or other instrument
furnished or to be furnished to Parent pursuant hereto or in connection
herewith contains, as of the date of such representation, warranty,
certificate, schedule, document or instrument, or will contain any untrue
statement of a material fact or omits, at the date thereof, or will omit to
state a material fact necessary to make any statement herein or therein, in
light of the circumstances under which such statement is or will be made, not
misleading.
Section 2.24. No Existing Discussions. As of the date hereof, the Company is
not engaged, directly or indirectly, in any discussions or negotiations with
any other party with respect to any Third Party Acquisition (as defined in
Section 4.4).
Section 2.25. Section 203 of the DGCL; Other Takeover Laws. The Company
Board has taken all actions required to be taken by it so that the restrictions
contained in Section 203 of the DGCL applicable to an "interested stockholder"
or a "business combination" (as defined in Section 203) and the restrictions
contained in any "fair price," "business combination" or "control share
acquisition" statute or other similar statute or regulation of any other
jurisdiction applicable to the transactions contemplated hereby, will not apply
to the execution, delivery or performance of this Agreement or the consummation
of the Merger or the other transactions contemplated by this Agreement.
Section 2.26. Government Contracts.
(a) With respect to each and every executory Government Contract or
outstanding Bid to which the Company or any of the Company's subsidiaries is a
party: (i) the Company and each of its subsidiaries has complied in all
material respects with all material terms and conditions of such Government
Contract or Bid, including all material clauses, provisions and requirements
incorporated expressly, by reference or by operation of law therein; (ii) the
Company and each of its subsidiaries has complied in all material respects with
all requirements of statute, rule, regulation, order or agreement with the U.S.
Government pertaining to such Government Contract or Bid; (iii) all material
representations and certifications executed, acknowledged or set forth in or
pertaining to such Government Contract or Bid were current, accurate and
complete in all material respects as of their effective date, and the Company
and each of its subsidiaries has complied in all material
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respects with all such representations and certifications; (iv) neither the
U.S. Government nor any prime contractor, subcontractor or other person has
notified the Company or any of its subsidiaries, either orally or in writing,
that the Company or any of its subsidiaries has breached or violated any
statute, rule, regulation, certification, representation, clause, provision or
requirement; (v) no termination for convenience, termination for default, cure
notice or show cause notice has been issued; (vi) since August 31, 1997, no
cost incurred by the Company or any of its subsidiaries has been questioned or
disallowed; and (vii) no money due to the Company or any of its subsidiaries
has been withheld or set off. Section 2.26(a)(1) of the Company Disclosure
Schedule lists each and every executory Government Contract to which the
Company or any of its subsidiaries is a party; Section 2.26(a)(2) of the
Company Disclosure Schedule lists each and every outstanding Bid to which the
Company or any of its subsidiaries is a party.
(b) (i) Neither the Company, nor any of the Company's subsidiaries nor, to
the Company's knowledge, any of the Company's or its subsidiaries' other
affiliates, directors, officers, employees, agents or consultants is (or for
the last five years has been) under administrative, civil or criminal
investigation, indictment or information, audit or internal investigation with
respect to any alleged irregularity, misstatement or omission arising under or
relating to any Government Contract or Bid; (ii) neither the Company nor any of
the Company's subsidiaries nor, to the Company's knowledge, any of the
Company's or its subsidiaries' other respective affiliates, directors,
officers, employees, agents or consultants has made a voluntary disclosure to
the U.S. Government with respect to any alleged irregularity, misstatement or
omission arising under or relating to any Government Contract or Bid that has
led or could lead, either before or after the Closing Date, to any of the
consequences set forth in (i)-(ii) above or any other damage, penalty
assessment, recoupment of payment or disallowance of cost.
(c) There exist (i) no financing arrangements with respect to performance of
any executory Government Contract; (ii) no material outstanding claims against
the Company or any of its subsidiaries, either by the U.S. Government or by any
prime contractor, subcontractor, vendor or other third party, arising under or
relating to any Government Contract or Bid; (iii) no facts that are known to
the Company or any of its subsidiaries upon which such a material claim may be
based in the future; (iv) no material disputes between the Company or any of
its subsidiaries and the U.S. Government or any prime contractor, subcontractor
or vendor arising under or relating to any Government Contract or Bid; and (v)
no facts that are known by the Company or any of its subsidiaries over which
such a material dispute may arise in the future. Neither the Company nor any of
its subsidiaries has any interest in any pending or potential claim against the
U.S. Government or any prime contractor, subcontractor or vendor arising under
or relating to any Government Contract or Bid.
(d) Neither the Company, nor any of the Company's subsidiaries, nor, to the
Company's knowledge, any of their other respective affiliates, directors,
officers or employees is (or at any time during the last five years has been)
suspended or debarred from doing business with the U.S. Government or has been
declared nonresponsible or ineligible for U.S. Government contracting. To the
knowledge of the Company and its subsidiaries, there are no circumstances that
would warrant the institution of suspension or debarment proceedings or the
finding of nonresponsibility or ineligibility on the part of the Company or any
of its subsidiaries in the future.
(e) There exists no Government Contract as to which, as of August 31, 1999,
the estimated cost at completion (including material and labor costs, other
direct costs, overheads, engineering costs and manufacturing costs, whether
incurred or yet to be incurred) exceeds by $500,000 the aggregate
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contract revenue recorded or to be recorded under such Government Contract
through completion (a "Loss Contract").
(f) Neither the Company nor any of its subsidiaries has any fixed-price
development contracts.
(g) For all purposes of this Section 2.26, "Bid" means any quotation, bid
or proposal by the Company or any of its affiliates which, if accepted or
awarded, would lead to a contract with the U.S. Government or any other
entity, including a prime contractor or a higher tier subcontractor to the
U.S. Government, for the design, manufacture or sale of products or the
provision of services by the Company or any of its subsidiaries.
(h) For all purposes of this Section 2.26, "Government Contract" means any
prime contract, subcontract, teaming agreement or arrangement, joint venture,
basic ordering agreement, letter contract, purchase order, delivery order;
Bid, change order, arrangement or other commitment of any kind relating to the
business of the Company or any of its subsidiaries between the Company or any
of its subsidiaries and (i) the U. S. Government, (ii) any prime contractor to
the U, S, Government or (iii) any subcontractor with respect to any contract
described in clause (i) or (ii). For all purposes of this Section 2.26,
"executory Government Contract" means a Government Contract that has not been
closed by the U.S. Government, such prime contractor or such subcontractor, as
appropriate.
Section 2.27. No Research Grants. Neither the Company nor any of its
subsidiaries since September 1, 1989 has provided any research, educational or
study grants of any kind to any hospital, physician or health care provider.
Section 2.28. Investigative Proceedings. Neither the Company nor any of its
subsidiaries since September 1, 1989 has received written notice that the
Company or any subsidiary has been, the subject of any investigative
proceeding before or conducted by any Payor (as defined in Section 2.30 of
this Agreement) or any federal or state regulatory authority or the agent of
any such authority or Payor, including, without limitation, federal and state
health authorities. There are no actions, appeals, investigations, audits or
reviews pending or, to the knowledge of the Company and its subsidiaries,
threatened before any Payor or other entity, commission, board or agency, with
respect to any claims or reports filed by the Company or its subsidiaries with
any Payor.
Section 2.29. Health Care Business. Neither the Company, nor any of the
Company's subsidiaries, nor, to the Company's or any of its subsidiaries'
knowledge, any of their other respective affiliates, directors, officers or
employees, to the extent they operate, administer or provide services to any
employee benefit plan within the meaning of ERISA Section 3(3), or to others
providing services to such a plan, other than an Employee Benefit Plan as
described in Section 2.11(a) hereof, has committed any violation of Title I of
ERISA or Code Section 4975 with respect to such plan having a Material Adverse
Effect on the Company.
Section 2.30. Licenses and Governmental Authorizations. Seller possesses
all Governmental Authorizations necessary for the conduct of its business,
activities and operations. Section 2.30 of the Company Disclosure Schedule
contains a list of all Governmental Authorizations held or applied for by
Seller which have a material affect on its business operations or activities.
All such Governmental Authorizations are in full force and effect and are not
subject to any material conditions which are unusual or not customary and
there is no event nor is any action or proceeding pending or, to the Company's
knowledge threatened which could cause permanent revocation or suspension of
or otherwise adversely affect the continued use and enjoyment of any such
Governmental Authorization. The term "Governmental Authorization" shall mean
any material approval, consent, license, permit,
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accreditation, waiver, or other authorization required by any Governmental
Authority in order to own or operate all or any part of the business of the
Company and its subsidiaries. To the Company's knowledge, there is no proposed
termination or cancellation of or material adverse modification or change in
the relationship of Seller with any Payor. The term "Payor" shall mean Blue
Cross, Blue Shield or any material third party payor, including but not limited
to, insurance companies, health maintenance organizations, preferred provider
organizations, peer review organizations or any other managed care program or
healthcare provider, or any fiscal or other intermediary or carrier acting for
or on behalf of such payor.
Section 2.31. Year 2000 Compliance.
(a) The following terms have the following meanings:
(i) "Products" of a person means all of the products and systems of a
person or any of its subsidiaries (including products and systems currently
under development), including without limitation all Software, that have
been marketed or commercially distributed or used by the person or any of
its subsidiaries in connection with the performance of data processing or
other services for customers at any time within the five (5)-year period
ending on the date hereof; and
(ii) "Business Systems" of a person means all of the internal computer
systems and other equipment of a person or any of its subsidiaries,
comprised of software, hardware (including, without limitation, computer
and all other machinery), databases or embedded control systems
(microprocessor controlled, robotic or other device) related to its or
their business.
(b) The Products of the Company and the Business Systems of the Company will
not be materially adversely affected, nor will the use or functionality thereof
be materially adversely limited, by the advent of the year 2000, the advent of
the twenty-first century or the transition from the twentieth century through
the year 2000 and into the twenty-first century (collectively referred to
herein as a "Year 2000 Event"). Neither the Company nor any subsidiary of the
Company is reasonably likely to incur liabilities, costs or expenses arising
from or relating to failure or faulty operation of any Product of the Company
or Business System of the Company, due to a Year 2000 Event where the aggregate
of such liabilities, costs and expenses would have a Material Adverse Effect on
the Company, nor will the business or operations of the Company or any
subsidiary be disrupted by any such failure or faulty operation, to the extent
that such disruption would have a Material Adverse Effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Except as set forth on the appropriately numbered and lettered Section of
the Disclosure Schedule previously delivered by Parent to the Company (the
"Parent Disclosure Schedule"), Parent and Acquisition hereby represent and
warrant to the Company as follows:
Section 3.1. Organization.
(a) Each of Parent and each of its subsidiaries is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now
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being conducted, except where the failure to be so organized, existing and in
good standing or to have such power and authority would not, individually or in
the aggregate, have a Material Adverse Effect (as defined below) on Parent.
When used in connection with Parent or Acquisition, the term "Material Adverse
EffectMaterial Adverse Effect Section 3.1(a)" means any change or effect that
(i) is materially adverse to the business, results of operations, condition
(financial or otherwise) or prospects of Parent and its subsidiaries, taken as
a whole, other than any change or effect arising out of general economic
conditions unrelated to any businesses in which Parent and its subsidiaries are
engaged, or (ii) may impair the ability of Parent and/or Acquisition to
consummate the transactions contemplated hereby.
(b) Parent has heretofore delivered to the Company accurate and complete
copies of the Articles or Certificate of Incorporation and Bylaws, as currently
in effect, of Parent and Acquisition. Each of Parent and each of its
subsidiaries is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or
licensing necessary, except in such jurisdictions where the failure to be so
duly qualified or licensed and in good standing would not, individually or in
the aggregate, have a Material Adverse Effect on Parent.
Section 3.2. Capitalization of Parent and its Subsidiaries.
(a) The authorized capital stock of Parent consists of 275,000,000 shares of
Parent Common Stock, of which, as of September 10, 1999, 160,095,425 shares and
were issued and outstanding and 375,024 shares were held in Parent's treasury
(together with the associated preferred stock purchase rights (the "Parent
RightsParent Rights Section 3.2(a)") issued pursuant to the Rights Agreement,
dated February 18, 1998, between Parent and ChaseMellon Shareholder Services,
L.L.C. (the "Parent Rights")), and 1,000,000 shares of preferred stock, $1.00
par value per share, none of which is outstanding. All of the outstanding
shares of Parent Common Stock have been validly issued, and are fully paid,
nonassessable and free of preemptive rights. As of September 10, 1999,
11,512,269 shares of Parent Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of
outstanding options. Between September 10, 1999 and the date hereof, no shares
of Parent's capital stock have been issued other than pursuant to stock options
already in existence on September 10, 1999. Except as set forth above, as of
the date hereof, there are outstanding (i) no shares of capital stock or other
voting securities of Parent, (ii) no securities of Parent or its subsidiaries
convertible into or exercisable or exchangeable for shares of capital stock or
voting securities of Parent, (iii) no options or other rights to acquire from
Parent or its subsidiaries, and no obligations of Parent or its subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exercisable or exchangeable for capital stock or voting securities of Parent,
and (iv) no equity equivalents, interests in the ownership or earnings of
Parent or its subsidiaries or other similar rights (collectively "Parent
Securities"). As of the date hereof, there are no outstanding obligations of
Parent or any of its subsidiaries to repurchase, redeem or otherwise acquire
any Parent Securities. There are no stockholder agreements, voting trusts or
other agreements or understandings to which Parent is a party or by which it is
bound relating to the voting of any shares of capital stock of Parent.
(b) The Parent Common Stock (including the associated Parent Rights)
constitutes the only class of equity securities of Parent or its subsidiaries
registered or required to be registered under the Exchange Act.
Section 3.3. Authority Relative to this Agreement; Recommendation. Each of
Parent and Acquisition has all necessary corporate power and authority to
execute and deliver this Agreement
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and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the boards of
directors of Parent and Acquisition and by Parent as the sole stockholder of
Acquisition, and no other corporate proceedings on the part of Parent or
Acquisition are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Acquisition and constitutes a
valid, legal and binding agreement of each of Parent and Acquisition,
enforceable against each of Parent and Acquisition in accordance with its
terms.
Section 3.4. SEC Reports; Financial Statements.
(a) Parent has filed all required forms, reports and documents with the SEC
since March 30, 1996, each of which has complied in all material respects with
all applicable requirements of the Securities Act and the Exchange Act, each as
in effect on the dates such forms, reports and documents were filed. Parent has
heretofore delivered to the Company, in the form filed with the SEC (including
any amendments thereto but excluding any exhibits), (i) its Annual Reports on
Form 10-K for the fiscal years ended March 28, 1997, April 3, 1998 and April 2,
1999, (ii) all definitive proxy statements relating to Parent's meetings of
stockholders (whether annual or special) held since March 30, 1996 and (iii)
all other reports or registration statements filed by Parent with the SEC since
March 30, 1996 (all of the foregoing, collectively, the "Parent SEC Reports").
None of such Parent SEC Reports, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements of Parent included in the Parent SEC Reports
fairly present, in conformity with generally accepted accounting principles
applied on a consistent basis (except as may be indicated in the notes
thereto), the consolidated financial position of Parent and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and changes in financial position for the periods then ended.
(b) Parent has heretofore made available or promptly will make available to
the Company a complete and correct copy of any amendments or modifications,
which are required to be filed with the SEC but have not yet been filed with
the SEC, to agreements, documents or other instruments which previously have
been filed by Parent with the SEC pursuant to the Exchange Act.
Section 3.5. Information Supplied. None of the information supplied or to be
supplied by Parent or Acquisition for inclusion or incorporation by reference
in (i) the S-4 will, at the time the S-4 is filed with the SEC and at the time
it becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (ii) the
Proxy Statement will, at the date mailed to Company stockholders and at the
times of the meeting or meetings of stockholders of the Company to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The S-4 will comply as to form in all material
respects with the provisions of the Securities Act and the rules and
regulations thereunder.
Section 3.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements
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of, the Securities Act, the Exchange Act, state securities or blue sky laws,
the HSR Act and the rules of the NYSE, and except for certain foreign
governmental approvals and the filing and recordation of the Merger Certificate
as required by the DGCL, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Entity is necessary for
the execution and delivery by Parent or Acquisition of this Agreement or the
consummation by Parent or Acquisition of the transactions contemplated hereby,
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notices would not, individually
or in the aggregate, have a Material Adverse Effect on Parent. Neither the
execution, delivery and performance of this Agreement by Parent or Acquisition
nor the consummation by Parent or Acquisition of the transactions contemplated
hereby will (i) conflict with or result in any breach of any provision of the
respective Certificate of Incorporation or Bylaws (or similar governing
documents) of Parent or Acquisition or any of Parent's other subsidiaries, (ii)
result in a material violation or material breach of, or constitute (with or
without notice or lapse of time or both) a material default (or give rise to
any right of termination, amendment, cancellation or acceleration or any Lien)
under, any of the terms, conditions or provisions of any material note, bond,
mortgage, indenture, lease, license, contract, agreement or other instrument or
obligation to which Parent or Acquisition or any of Parent's other subsidiaries
is a party or by which any of them or any of their respective properties or
assets may be bound or (iii) violate any order, writ, injunction, decree, or,
in any material respect, any material law, statute, rule or regulation
applicable to Parent or Acquisition or any of Parent's other subsidiaries or
any of their respective properties or assets, except in the case of clauses
(ii) or (iii) for violations, breaches or defaults which would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Section 3.7. No Default. None of Parent or any of its subsidiaries is in
breach, default or violation (and no event has occurred which with notice or
the lapse of time or both would constitute a breach, default or violation) of
any term, condition or provision of (i) its Articles of Incorporation or Bylaws
(or similar governing documents), (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
Parent or any of its subsidiaries is a party or by which any of them or any of
their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Parent, its
subsidiaries or any of their respective properties or assets, except in the
case of clauses (ii) or (iii) for violations, breaches or defaults that would
not, individually or in the aggregate, have a Material Adverse Effect on
Parent. Each note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound that is material to Parent and its
subsidiaries taken as a whole is in full force and effect and is not subject to
any material default thereunder of which Parent is aware by any party obligated
to Parent or any subsidiary thereunder.
Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except as and
to the extent publicly disclosed by Parent in the Parent SEC Reports, as of
April 3, 1999, none of Parent or its subsidiaries had any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
that would be required by generally accepted accounting principles to be
reflected on a consolidated balance sheet of Parent and its consolidated
subsidiaries (including the notes thereto) or which would have, individually or
in the aggregate, a Material Adverse Effect on Parent. From April 3, 1999
through the date hereof, none of Parent or its subsidiaries has incurred any
liabilities of any nature, whether or not accrued, contingent or otherwise,
which could reasonably be expected to have, and there have been no events,
changes or effects with respect to Parent or its subsidiaries having or which
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
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Section 3.9. Litigation. Except as publicly disclosed by Parent in the
Parent SEC Reports, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Parent, threatened against Parent
or any of its subsidiaries or any of their respective properties or assets
which, individually or in the aggregate, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or could reasonably
be expected to prevent or delay the consummation of the transactions
contemplated by this Agreement. Except as publicly disclosed by Parent in the
Parent SEC Reports, none of Parent or its subsidiaries is subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen in the future, could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent or could
reasonably be expected to prevent or delay the consummation of the transactions
contemplated hereby.
Section 3.10. Compliance with Applicable Law. Except as publicly disclosed
by Parent in the Parent SEC Reports, Parent and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of their respective
businesses (the "Parent PermitsParent Permits Section 3.10"), except for
failures to hold such permits, licenses, variances, exemptions, orders and
approvals which would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. Except as publicly disclosed by Parent in the Parent
SEC Reports, Parent and its subsidiaries are in compliance with the terms of
the Parent Permits, except where the failure so to comply would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Except as publicly disclosed by Parent in the Parent SEC Reports, the
businesses of Parent and its subsidiaries are not being conducted in violation
of any law, ordinance, rule or regulation of any Governmental Entity except for
violations or possible violations which do not, and, insofar as reasonably can
be foreseen, in the future will not, individually or in the aggregate, have a
Material Adverse Effect on Parent. Except as publicly disclosed by Parent in
the Parent SEC Reports, no investigation or review by any Governmental Entity
with respect to Parent or its subsidiaries is pending or, to the knowledge of
Parent, threatened, nor, to the knowledge of Parent, has any Governmental
Entity indicated an intention to conduct the same, other than, in each case,
those which Parent reasonably believes will not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
Section 3.11. Employee Benefit Plans; Labor Matters.
(a) Schedule 3.11(a) of the Parent Disclosure Schedule lists all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), and all bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, programs or arrangements,
and any severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee or director of Parent, any trade or
business (whether or not incorporated) which is a member of a controlled group
including Parent or which is under common control with Parent (an "ERISA
Affiliate") within the meaning of Section 414 of the Code, as well as each plan
with respect to which Parent or an ERISA Affiliate could incur liability under
Section 4069 (if such plan has been or were terminated) or Section 4212(c) of
ERISA (together, the "Parent Benefit Plans").
(b) With respect to each Parent Benefit Plan, (i) no event has occurred and,
to the knowledge of Parent, there currently exists no condition or set of
circumstances, in connection with which Parent or any of its subsidiaries could
be subject to any liability under the terms of the Parent Benefit Plans, ERISA,
the Code or any other applicable law which would have, individually or in the
aggregate, a
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Material Adverse Effect on Parent. There is no pending, or to Parent's
knowledge, threatened labor dispute, strike or work stoppage against Parent or
any of its subsidiaries which may reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Parent.
Section 3.12. Environmental Laws and Regulations.
(a) Except as publicly disclosed by Parent in the Parent SEC Reports, (i)
each of Parent and its subsidiaries is in material compliance with all
Environmental Laws, except for non-compliance that would not, individually or
in the aggregate, have a Material Adverse Effect on Parent, which compliance
includes, but is not limited to, the possession by Parent and its subsidiaries
of all material permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof; (ii) none of Parent or its subsidiaries has received written notice
of, or, to the knowledge of Parent, is the subject of, any Environmental Claim
that could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent; and (iii) to the knowledge of Parent, there
are no circumstances that are reasonably likely to prevent or interfere with
such material compliance in the future.
(b) Except as publicly disclosed by Parent, there are no Environmental
Claims which could reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect on Parent that are pending or, to the knowledge
of Parent, threatened against Parent or any of its subsidiaries or, to the
knowledge of Parent, against any person or entity whose liability for any
Environmental Claim Parent or any of its subsidiaries has or may have retained
or assumed either contractually or by operation of law.
Section 3.13. Tax Matters. Parent and each of its subsidiaries have
accurately prepared in all material respects and timely filed all material Tax
Returns they are required to have filed. Such Tax Returns are accurate and
correct in all material respects. Parent and each of its subsidiaries have paid
all Taxes shown as due on all Tax Returns and have adequately provided for all
Taxes for which they are required to provide.
Section 3.14. Title to Property. Parent and each of its subsidiaries have
good and marketable title to all of their properties and assets, free and clear
of all Liens, except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which would not, individually or in the aggregate, have a Material Adverse
Effect on Parent; and, to Parent's knowledge, all leases pursuant to which
Parent or any of its subsidiaries lease from others real or personal property
are in good standing, valid and enforceable in accordance with their respective
terms, and there is not, to the knowledge of Parent, under any of such leases,
any existing material default or event of default (or event which with notice
or lapse of time, or both, would constitute a material default and in respect
of which the Parent or such subsidiary has not taken adequate steps to prevent
such a default from occurring) except where the lack of such good standing,
validity and enforceability, or the existence of such default or event, would
not, individually or in the aggregate, have a Material Adverse Effect on
Parent.
Section 3.15. Intellectual Property; Software.
(a) Each of Parent and its subsidiaries owns, or possesses adequate licenses
or other valid rights to use, all existing United States and foreign patents,
trademarks, trade names, services marks, copyrights, trade secrets, and
applications therefor that are material to its business as currently conducted
(the "Parent Intellectual Property RightsParent Intellectual Property Rights
Section 3.15(a)").
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(b) The validity of the Parent Intellectual Property Rights and the title
thereto of Parent or any subsidiary, as the case may be, is not being
questioned in any litigation to which Parent or any subsidiary is a party.
(c) The conduct of the business of Parent and its subsidiaries as now
conducted does not, to Parent's knowledge, infringe any valid patents,
trademarks, tradenames, service marks or copyrights of others. The consummation
of the transactions contemplated hereby will not result in the loss or
impairment of any material Parent Intellectual Property Rights.
(d) Each of Parent and its subsidiaries considers its computer software as
trade secrets, and each has taken steps it believes appropriate to protect and
maintain the same as such.
Section 3.16. Insurance. Parent and its subsidiaries maintain general
liability and other business insurance that Parent believes to be reasonably
prudent for its business.
Section 3.17. No Prior Activities of Acquisition. Except for obligations
incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions
contemplated hereby, Acquisition has neither incurred any obligation or
liability nor engaged in any business or activity of any type or kind
whatsoever or entered into any agreement or arrangement with any person.
Section 3.18. Tax Treatment; Pooling. Neither Parent nor, to the knowledge
of Parent, any of its affiliates has taken or agreed to take any action that
would prevent the Merger (a) from constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code or (b) from being treated as
a Pooling Transaction for financial accounting purposes.
Section 3.19. Affiliates. Except for the directors and executive officers of
Parent, there are no persons who, to the knowledge of Parent, may be deemed to
be affiliates of Parent under Rule 1-02 of Regulation S-X of the SEC ("Parent
Affiliates").
Section 3.20. Certain Business Practices. None of Parent, any of its
subsidiaries or any directors, officers, agents or employees of Parent or any
of its subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the FCPA, or (iii) made any other unlawful payment.
Section 3.21. Insider Interests. No officer or director of the Parent has
any interest in any material property, real or personal, tangible or
intangible, including without limitation, any computer software or Parent
Intellectual Property Rights, used in or pertaining to the business of Parent
or any subsidiary.
Section 3.22. Disclosure. No representation or warranty of Parent in this
Agreement or any certificate, schedule, document or other instrument furnished
or to be furnished to the Company pursuant hereto or in connection herewith
contains, as of the date of such representation, warranty, certificate,
schedule, document or instrument, or will contain any untrue statement of a
material fact or omits, at the date thereof, or will omit to state a material
fact necessary to make any statement herein or therein, in light of the
circumstances under which such statement is or will be made, not misleading.
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Section 3.23. Brokers. No broker, finder or investment banker (other than
Merrill Lynch & Co.) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Acquisition.
Section 3.24. Year 2000 Compliance. All of the Products of Parent and the
Business Systems of Parent, and the conduct by Parent and its subsidiaries of
their business with customers and suppliers will not be affected by the advent
of the year 2000, the advent of the twenty-first century or the transition
from the twentieth century through the year 2000 and into the twenty-first
century in a manner that constitutes a Material Adverse Effect on Parent.
Neither Parent nor any subsidiary of Parent is reasonably likely to incur
liabilities, costs or expenses arising from or relating to failure or faulty
operation of any Product of Parent or Business System of Parent, due to a Year
2000 Event where the aggregate of such liabilities, costs and expenses would
have a Material Adverse Effect on Parent, nor will the business or operations
of Parent or any subsidiary be disrupted by any such failure or faulty
operation, to the extent such disruption would have a Material Adverse Effect
on Parent.
ARTICLE 4
COVENANTS
Section 4.1. Conduct of Business of the Company. Except as contemplated by
this Agreement or as described in Section 4.1 of the Company Disclosure
Schedule, during the period from the date hereof to the Effective Time, the
Company will, and will cause each of its subsidiaries to, conduct its
operations in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, with no less diligence and effort
than would be applied in the absence of this Agreement, seek to preserve
intact its current business organizations, keep available the service of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end that its
goodwill and ongoing businesses shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing, except as otherwise
expressly provided in this Agreement or as described in Section 4.1 of the
Company Disclosure Schedule, prior to the Effective Time, neither the Company
nor any of its subsidiaries will, without the prior written consent of Parent:
(a) amend its certificate of incorporation or Bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities (except bank loans in the ordinary
course of business consistent with past practice) or equity equivalents
(including, without limitation, any stock options or stock appreciation
rights), except for the issuance and sale of Shares pursuant to options
previously granted under the Company Plans and the grant of options under the
Company Plans to purchase up to 275,000 Shares relating to fiscal 1999 awards
made in the ordinary course of business;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof, except for cash dividends in accordance
with past practices and amounts per share) in respect of its capital stock,
make any other actual, constructive or deemed distribution in respect of its
capital stock or otherwise make any payments to stockholders in their capacity
as such, or redeem or otherwise acquire any of its securities or any
securities of any of its subsidiaries;
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(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any or its subsidiaries (other than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring or in
any other fashion the corporate structure or ownership of any subsidiary;
(f) (i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings under existing lines of credit in the ordinary
course of business consistent with past practice; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except in
the ordinary course of business consistent with past practice and except for
obligations of subsidiaries of the Company incurred in the ordinary course of
business; (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to subsidiaries of the Company or
customary loans or advances to employees, in each case in the ordinary course
of business consistent with past practice); (iv) pledge or otherwise encumber
shares of capital stock of the Company or its subsidiaries; or (v) mortgage or
pledge any of its material assets, tangible or intangible, or create or suffer
to exist any material Lien with respect thereto (other than tax Liens for Taxes
not yet due);
(g) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer or employee in any manner, or increase in any manner the compensation
or fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units); provided, however, that this paragraph (g) shall not
prevent the Company or its subsidiaries from (i) entering into employment
agreements or severance agreements with new employees in the ordinary course of
business and consistent with past practice or (ii) increasing annual
compensation and/or providing for or amending bonus arrangements for employees
for fiscal 1999 in the ordinary course of year-end compensation reviews
consistent with past practice;
(h) acquire, sell, lease or dispose of any assets in any single transaction
or series of related transactions having a fair market value in excess of $1
million in the aggregate;
(i) except as may be required as a result of a change in law or in generally
accepted accounting principles, change any of the accounting principles or
practices used by it;
(j) revalue in any material respect any of its assets, including, without
limitation, writing down the value of software or inventory or writing-off
notes or accounts receivable, other than in the ordinary course of business and
in accordance with GAAP, applied on a basis consistent with past practice;
(k) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or any equity interest therein; (ii) enter into any material contract
or agreement other than in the ordinary course of business consistent with past
practice; (iii) authorize any new capital expenditure or expenditures which,
individually, is in excess of $1 million or, in the aggregate, are in excess of
$5 million; provided that none of the foregoing shall limit any capital
expenditure required pursuant to existing customer contracts;
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(l) make any Tax election or settle or compromise any Tax liability material
to the Company and its subsidiaries taken as a whole;
(m) settle or compromise any pending or threatened suit, action or claim
which relates to the transactions contemplated hereby or the settlement or
compromise of which could have a Material Adverse Effect on the Company;
(n) commence any material software development project or terminate any
material software development project that is currently ongoing, in either case
except pursuant to the terms of existing contracts with customers;
(o) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(n) or any action which would make any
of the representations or warranties of the Company contained in this Agreement
untrue or incorrect; or
(p) take any action or permit any action to be taken that would accelerate
the vesting of any stock options issued by the Company or any of its
subsidiaries.
Section 4.2. Conduct of Business of Parent. Except as contemplated by this
Agreement, during the period from the date hereof to the Effective Time, Parent
will, and will cause each of its subsidiaries to, conduct its operations in the
ordinary course of business consistent with past practice and, to the extent
consistent therewith, with no less diligence and effort than would be applied
in the absence of this Agreement, seek to preserve intact its current business
organizations, keep available the service of its current officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and ongoing businesses
shall be unimpaired at the Effective Time. Without limiting the generality of
the foregoing, except as otherwise expressly provided in this Agreement, prior
to the Effective Time, neither Parent nor any of its subsidiaries will, without
the prior written consent of the Company:
(a) knowingly take any action that would result in a failure to maintain the
trading of the Parent Common Stock on the NYSE;
(b) declare, set aside or pay any dividend or other distribution in respect
of its capital stock, except for dividends payable in Parent Common Stock or
dividends by a subsidiary of Parent to Parent or another subsidiary of Parent
or (other than in connection with the forfeiture of restricted stock or the
exercise of stock options) redeem, repurchase or otherwise acquire any of its
securities;
(c) acquire or agree to acquire or agree to be acquired, by merging or
consolidating with, by purchasing an equity interest in or the assets of, or by
any other manner, any business or any corporation, partnership or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other entity (other than the purchase of assets from
suppliers, clients or vendors in the ordinary course of business and consistent
with past practice), or agree to a sale of a material portion of its assets if,
in each case, such transaction would prevent or delay for more than 30 days the
consummation of the transactions contemplated by this Agreement;
(d) adopt or propose to adopt any amendments to its charter documents which
would have an adverse effect on the consummation of the transactions
contemplated by this Agreement; or
(e) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.2(a) through 4.2(d) or any action which would make any
of the representations or warranties of Parent contained in this Agreement
untrue or incorrect.
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Section 4.3. Preparation of S-4 and the Proxy Statement. Parent and the
Company shall promptly prepare and file with the SEC the Proxy Statement, and
Parent shall prepare and file with the SEC the S-4, in which the Proxy
Statement will be included as a prospectus. Each of Parent and the Company
shall use its best efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing. Parent shall also
take any action (other than qualifying to do business in any jurisdiction in
which it is now not so qualified) required to be taken under any applicable
state securities laws in connection with the issuance of Parent Common Stock in
the Merger and upon the exercise of Company Stock Options, and the Company
shall furnish all information concerning the Company and the holders of Shares
as may be reasonably requested in connection with any such actions.
Section 4.4. Other Potential Acquirers.
(a) The Company, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any discussions
or negotiations with any parties with respect to any Third Party Acquisition
(as defined below). The Company may furnish confidential information and
access, in each case only in response to unsolicited requests therefor, to any
person or group pursuant to confidentiality agreements with terms no less
favorable to the Company than the Confidentiality Agreement is with respect to
Parent, and may participate in discussions and negotiate with such person or
group concerning any Third Party Acquisition, in all cases only if (i) such
person or group has submitted a Superior Proposal (as defined in paragraph
(c) below) to the Company Board relating to any such transaction and (ii) the
Company Board by a majority vote determines in its good faith judgment, after
consultation with and based upon the advice of its independent legal counsel,
that it is required to do so in order to comply with its fiduciary duties. The
Company Board shall provide a copy of any such Superior Proposal to Parent
promptly upon receipt thereof and thereafter keep Parent promptly advised of
any development with respect thereto. Except as set forth above, neither the
Company nor any of its affiliates shall, nor shall the Company authorize or
permit any of its or their respective officers, directors, employees,
representatives or agents to, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any person or group (other than Parent and Acquisition, any
affiliate or associate of Parent and Acquisition or any designees of Parent and
Acquisition) concerning any Third Party Acquisition; provided, however, that
nothing herein shall prevent the Company Board from taking, and disclosing to
the Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer.
(b) Except as set forth in this Section 4.4(b), the Company Board shall not
withdraw, or modify in a manner adverse to Parent, its recommendation of the
transactions contemplated hereby or approve or recommend, or cause the Company
to enter into any agreement with respect to, any Third Party Acquisition.
Notwithstanding the foregoing, if the Company Board by a majority vote
determines in its good faith judgment, after consultation with and based upon
the advice of its independent legal counsel, that it is required to do so in
order to comply with its fiduciary duties, the Company Board may withdraw, or
modify in a manner adverse to Parent, its recommendation of the transactions
contemplated hereby or approve or recommend a Superior Proposal, but in each
case only (i) after providing written notice to Parent (a "Notice of Change")
advising Parent that the Company Board has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person or group making such Superior Proposal and (ii) if
Parent does not, within five business days of Parent's receipt of the Notice of
Change, make an offer which the Company Board by a majority vote determines in
its good faith judgment (after
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consultation with its financial advisers and legal counsel) to be as favorable
to the Company's stockholders as such Superior Proposal; provided, however,
that the Company shall not be entitled to withdraw, or modify in a manner
adverse to Parent, its recommendation of the transactions contemplated hereby
or enter into any agreement with respect to a Superior Proposal unless and
until this Agreement is terminated by its terms pursuant to Section 6.1.
(c) For the purposes of this Agreement, "Third Party Acquisition" means the
occurrence, after the date hereof, of any of the following events: (i) the
acquisition of the Company by merger or otherwise by any person (which includes
a "person" or "group" as such terms are defined in Section 13(d)(3) of the
Exchange Act) other than Parent, Acquisition or any affiliate thereof (a "Third
Party"); (ii) the acquisition by a Third Party of more than 30% of the total
assets of the Company and its subsidiaries, taken as a whole; (iii) the
beneficial ownership by a Third Party of 20% or more of the outstanding Shares
(other than the beneficial ownership by a person named on Section 4.4(c) of the
Disclosure Schedule, with respect to which person 20% shall be deemed to be
replaced by 30% for purposes of this clause (iii)); (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; (v) the repurchase by the Company or any of its
subsidiaries of more than 15% of the outstanding Shares; or (vi) the
acquisition by the Company or any subsidiary, by merger, purchase of stock or
assets, joint venture or otherwise, of a direct or indirect ownership interest
or investment in any business whose annual revenues, net income or assets is
equal to or greater than 40% of the annual revenues, net income or assets of
the Company and its subsidiaries taken as a whole. For purposes of this
Agreement, a "Superior Proposal" means any bona fide written proposal to
acquire, directly or indirectly, by merger, consolidation, share exchange,
share purchase, business combination or other similar transaction involving the
Company or any of its subsidiaries, for consideration consisting of cash,
securities or other property, more than 50% of the Shares then outstanding or a
substantial portion of the consolidated assets of the Company, which the
Company Board by a majority vote determines in its good faith judgment (after
consultation with its financial advisers and legal counsel), (i) would, if
consummated, result in a transaction that is more favorable to the Company's
stockholders from a financial point of view than the Merger and (ii) is
reasonably capable of being completed in accordance with its terms (taking into
account all legal, financial, regulatory, and other aspects of the proposal
including the nature and sufficiency of financing, if any, for such proposal
and the Person making the proposal).
Section 4.5. Comfort Letters.
(a) The Company shall use all reasonable efforts to cause Ernst & Young LLP
to deliver a letter dated as of the date of the Proxy Statement and the S-4,
and addressed to the Company and Parent and their respective Boards of
Directors, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for agreed upon procedures letters delivered
by independent public accountants in connection with registration statements
and proxy statements similar to the Proxy Statement and the S-4.
(b) Parent shall use all reasonable efforts to cause Deloitte & Touche LLP
to deliver a letter dated as of the date of the Proxy Statement and the S-4,
and addressed to Parent and the Company and their respective Boards of
Directors, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for agreed upon procedures letters delivered
by independent public accountants in connection with registration statements
and proxy statements similar to the Proxy Statement and the S-4.
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Section 4.6. Meeting of Company Stockholders. The Company shall take all
action necessary, in accordance with applicable law and its certificate of
incorporation and bylaws, to duly call, give notice of, convene and hold a
meeting of its stockholders as promptly as practicable to consider and vote
upon the adoption and approval of this Agreement and the transactions
contemplated hereby. The stockholder vote required for the adoption and
approval of the transactions contemplated by this Agreement shall be the vote
required by the DGCL and the certificate of incorporation and bylaws of the
Company. The Company will, through its Boards of Directors, recommend to its
stockholders approval of such matters; provided, however, that, subject to the
provisions of Section 6.3, the Company Board may withdraw its recommendation if
(i) the Company receives a Superior Proposal and, (ii) after complying with the
provisions of Section 4.4(b), the Company Board by a majority vote determines
in its good faith judgment, after consultation with and based upon the advice
of its independent legal counsel, that it is required, in order to comply with
its fiduciary duties, to recommend the Superior Proposal. The Company and
Parent shall coordinate and cooperate with respect to the timing of such
meeting and shall use their best efforts to hold such meeting as soon as
practicable after the date hereof.
Section 4.7. Stock Exchange Listing. Parent shall use its best efforts to
cause the shares of Parent Common Stock to be issued in the Merger and the
shares of Parent Common Stock to be reserved for issuance upon exercise of
Company Stock Options (i) to be approved for listing on the NYSE and (ii) to be
approved for listing on each other national securities exchange on which Parent
Common Stock is then listed, in each case subject to official notice of
issuance, on or prior to the Effective Time.
Section 4.8. Access to Information.
(a) Between the date hereof and the Effective Time, the Company will give
Parent and its authorized representatives, and Parent will give the Company and
its authorized representatives, reasonable access to all employees, plants,
offices, warehouses and other facilities and to all books and records of itself
and its subsidiaries, will permit the other party to make such inspections as
such party may reasonably request and will cause its officers and those of its
subsidiaries to furnish the other party with such financial and operating data
and other information with respect to the business and properties of itself and
its subsidiaries as the other party may from time to time reasonably request.
Each party will direct all requests for information and access to a senior
executive to be designated by the other party, and shall conduct such
inspections and investigations in a manner that does not unreasonably interfere
with the conduct of business by the other party.
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent, and Parent shall furnish to the Company, within 25 business
days after the end of each fiscal month (commencing with August 1999), an
unaudited consolidated balance sheet of the party furnishing such information
as of the end of such month and the related consolidated statements of earnings
and stockholders' equity (deficit) for such period, and, within 25 business
days after the end of each fiscal quarter, a statement of cash flows for the
quarter then ended, each prepared in accordance with generally accepted
accounting principles in conformity with the practices consistently applied by
such party with respect to its monthly and quarterly financial statements. All
the foregoing shall be in accordance with the books and records of the party
furnishing such information and shall fairly present its consolidated financial
position (taking into account the differences between the monthly and quarterly
statements prepared by such party in conformity with its past practices) as of
the last day of the period then ended.
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(c) Each of the parties hereto will hold and will cause its consultants and
advisers to hold in confidence all documents and information furnished to it in
connection with the transactions contemplated by this Agreement pursuant to the
terms of the Confidentiality Agreement.
Section 4.9. Additional Agreements; Reasonable Efforts. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (i)
cooperating in the preparation and filing of the Proxy Statement and the S-4,
any filings that may be required under the HSR Act, and any amendments to any
thereof; (ii) obtaining consents of all third parties and Governmental Entities
necessary, proper or advisable for the consummation of the transactions
contemplated by this Agreement; (iii) contesting any legal proceeding relating
to the Merger; and (iv) executing any additional instruments necessary to
consummate the transactions contemplated hereby. Subject to the terms and
conditions of this Agreement, Parent and the Company agree to use all
reasonable efforts to cause the Effective Time to occur as soon as practicable
after the stockholder votes with respect to the Merger. In case at any time
after the Effective Time any further action is necessary to carry out the
purposes of this Agreement, the proper officers and directors of each party
hereto shall take all such necessary action.
Section 4.10. Public Announcements. Parent and the Company will consult with
one another before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement,
including, without limitation, the Merger, and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by applicable law or by obligations pursuant to any listing
agreement with the NYSE as determined by Parent or the Company, as the case may
be.
Section 4.11. Directors' and Officers' Insurance; Indemnification. (a) Parent
will provide, until the sixth anniversary of the Closing Date, the directors and
officers of the Company who are currently covered by the Company's existing
insurance and indemnification policy an insurance and indemnification policy
that provides coverage for events occurring prior to the Effective Time (the
"D&O Insurance") that is no less favorable than the Company's existing policy
or, if substantially equivalent coverage is unavailable, the best available
coverage; provided, that Parent shall not be required to pay an annual premium
for the D&O Insurance in excess of 200% of the last annual premium paid by the
Company prior to the date hereof, but in such case shall purchase as much
coverage as possible for such amount.
(b) After the Effective Time, the Surviving Corporation shall indemnify and
hold harmless each person who is now, or has been prior to the date hereof or
who becomes prior to the Effective Time, an officer or director of the Company
or any of its subsidiaries (the "Indemnified Persons") against (i) all losses,
claims, damages, costs, expenses (including without limitation counsel fees and
expenses), settlement payments or liabilities arising out of or in connection
with any claim, demand, action, suit, proceeding or investigation based in
whole or in part on, or arising in whole or in part out of, the fact that such
person is or was an officer or director of the Company or any of its
subsidiaries, whether or not pertaining to any matter existing or occurring at
or prior to the Effective Time and whether or not asserted or claimed prior to
or at or after the Effective Time (the "Indemnified Liabilities") and (ii) all
Indemnified Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to, this Agreement or the transactions contemplated
hereby, in each case to the fullest extent required or permitted under
applicable law or under the Surviving
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Corporation's certificate of incorporation or bylaws. Each Indemnified Person
is intended to be a third party beneficiary of this Section 4.11 and may
specifically enforce its terms. This Section 4.11 shall not limit or otherwise
adversely affect any rights any Indemnified Person may have under any agreement
with the Company or under the Company's certificate of incorporation or bylaws.
Section 4.12. Notification of Certain Matters. The Company shall give prompt
notice to Parent and Acquisition, and Parent and Acquisition shall give prompt
notice to the Company, of (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Company, Parent or Acquisition, as the case may be,
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 4.12 shall not cure such breach or non-
compliance or limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 4.13. Affiliates; Pooling; Tax Free Reorganization.
(a) Within thirty days after the date hereof, the Company shall obtain from
any person who was a Company Affiliate on the date of this Agreement, a letter
agreement substantially in the form of Exhibit A hereto, and shall deliver the
same to Parent within such thirty day period.
(b) The Company shall obtain from any person who may be deemed to have
become a Company Affiliate after the date of this Agreement and on or prior to
the Effective Time, a letter agreement substantially in the form of Exhibit A
hereto, and shall deliver the same to Parent as soon as practicable.
(c) Within thirty days after the date hereof, Parent shall obtain from any
person who was a Parent Affiliate on the date of this Agreement, a letter
agreement substantially in the form of Exhibit B hereto.
(d) Parent shall obtain from any person who may be deemed to have become a
Parent Affiliate after the date of this Agreement and on or prior to the
Effective Time, a letter agreement substantially in the form of Exhibit B
hereto.
(e) Parent shall not be required to maintain the effectiveness of the S-4
for the purpose of resale of shares of Parent Common Stock by stockholders of
the Company who may be affiliates of the Company or Parent pursuant to Rule 145
under the Securities Act.
(f) Each party hereto shall use all reasonable efforts to cause the Merger
to be treated for financial accounting purposes as a Pooling Transaction, and
shall not take, and shall use all reasonable efforts to prevent any affiliate
of such party from taking, any actions which could prevent the Merger from
being treated for financial accounting purposes as a Pooling Transaction.
(g) The Company and Parent and Acquisition shall execute and deliver to
Weil, Gotshal & Manges LLP, counsel to the Company, and Gibson, Dunn & Crutcher
LLP, counsel to Parent, certificates substantially in the form attached hereto
as Exhibits C-1 and C-2, respectively, at such time or times as reasonably
requested by such law firm in connection with its delivery of an opinion with
respect to the transactions contemplated hereby. Prior to the Effective Time,
none of the Company, Parent or Acquisition shall take or cause to be taken any
action which would cause to be untrue (or fail to take or cause not to be taken
any action which would cause to be untrue) any of the representations in
Exhibits C-1 or C-2.
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Section 4.14. State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation is or shall become applicable to the transactions contemplated
hereby, Parent, the Company and their respective Boards of Directors shall use
all reasonable efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and shall otherwise
act to minimize the effects of any such statute or regulation on the
transactions contemplated hereby.
Section 4.15. Employee Benefits.
(a) On or before Closing, the Company shall cause (i) the Nichols Research
Corporation Retirement Plan, The Welkins Associates Ltd. Money Purchase Plan,
the PRISM Simplified Employee Pension Plan, and the Murray & West, Inc. 401(k)
Plan (the "Retirement Plans") to be terminated with an effective date of
termination to be on or before Closing (the "Termination Date") and (ii) the
account of each participant in the Retirement Plans as of the Termination Date
to become one hundred percent (100%) vested and nonforfeitable.
(b) The Company shall take all actions necessary to provide that each
outstanding and valid option or right to purchase shares of Company common
stock granted or provided under the Company's 1988 Employees' Stock Purchase
Plan (the "Stock Purchase Plan") shall be exercised automatically on the day
that is at least three (3) days prior to the Closing Date and the Stock
Purchase Plan shall be terminated effective immediately thereafter.
(c) For the purposes of eligibility to participate and vesting in Parent's
Matched Asset Plan, Parent shall cause each employee of the Company to receive
full credit for years of service with the Company or any affiliate of the
Company (and service otherwise credited by the Company or any affiliate of the
Company) prior to the Closing.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1. Conditions to Each Party's Obligations to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
are subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) this Agreement shall have been approved and adopted by the requisite
vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which prohibits,
restrains or enjoins the consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act shall have
terminated or expired, and any other governmental or regulatory notices or
approvals required in order to consummate the transactions contemplated hereby
shall have been either filed or received;
(d) the S-4 shall have become effective under the Securities Act and shall
not be the subject of any stop order or proceedings seeking a stop order, and
Parent shall have received all state securities laws or "blue sky" permits and
authorizations necessary to issue shares of Parent Common Stock in exchange for
Shares in the Merger; and
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(e) (i) the Company shall have received confirmation in writing from Ernst &
Young LLP that in accordance with generally accepted accounting principles and
applicable published rules and regulations of the SEC, the Company is eligible
to be a party to a merger accounted for as a Pooling Transaction and that Ernst
& Young LLP is not aware of any matters that prohibit the use of pooling of
interests accounting in connection with the Merger, and such confirmation shall
not have been withdrawn or modified in any material respect, and (ii) Parent
shall have received a written opinion from Deloitte & Touche LLP stating that
the Merger will be accounted for under generally accepted accounting principles
as a Pooling Transaction and such opinion shall not have been withdrawn or
modified in any material respect.
Section 5.2. Conditions to the Obligations of the Company. The obligation of
the Company to effect the Merger is subject to the satisfaction at or prior to
the Effective Time of the following additional conditions:
(a) each of the representations and warranties of Parent and Acquisition
contained in this Agreement that is qualified as to materiality shall be true
and correct at and as of the Effective Time as if made at and as of such time
(other than representations and warranties that address matters only as of a
certain date, which shall be true and correct as of such certain date) and each
of the representations and warranties that is not so qualified shall be true
and correct in all material respects at and as of the Effective Time as if made
on and as of such date (other than representations and warranties that address
matters only as of a certain date, which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and the Company shall have received a
certificate signed on behalf of Parent to such effect;
(b) each of the covenants and obligations of Parent and Acquisition to be
performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time, and at the Closing Parent and Acquisition shall have
delivered to the Company a certificate to that effect;
(c) the shares of Parent Common Stock issuable to the Company stockholders
pursuant to this Agreement and such other shares required to be reserved for
issuance in connection with the Merger shall have been authorized for listing
on the NYSE upon official notice of issuance;
(d) the Company shall have received the opinion, based on the
representations of the Company and Parent and Acquisition substantially in the
form attached hereto as Exhibits C-1 and C-2, respectively, of Weil, Gotshal &
Manges LLP, counsel to the Company, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and such opinion shall not have been withdrawn or
modified in any material respect;
(e) Parent shall have received the opinion, based on the representations of
the Company and Parent and Acquisition substantially in the form attached
hereto as Exhibits C-1 and C-2, respectively, of Gibson, Dunn & Crutcher LLP,
counsel to Parent, a copy of which shall have been provided to the Company, to
the effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and such
opinion shall not have been withdrawn or modified in any material respect; and
(f) there shall have been no events, changes or effects with respect to
Parent or its subsidiaries having a Material Adverse Effect on Parent.
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<PAGE>
Section 5.3. Conditions to the Obligations of Parent and Acquisition. The
respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions:
(a) each of the representations and warranties of the Company contained in
this Agreement that is qualified as to materiality shall be true and correct at
and as of the Effective Time as if made at and as of such time (other than
representations and warranties that address matters only as of a certain date,
which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Effective Time as if made on
and as of such date (other than representations and warranties that address
matters only as of a certain date, which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and Parent shall have received a certificate
signed on behalf of the Company to such effect;
(b) each of the covenants and obligations of the Company to be performed at
or before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed in all material respects at or before the Effective Time,
and at the Closing the Company shall have delivered to Parent a certificate to
that effect;
(c) Parent shall have received from each affiliate of the Company referred
to in Section 4.13 an executed copy of the letter attached hereto as Exhibit A
and shall have received from each affiliate of Parent referred to in Section
4.13 an executed copy of the letter attached hereto as Exhibit B;
(d) the Company shall have obtained the consent or approval of each person
whose consent or approval shall be required in order to permit the succession
by the Surviving Corporation pursuant to the Merger to any material obligation,
right or interest of the Company or any subsidiary of the Company under any
material loan or credit agreement, note, mortgage, indenture, lease or other
contract, agreement or instrument, provided, that obtaining such consents or
approvals with respect to the credit facility agreements set forth in Section
5.3(d) of the Company Disclosure Schedule shall not be a condition precedent to
the respective obligations of Parent and Acquisition to effect the Merger;
(e) Parent shall have received the opinion, based on the representations of
the Company and Parent and Acquisition substantially in the form attached
hereto as Exhibits C-1 and C-2, respectively, of Gibson, Dunn & Crutcher LLP,
counsel to Parent, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code and such opinion shall not have been withdrawn or modified in any
material respect; and
(f) there shall have been no events, changes or effects with respect to the
Company or its subsidiaries having a Material Adverse Effect on the Company.
ARTICLE 6
TERMINATION; AMENDMENT; WAIVER
6.1. Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval and adoption of this Agreement by the Company's stockholders:
(a) by mutual written consent of Parent, Acquisition and the Company;
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(b) by Parent and Acquisition or the Company if (i) any court of competent
jurisdiction in the United States or other United States Governmental Entity
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become nonappealable or
(ii) the Merger has not been consummated by February 29, 2000 (the "Expiration
Date"); provided that no party may terminate this Agreement pursuant to this
clause (ii) if such party's failure to fulfill any of its obligations under
this Agreement shall have been the reason that the Effective Time shall not
have occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition set forth in
this Agreement, or if any representation or warranty of Parent or Acquisition
shall have become untrue, in either case such that the conditions set forth in
Section 5.2(a) would be incapable of being satisfied by the Expiration Date (or
as otherwise extended), provided that the Company has not breached any of its
obligations hereunder; (ii) there shall have been a breach by Parent or
Acquisition of any of their respective covenants or agreements hereunder having
a Material Adverse Effect on Parent or materially adversely affecting (or
materially delaying) the consummation of the Merger, and Parent or Acquisition,
as the case may be, has not cured such breach within twenty business days after
notice by the Company thereof, provided that the Company has not breached any
of its obligations hereunder; (iii) the Company shall have convened a meeting
of its stockholders to vote upon the Merger and shall have failed to obtain the
requisite vote of its stockholders; (iv) the Company Board shall have
recommended to the Company's stockholders a Superior Proposal; (v) the Company
Board shall have withdrawn, modified or changed its approval or recommendation
of this Agreement or the Merger or shall have failed to call, give notice of,
convene or hold a stockholders' meeting to vote upon the Merger, or shall have
adopted any resolution to effect any of the foregoing, provided, that the
Company shall not be entitled to terminate this Agreement pursuant to clause
(iv) or (v) hereof unless (x) the Company has complied with Section 4.4 hereof
and (y) prior to such termination, the Company shall have paid to Parent, in
immediately available funds, the amounts required to be paid pursuant to
Section 6.3(a) hereof; (vi) the Initial Parent Price exceeds the Final Parent
Price by an amount in excess of 20% of the Initial Parent Price; or (vii) there
shall have been events, changes or effects with respect to Parent and its
subsidiaries having a Material Adverse Effect on Parent; or
(d) by Parent and Acquisition if (i) there shall have been a breach of any
representation or warranty on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have
become untrue, in either case such that the conditions set forth in Section
5.3(a) would be incapable of being satisfied by the Expiration Date (or as
otherwise extended), provided that neither Parent nor Acquisition has breached
any of its obligations hereunder; (ii) there shall have been a breach by the
Company of any of its covenants or agreements hereunder having a Material
Adverse Effect on the Company or materially adversely affecting (or materially
delaying) the consummation of the Merger, and the Company has not cured such
breach within twenty business days after notice by Parent or Acquisition
thereof, provided that neither Parent nor Acquisition has breached any of its
obligations hereunder; (iii) the Company Board shall have recommended to the
Company's stockholders a Superior Proposal; (iv) the Company Board shall have
withdrawn, modified or changed its approval or recommendation of this Agreement
or the Merger or shall have failed to call, give notice of, convene or hold a
stockholders' meeting to vote upon the Merger, or shall have adopted any
resolution to effect any of the foregoing; (v) the Company shall have convened
a meeting of its stockholders to vote upon the Merger and shall have failed to
obtain the requisite vote of its stockholders; or (vi) there shall have been
events, changes or effects with respect to the Company and its subsidiaries
having a Material Adverse Effect on the Company.
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6.2. Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 6.1, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any party
hereto or its affiliates, directors, officers or stockholders, other than the
provisions of this Section 6.2 and Sections 4.8(c) and 6.3 hereof. Nothing
contained in this Section 6.2 shall relieve any party from liability for any
breach of this Agreement.
6.3. Fees and Expenses.
(a) In the event that this Agreement shall be terminated pursuant to:
(i) Sections 6.1(c)(iv) or (v) or 6.1(d)(iii) or (iv);
(ii) Sections 6.1(d)(i) or (ii) and, within twelve months thereafter,
the Company enters into an agreement with respect to a Third Party
Acquisition, or a Third Party Acquisition occurs, involving any party (or
any affiliate thereof) (x) with which the Company (or its agents) had
negotiations with a view to a Third Party Acquisition, (y) to which the
Company (or its agents) furnished information with a view to a Third Party
Acquisition or (z) which had submitted a proposal or expressed an interest
in a Third Party Acquisition, in the case of each of clauses (x), (y) and
(z) after the date hereof and prior to such termination; or
(iii) Sections 6.1(c)(iii) or 6.1(d)(v) and, at the time of the Company
stockholders' meeting at which the Company failed to obtain the requisite
vote, as applicable, either (x) there shall be outstanding an offer by a
Third Party to consummate, or there shall have been under consideration by
the Company or there shall have been publicly announced a plan or proposal
with respect to, a Third Party Acquisition or (y) any Third Party shall
have publicly reported beneficial ownership (whether or not such report
disclaims beneficial ownership) of 20% or more of the outstanding Shares
(unless such Third Party is the person named on Section 4.4(c) of the
Company Disclosure Schedule, in which event 20% shall be deemed to be
replaced by 30% for purposes of this clause (y));
Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent
and Acquisition for such damages, the Company shall pay to Parent the amount of
$16.5 million as liquidated damages immediately upon the occurrence of the
event described in this Section 6.3(a) giving rise to such damages. It is
specifically agreed that the amount to be paid pursuant to this Section 6.3(a)
represents liquidated damages and not a penalty.
(b) Upon the termination of this Agreement pursuant to Sections 6.1(c)(iii)
or (vi) or 6.1(d)(i), (ii) or (v), in addition to any other remedies that
Parent or Acquisition may have as a result of such termination, the Company
shall reimburse Parent, Acquisition and their affiliates (not later than ten
business days after submission of statements therefor) for all documented out-
of-pocket fees and expenses, actually and reasonably incurred by any of them or
on their behalf in connection with the Merger and the consummation of all
transactions contemplated by this Agreement (including, without limitation,
fees payable to investment bankers, counsel to any of the foregoing, and
accountants), up to an aggregate of $5 million, which amount shall be credited
against the fee payable pursuant to Section 6.3(a), if any.
(c) Upon the termination of this Agreement pursuant to Section 6.1(c)(i) or
(ii), in addition to any other remedies that the Company may have as a result
of such termination, Parent shall reimburse the Company and their affiliates
(not later than ten business days after submission of statements therefor) for
all documented out-of-pocket fees and expenses, actually and reasonably
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incurred by any of them or on their behalf in connection with the Merger and
the consummation of all transactions contemplated by this Agreement (including,
without limitation, fees payable to investment bankers, counsel to any of the
foregoing, and accountants), up to an aggregate of $5 million.
(d) Except as specifically provided in this Section 6.3, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
Section 6.4. Amendment. This Agreement may be amended by action taken by the
Company, Parent and Acquisition at any time before or after approval of the
Merger by the stockholders of the Company but, after any such approval, no
amendment shall be made which requires the approval of such stockholders under
applicable law without such approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of the parties hereto.
Section 6.5. Extension; Waiver. At any time prior to the Effective Time,
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in
the representations and warranties of the other party contained herein or in
any document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions
contained herein. Any agreement on the part of any party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such
rights.
ARTICLE 7
MISCELLANEOUS
Section 7.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall not
limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
Section 7.2. Entire Agreement; Assignment. This Agreement and the
Confidentiality Agreement (a) constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all
prior or contemporaneous agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and thereof and
(b) shall not be assigned by operation of law or otherwise; provided, however,
that Acquisition may assign any or all of its rights and obligations under this
Agreement to any direct, wholly-owned subsidiary of Parent, but no such
assignment shall relieve Acquisition of its obligations hereunder if such
assignee does not perform such obligations.
Section 7.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby and,
to such end, the provisions of this Agreement are agreed to be severable.
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Section 7.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
facsimile or by overnight courier to each other party as follows:
<TABLE>
<C> <S>
if to Parent or Acquisition: Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, CA 90245
Attention: Hayward D. Fisk, Esq.
Paul T. Tucker
with a copy to: Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071
Attention: Ronald S. Beard, Esq.
if to the Company to: Nichols Research Corporation
4090 South Memorial Parkway
Huntsville, Alabama 35815
Attention: Chris H. Horgen
with a copy to: Weil, Gotshal & Manges LLP
765 Fifth Avenue
New York, NY 10153
Attention: Frederick S. Green
</TABLE>
or to such other address as the person to which notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 7.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
Section 7.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
Section 7.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 1.11, 4.11 and 7.2,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
Section 7.8. Certain Definitions. For the purposes of this Agreement, the
term:
(a) "affiliate" of a person means (except as otherwise provided in Sections
2.18, 3.19 and 4.13) a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
the first mentioned person;
(b) "beneficial ownership" shall have the meaning set forth in Rule 13d-3
promulgated under the Exchange Act;
(c) "business day" means any day other than a day on which the NYSE is
closed;
(d) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
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<PAGE>
(e) "knowledge" or "known" means, with respect to any matter in question, if
an executive officer of the Company or Parent, as the case may be, has actual
knowledge of such matter;
(f) "person" means an individual, corporation, partnership, joint venture,
limited liability company, association, trust, unincorporated organization or
other legal entity; and
(g) "subsidiary" or "subsidiaries Section" of the Company, Parent, the
Surviving Corporation or any other person, means any corporation, partnership,
joint venture, limited liability company, association, trust, unincorporated
association or other legal entity of which the Company, Parent, the Surviving
Corporation or any such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
50% or more of the capital stock, the holders of which are generally entitled
to vote for the election of the board of directors or other governing body of
such legal entity, or, with respect to any entity without capital stock, 50% or
more of the equity interests or 50% or more of the voting interests in such
entity.
Section 7.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company or Parent or any officer,
director, employee, agent, representative or investor of or in any party
hereto.
Section 7.10. Specific Performance. The parties hereby acknowledge and agree
that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to consummate the Merger, will cause irreparable injury to the other
parties for which damages, even if available, will not be an adequate remedy.
Accordingly, each party hereby consents to the issuance of injunctive relief by
any court of competent jurisdiction to compel performance of such party's
obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that, if Parent is
entitled to receive and in fact receives any payment or reimbursement of
expenses pursuant to Sections 6.3(a) or (b), it shall not be entitled to
specific performance to compel the consummation of the Merger.
Section 7.11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement and Plan
of Merger to be duly executed on its behalf as of the day and year first above
written.
NICHOLS RESEARCH CORPORATION
/s/ Chris H. Horgen
By: _________________________________
Name: Chris H. Horgen
Title: Chairman
COMPUTER SCIENCES CORPORATION
/s/ Van B. Honeycutt
By: _________________________________
Name: Van B. Honeycutt
Title: Chairman
NEVADA ACQUISITION CORPORATION
/s/ Leon J. Level
By: _________________________________
Name: Leon J. Level
Title: Vice President
A-45
<PAGE>
APPENDIX B
[LOGO OF GOLDMAN SACHS]
PERSONAL AND CONFIDENTIAL
September 19, 1999
Board of Directors
Nichols Research Corporation
4090 South Memorial Parkway
Huntsville, AL 35815
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.01
per share (the "Company Shares"), of Nichols Research Corporation (the
"Company") of the Exchange Ratio (as defined below) pursuant to the Agreement
and Plan of Merger, dated as of September 19, 1999, among Computer Sciences
Corporation ("Buyer"), Nevada Acquisition Corporation ("Acquisition"), a
wholly-owned subsidiary of Buyer, and the Company (the "Agreement"). Pursuant
to the Agreement, the Company will be merged with Acquisition and each
outstanding Company Share will be converted into the right to receive a certain
number (the "Exchange Ratio") of shares of Common Stock, par value $1.00 per
share (the "Buyer Shares"), of Buyer. The Exchange Ratio shall equal a
fraction: (A) the numerator of which is $28.00 and the denominator of which is
the Initial Parent Price (as defined in the Agreement), if the difference
(positive or negative) between the Final Parent Price (as defined in the
Agreement) and the Initial Parent Price equals a number that is less than or
equal to ten percent (10%) of the Initial Parent Price; (B) the numerator of
which is $30.80 and the denominator of which is the Final Parent Price, if the
Final Parent Price exceeds the Initial Parent Price by an amount in excess of
ten percent (10%) of the Initial Parent Price; (C) the numerator of which is
$25.20 and the denominator of which is the Final Parent Price, if the Initial
Parent Price exceeds the Final Parent price by an amount in excess of ten
percent (10%) of the Initial Parent Price but less than or equal to twenty
percent (20%) of the Initial Parent Price; and (D) the numerator of which is
$25.50 and the denominator of which is 80% of the Initial Parent Price, if the
Initial Parent Price exceeds the Final Parent Price by an amount in excess of
twenty percent (20%) of the Initial Parent Price.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. We also have provided certain investment banking services to Buyer
from time to time, including having acted as co-manager of a public offering of
$200 million aggregate principal amount of 6.25% Notes due 2009 (the "6.25%
Notes") in March 1999, as co-manager of a public offering of $150 million
aggregate principal amount of 6.5% Notes due 2001 in December 1996, as
financial advisor to Buyer in connection with Buyer's acquisition of The
Continuum Company, Inc. in 1996 and as financial advisor to Buyer in connection
with the defense of Buyer from an unsolicited offer made by Computer Associates
International Incorporated in 1998. Goldman, Sachs & Co. may provide investment
banking services to Buyer and its subsidiaries in the future. Goldman, Sachs &
Co. provides a full range of financial advisory and securities services and, in
the course of its normal trading activities, may from time to time effect
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<PAGE>
transactions and hold securities, including derivative securities, of the
Company or Buyer for its own account and for the accounts of customers. As of
the date hereof, Goldman, Sachs & Co. has accumulated a long position of
110,687 Buyer Shares against which Goldman, Sachs & Co. is short 27,248 Buyer
Shares, and $6,850,000 aggregate principal amount of Buyer's 6.25% Notes.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of
the Company for the five fiscal years ended August 31, 1998 and of Buyer for
the five fiscal years ended April 2, 1999; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company and Buyer;
certain other communications from the Company and Buyer to their respective
stockholders; and certain internal financial analyses and forecasts for the
Company prepared by its management. We also have held discussions with members
of the senior management of the Company and Buyer regarding the strategic
rationale for, and the potential benefits of, the transaction contemplated by
the Agreement and the past and current business operations, financial condition
and future prospects of their respective companies. In addition, we have
reviewed the reported price and trading activity for the Company Shares and the
Buyer Shares, compared certain financial and stock market information for the
Company and Buyer with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the information technology services
industry specifically and in other industries generally and performed such
other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. As you are aware, we were
informed by the senior management of Buyer that internal financial projections
for Buyer were not available. Accordingly, our review of Buyer's expected
future financial performance for purposes of rendering our opinion was limited
to discussions with the senior management of Buyer regarding certain research
analysts' estimates of Buyer. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or Buyer
or any of their subsidiaries and we have not been furnished with any such
evaluation or appraisal. We have assumed with your consent that the transaction
contemplated by the Agreement will be accounted for as a pooling-of-interests
under generally accepted accounting principles. We also have assumed that all
material governmental, regulatory or other consents and approvals necessary for
the consummation of the transaction contemplated by the Agreement will be
obtained without any adverse effect on the Company or the Buyer or on the
contemplated benefits of the transaction. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board
of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute
a recommendation as to how any holder of Company Shares should vote with
respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair from a financial point of view to such
holders.
Very truly yours,
/s/ Goldman, Sachs & Co.
Goldman, Sachs & Co.
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APPENDIX C
[LETTERHEAD OF THE ROBINSON-HUMPHREY COMPANY, LLC]
September 18, 1999
Board of Directors
Nichols Research Corporation
4090 Memorial Parkway South
Huntsville, Alabama 35802-1326
Lady and Gentlemen:
We understand that Nichols Research Corporation (the "Company") is
considering a proposed merger of the Company with Computer Sciences Corporation
("Computer Sciences"). We understand that under this merger (the "Proposed
Transaction"), the Company's shareholders will receive 0.4230 share of Computer
Sciences Common Stock in exchange for each share of the Company's Common Stock,
subject to adjustment in certain events. Furthermore, we understand that the
merger will be accounted for as a pooling of interests and will be treated as a
tax-free exchange to the Company's shareholders. The terms and conditions of
the Proposed Transaction are set forth in more detail in the draft Agreement
and Plan of Merger dated September 18, 1999 ("the Agreement").
We have been requested by the Company to render our opinion with respect to
the fairness, from a financial point of view, to the Company's shareholders, as
of September 18, 1999, of the consideration to be received in the Proposed
Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement, (2)
publicly available information concerning the Company and Computer Sciences
that we believe relevant to our inquiry, (3) financial and operating
information with respect to the business, operations and prospects of the
Company furnished to us by the Company, (4) trading histories of the Company's
Common Stock and Computer Sciences' Common Stock, (5) a comparison of the
publicly available historical financial results and present financial condition
of the Company and Computer Sciences, with those of other companies which we
deemed relevant, (6) a comparison of the financial terms of the Proposed
Transaction with the terms of certain other recent transactions that we deemed
relevant, and (7) certain historical data relating to percentage premiums paid
in acquisitions of publicly traded companies. In addition, we have had
discussions with the management of the Company concerning their respective
businesses, operations, assets, present condition and future prospects, and
undertook such other studies, analyses and investigations, as we deemed
appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to the future financial performance of
Computer Sciences, we were directed by Computer Sciences to rely on publicly
available estimates of research analysts in performing our analysis and, with
your knowledge, we have assumed that such estimates are a reasonable basis upon
which to evaluate the future financial performance of Computer Sciences, and
that Computer Sciences will perform substantially in accordance with such
estimates. In arriving at our opinion, we have not conducted a physical
inspection of the properties and facilities of the Company or Computer Sciences
and have
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not made nor obtained any independent evaluations or appraisals of the assets
or liabilities of the Company or Computer Sciences. In addition: (1) you have
not authorized us to solicit and we have not solicited, any indications of
interest from any third party with respect to all or a part of the Company's
business, and (2) for matters relating to the negotiations of the Agreement we
have relied in part on information supplied to us by Goldman, Sachs & Co. Our
opinion is necessarily based upon market, economic and other conditions as they
existed on, and can be evaluated as of, the date of this letter.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee upon the issuance of our opinion.
In addition, the Company has agreed to indemnify us for certain liabilities
arising out of the rendering of this opinion. We have also performed various
investment banking services for the Company in the past four years (including
acting as managing underwriter for a public offering of Common Stock and
providing financial advisory services on three acquisitions consummated by the
Company) and have received customary fees for such services. In the ordinary
course of our business, we actively trade in the equity securities of the
Company for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered in the Proposed Transaction is fair to the shareholders of the Company.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered in connection with its consideration of the Proposed
Transaction. This opinion is not intended to be and does not constitute a
recommendation to any shareholder of the Company as to how such shareholder
should vote with respect to the Proposed Transaction.
Very truly yours,
/s/ The Robinson-Humphrey Company, LLC
______________________________________
The Robinson-Humphrey Company, LLC
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Section 78.7502 of the Nevada General Corporation Law provides that a
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he acted in good faith and in
a manner in which he reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 78.7502 further provides that a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of another corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement and
attorneys' fees actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit if he acted in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation. In the case of any action by or in the right of
the corporation, no indemnification may be made for any claim, issue or matter
as to which such person shall have been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the
corporation, or for amounts paid in settlement to the corporation, unless and
only to the extent that the court in which such action or suit was brought or
another court of competent jurisdiction determines that in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper. Section 78.7502 further
provides that to the extent a director, officer, employee or agent of a
corporation has been successful in the defense of any action, suit or
proceeding referred to above or in the defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
The Registrant's Restated Articles of Incorporation, as amended (the
"Charter"), provide that the Registrant shall, to the fullest extent permitted
by applicable law, indemnify any person who was or is a party or is threatened
to be made a party to any action, suit or proceeding of the type described
above by reason of the fact that he or she is or was or has agreed to become a
director or officer of the Registrant, or is serving at the request of the
Registrant as a director or officer of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. The indemnification
of directors and officers shall be against all loss, liability and expenses
actually and reasonably incurred by or on behalf of a director or officer in
connection with such action, suit or proceeding, including any appeals;
provided that with respect to any action, suit or proceeding initiated by a
director or officer, the Registrant shall indemnify such director or officer
only if the action, suit or proceeding was authorized by the Registrant's Board
of Directors, except with respect to a suit for enforcement of rights to
indemnification or advancement of expenses in accordance with the procedure
therefor prescribed in the Charter.
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The Charter also provides that the expenses of directors and officers
incurred as a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, shall be
paid by the Registrant as they are incurred and in advance of the final
disposition of the action, suit or proceeding; provided that if applicable law
so requires, the advance payment of expenses shall be made only upon receipt by
the Registrant of an undertaking by or on behalf of the director or officer to
repay all amounts so advanced in the event it is ultimately determined by a
final decision, order or decree of a court of competent jurisdiction that the
director or officer is not entitled to be indemnified for such expenses under
the Charter.
The Registrant has entered into Indemnification Agreements with each of its
directors and officers pursuant to which it has indemnified them against
expenses incurred in connection with any claims made against them as a result
of any act, omission, neglect or breach of duty committed or suffered while
acting as a director or officer of the Registrant, or while serving at the
request of the Registrant as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
These Indemnification Agreements do not obligate the Registrant to make any
payment in connection with a claim against a director or officer to the extent
that: (a) payment is made under an insurance policy, except in respect of any
deductible amount or any excess beyond the amount of payment under such
insurance, (b) the director or officer is otherwise indemnified, (c) the claim
is based upon the director or officer gaining any improper personal profit or
advantage to which he or she is not legally entitled, (d) the claim is for an
accounting of profits made from the purchase or sale by the director or officer
of securities of the Registrant within the meaning of Section 16(b) of the
Securities Exchange Act of 1934 or (e) the claim is brought about or
contributed to by the dishonesty of the director or officer, but only if a
judgment or other final adjudication adverse to the director or officer
establishes that he or she committed acts of active and deliberate dishonesty,
with actual dishonest purpose and intent, which acts were material to the cause
of action so adjudicated. The Indemnification Agreements provide that the costs
and expenses incurred by directors and officers in defending or investigating
any action, suit, proceeding or investigation will be paid by the Registrant in
advance of the final disposition of the matter upon receipt of a written
undertaking by or on behalf of the director or officer to repay any such
amounts if it is ultimately determined that he or she is not entitled to
indemnification under his or her Indemnification Agreement. No such advance
will be made by the Registrant, however, if, within 60 days of a request for
such an advance, a determination is reasonably made by the Board of Directors
or independent legal counsel, based upon the facts known at the time of such
determination, that it is more likely than not it will ultimately be determined
that the director or officer is not entitled to indemnification under his or
her Indemnification Agreement.
The Registrant currently maintains an insurance policy which, within the
limits and subject to the terms and conditions thereof, covers certain expenses
and liabilities that may be incurred by directors and officers in connection
with or as a consequence of certain actions, suits or proceedings that may be
brought against them as a result of an act or omission committed or suffered
while acting as a director or officer of the Registrant.
Item 21. Exhibits
See the Exhibit Index attached to this Registration Statement and
incorporated by reference.
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<PAGE>
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to this
registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(2) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(3) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(b) The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and where applicable each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report, to security holders that is incorporated
by reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(d) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c)
such reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other
items of the applicable form.
(e) The undersigned registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (b) immediately preceding, or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415 will
be filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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<PAGE>
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the proxy
statement/prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form within
one business day of receipt of such request and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction and the
company being acquired involved therein that was not the subject of and
included in the registration statement when it became effective.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of El Segundo, State of
California on October 11, 1999.
COMPUTER SCIENCES CORPORATION
/s/ Van B. Honeycutt
By: _________________________________
Van B. Honeycutt
Title: Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint Van B. Honeycutt, Leon J. Level and
Hayward D. Fisk, and each of them, with full power of substitution and full
power to act without the other, his true and lawful attorney-in-fact and agent
to act for him or her in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any subsequent registration
statement the Company may hereafter file with the Securities and Exchange
Commission pursuant to Rule 462(b) under the Securities Act to register
additional shares of common stock, and to file this Registration Statement,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in order to
effectuate the same as fully, to all intents and purposes, as they, he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated below and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Van B. Honeycutt Chairman, President and October 11, 1999
____________________________________ Chief Executive Officer
Van B. Honeycutt (Principal Executive
Officer)
/s/ Leon J. Level Vice President, Chief October 11, 1999
____________________________________ Financial Officer and
Leon J. Level Director (Principal
Financial Officer)
/s/ Scott M. Delanty Vice President and October 11, 1999
____________________________________ Controller (Principal
Scott M. Delanty Accounting Officer)
/s/ Irving W. Bailey, II Director October 11, 1999
____________________________________
Irving W. Bailey, II
</TABLE>
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<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen L. Baum Director October 11, 1999
____________________________________
Stephen L. Baum
/s/ William R. Hoover Director October 11, 1999
____________________________________
William R. Hoover
/s/ Thomas A. McDonnell Director October 11, 1999
____________________________________
Thomas A. McDonnell
/s/ F. Warren McFarlan Director October 11, 1999
____________________________________
F. Warren McFarlan
/s/ James. R. Mellor Director October 11, 1999
____________________________________
James R. Mellor
/s/ William P. Rutledge Director October 11, 1999
____________________________________
William P. Rutledge
</TABLE>
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
------- ----------- ------------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated as of September 19,
1999 among Computer Sciences Corporation, Nichols
Research Corporation and Nevada Acquisition
Corporation, as set forth in Appendix A to the proxy
statement/prospectus covering the common stock to be
issued in connection with the proposed acquisition of
Nichols Research Corporation.
3.1 Restated Articles of Incorporation, effective October
31, 1988, filed as Exhibit (3)(a)
to Form 10-K for the year ended March 31, 1989, and
incorporated herein by reference.
3.2 Amendment to Restated Articles of Incorporation,
effective August 10, 1992, filed as Appendix B to the
proxy statement for its August 10, 1992 Annual Meeting
of Stockholders, and incorporated herein by reference.
3.3 Amendment to Restated Articles of Incorporation,
effective July 31, 1996, filed as Annex D to the proxy
statement for its July 31, 1996 Annual Meeting of
Stockholders, and incorporated herein by reference.
3.4 Certificate of Amendment of Certificate of Designations
of Series A Junior Participating Preferred Stock,
effective August 1, 1996.
3.5 By-Laws of Computer Sciences Corporation, as amended
and restated effective May 4, 1998, filed as Exhibit
3.5 to Form 10-K for the year ended April 3, 1998, and
incorporated herein by reference.
4.1 Rights Agreement dated February 18, 1998 between
Computer Sciences Corporation and ChaseMellon
Shareholder Services, L.L.C., filed as Exhibit 10.23 to
Form 8-A on February 25, 1998 and incorporated herein
by reference.
5.1 Opinion of Gibson, Dunn & Crutcher LLP
8.1 Tax Opinion of Gibson, Dunn & Crutcher LLP
8.2 Tax Opinion of Weil, Gotshal & Manges LLP
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in
Exhibits 5.1 and 8.1)
23.2 Consent of Weil, Gotshal & Manges LLP (included in
Exhibit 8.2)
23.3 Consent of Deloitte & Touche LLP
23.4 Consent of Ernst & Young LLP
23.5 Consent of Goldman, Sachs & Co.
23.6 Consent of The Robinson-Humphrey Company, LLC
24.1 Power of Attorney (included on signature page)
99.1 Form of Proxy of Nichols Research Corporation
</TABLE>
II-7
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATIONS
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
$1.00 Par Value
OF
COMPUTER SCIENCES CORPORATION
Pursuant to Section 78.195 of the General Corporation
Law of the State of Nevada
We, Hayward D. Fisk, Vice President, and Stephen E. Johnson, Assistant
Secretary, of COMPUTER SCIENCES CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of Nevada, in accordance
with the provisions of Section 78.195 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Restated Articles of Incorporation of the Corporation: (i) the Board on December
21, 1988 adopted a resolution creating a series of Preferred Stock, par value
$1.00 per share, designated as Series A Junior Participating Preferred Stock,
and caused to be filed with the Nevada Secretary of State on January 13, 1989 a
Certificate of Designations with respect thereto; and (ii) the Board on October
30, 1995 amended and restated such resolution in its entirety and caused to be
filed with the Nevada Secretary of State on November 3, 1995 a Certificate of
Amendment of Certificate of Designations with respect to the Series A Junior
Participating Preferred Stock; and
That on June 17, 1996, prior to the issuance of any shares of Series A
Junior Participating Preferred Stock, the Board of Directors, pursuant to the
authority conferred upon the Board by the Restated Articles of Incorporation,
again amended and restated such resolution in its entirety, effective as of
August 1, 1996, as follows:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the provisions of its Restated Articles of
Incorporation, a series of Preferred Stock of the Corporation be, and it hereby
is, created, and that the designation and amount thereof and the voting powers,
<PAGE>
preferences and relative, participating, optional and other special rights of
the shares of such series, and the qualifications, limitations or restrictions
thereof, are as follows:
Section 1. Designation and Amount. The shares of such series shall be
----------------------
designated as Series A Junior Participating Preferred Stock, par value $1.00 per
share (the "Series A Preferred Stock"), and the number of shares constituting
such series shall be Two Hundred Thousand (200,000).
Section 2. Dividends and Distributions.
---------------------------
(a) The holders of shares of Series A Preferred Stock, in preference to
the holders of shares of Common Stock, $1.00 per share, of the Corporation (the
"Common Stock") and of any other junior stock of the Corporation that may be
outstanding, shall be entitled to receive, when, as and if declared by the Board
of Directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the fifteenth day of January, April, July and October in each
year (each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00
per share ($4.00 per annum), or (ii) subject to the provision for adjustment
hereinafter set forth, 4,000 times the aggregate per share amount of all cash
dividends, and 4,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, other than a dividend payable in
shares of Common Stock, or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event that the
Corporation shall at any time declare or pay any dividend on Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then and
in each such event, the amount to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event under clause (ii) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event, and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (a) of this Section 2 immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided, however, that in the
event no
2
<PAGE>
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share ($4.00 per annum)
on the Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall not bear interest. Each share of
Preferred Stock shall rank on a parity with each other share of Preferred Stock,
regardless of series, with respect to the payment of dividends at the
respectively designated rates. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 60 days
prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
-------------
Stock shall have the following voting rights:
(a) Each share of Series A Preferred Stock shall entitle the holder
thereof to 1 vote with the right to cumulate votes in certain instances in the
manner set forth in the Restated Articles of Incorporation of the Corporation on
all matters submitted to a vote of the stockholders of the Corporation. In the
event that the Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then and in
each such event, the number of votes per share to which holders of shares of
Series A Preferred Stock are entitled shall be increased, in the case of a
subdivision, or in the case of such a dividend, or reduced, in the case of a
combination, in the same proportion as the subdivision, increase by dividend, or
combination of the Common Stock.
(b) Except as otherwise provided in the Restated Articles of Incorporation
of the Corporation or herein or by law, the holders of shares of Series A
Preferred
3
<PAGE>
Stock and the holders of shares of Common Stock shall vote together as one class
on all matters submitted to a vote of stockholders of the Corporation.
(c) In addition, the holders of shares of Series A Preferred Stock shall
have the following special voting rights:
In the event that at any time dividends on Series A Preferred Stock,
whenever accrued and whether or not consecutive, shall not have been paid or
declared and a sum sufficient for the payment thereof set aside, in an amount
equivalent to six quarterly dividends on all shares of Series A Preferred Stock
at the time outstanding, then and in each such event, the holders of shares of
Series A Preferred Stock and each other series of preferred stock now or
hereafter issued that shall be accorded such class voting right by the Board of
Directors and that shall have the right to elect two directors as the result of
a prior or subsequent default in payment of dividends on such series (each such
other series being hereinafter called "Other Series of Preferred Stock"), voting
separately as a class without regard to series, shall be entitled to elect two
directors at the next annual meeting of stockholders of the Corporation, in
addition to the directors to be elected by the holders of all shares of the
Corporation entitled to vote for the election of directors, and the holders of
all shares (including the Series A Preferred Stock) otherwise entitled to vote
for directors, voting separately as a class, shall be entitled to elect the
remaining members of the Board of Directors, provided that the Series A
Preferred Stock and each Other Series of Preferred Stock, voting as a class,
shall not have the right to elect more than two directors. Such special voting
right of the holders of shares of Series A Preferred Stock may be exercised
until all dividends in default on the Series A Preferred Stock shall have been
paid in full or declared and funds sufficient therefor set aside, and when so
paid or provided for, such special voting right of the holders of shares of
Series A Preferred Stock shall cease, but subject always to the same provisions
for the vesting of such special voting rights in the event of any such future
dividend default or defaults. At any time after such special voting rights
shall have so vested in the holders of shares of Series A Preferred Stock, the
Secretary of the Corporation may, and upon the written request of the holders of
record of 10% or more in number of the shares of Series A Preferred Stock and
each Other Series of Preferred Stock then outstanding addressed to the Secretary
at the principal executive office of the Corporation shall, call a special
meeting of the holders of shares of Preferred Stock so entitled to vote, for the
election of the directors to be elected by them as herein provided, to be held
within 60 days after such call and at the place and upon the notice provided by
law and in the Bylaws for the holding of meetings of stockholders; provided,
however, that the Secretary shall not be required to call such special meeting
in the case of any such request received less than 90 days before the date fixed
for any annual meeting of stockholders, and if in such case such special meeting
is not called or held, the holders of shares of Preferred Stock so entitled to
vote shall be entitled to exercise the special voting rights provided in this
paragraph at such annual meeting. If any such special meeting required to be
called as above
4
<PAGE>
provided shall not be called by the Secretary within 30 days after receipt of
any such request, then the holders of record of 10% or more in number of the
shares of Series A Preferred Stock and each Other Series of Preferred Stock then
outstanding may designate in writing one of their number to call such meeting,
and the person so designated may, at the expense of the Corporation, call such
meeting to be held at the place and upon the notice given by such person, and
for that purpose shall have access to the stock books of the Corporation. No
such special meeting and no adjournment thereof shall be held on a date later
than 60 days before the annual meeting of stockholders. If, at any meeting so
called or at any annual meeting held while the holders of shares of Series A
Preferred Stock have the special voting rights provided for in this paragraph,
the holders of not less than 40% of the shares of Series A Preferred Stock and
each Other Series of Preferred Stock then outstanding are present in person or
by proxy, which percentage shall be sufficient to constitute a quorum for the
election of additional directors as herein provided, the then authorized number
of directors of the Corporation shall be increased by two, as of the time of
such special meeting or the time of the first such annual meeting held while
such holders have special voting rights and such quorum is present, and the
holders of shares of Series A Preferred Stock and each Other Series of Preferred
Stock, voting as a class, shall be entitled to elect the additional directors so
provided for. If the directors of the Corporation are then divided into classes
under provisions of the Restated Articles of Incorporation of the Corporation or
the Bylaws, the two additional directors shall be members of those respective
classes of directors in which a vacancy is created as a result of such increase
in the authorized number of directors. If the foregoing expansion of the size of
the Board of Directors shall not be valid under applicable law, then the holders
of shares of Series A Preferred Stock and of each Other Series of Preferred
Stock, voting as a class, shall be entitled, at the meeting of stockholders at
which they would otherwise have voted, to elect directors to fill any then
existing vacancies on the Board of Directors, and shall additionally be
entitled, at such meeting and each subsequent meeting of stockholders at which
directors are elected, to elect all of the directors then being elected until by
such class vote two members of the Board of Directors have been so elected. Upon
the election at such meeting by the holders of shares of Series A Preferred
Stock and each Other Series of Preferred Stock, voting as a class, of the
directors they are entitled so to elect, the persons so elected, together with
such persons as may be directors or as may have been elected as directors by the
holders of all shares (including Series A Preferred Stock) otherwise entitled to
vote for directors, shall constitute the duly elected directors of the
Corporation. The additional directors so elected by holders of shares of Series
A Preferred Stock and each Other Series of Preferred Stock, voting as a class,
shall serve until the next annual meeting or until their respective successors
shall be elected and qualified, or if any such director is a member of a class
of directors under provisions dividing the directors into classes, each such
director shall serve until the annual meeting at which the term of office of
such director's class shall expire or until such director's successor shall be
elected and shall qualify, and at each subsequent meeting of stockholders at
which the directorship of any director
5
<PAGE>
elected by the vote of holders of shares of Series A Preferred Stock and each
other Series of Preferred Stock under the special voting rights set forth in
this paragraph is up for election, said special class voting rights shall apply
in the reelection of such director or in the election of such director's
successor; provided, however, that whenever the holders of shares of Series A
Preferred Stock and each Other Series of Preferred Stock shall be divested of
the special rights to elect two directors as above provided, the terms of office
of all persons elected as directors by the holders of shares of Series A
Preferred Stock and each Other Series of Preferred Stock, voting as a class, or
elected to fill any vacancies resulting from the death, resignation, or removal
of directors so elected by the holders of shares of Series A Preferred Stock and
each Other Series of Preferred Stock, shall forthwith terminate (and, if
applicable, the number of directors shall be reduced accordingly). If, at any
time after a special meeting of stockholders or an annual meeting of
stockholders at which the holders of shares of Series A Preferred Stock and each
Other Series of Preferred Stock, voting as a class, have elected directors as
provided above, and while the holders of shares of Series A Preferred Stock and
each Other Series of Preferred Stock shall be entitled so to elect two
directors, the number of directors who have been elected by the holders of
shares of Series A Preferred Stock and each Other Series of Preferred Stock (or
who by reason of one or more resignations, deaths or removals have succeeded any
directors so elected) shall by reason of resignation, death or removal be less
than two but at least one, the vacancy in the directors so elected by the
holders of shares of the Series A Preferred Stock and each Other Series of
Preferred Stock may be filled by the remaining director elected by such holders,
and in the event that such election shall not occur within 30 days after such
vacancy arises, or in the event that there shall not be incumbent at least one
director so elected by such holders, the Secretary of the Corporation may, and
upon the written request of the holders of record of 10% or more in number of
the shares of Series A Preferred Stock and each Other Series of Preferred Stock
then outstanding addressed to the Secretary at the principal office of the
Corporation shall, call a special meeting of the holders of shares of Series A
Preferred Stock and each Other Series of Preferred Stock so entitled to vote,
for an election to fill such vacancy or vacancies, to be held within 60 days
after such call and at the place and upon the notice provided by law and in the
Bylaws for the holding of meetings of stockholders; provided, however, that the
Secretary shall not be required to call such special meeting in the case of any
such request received less than 90 days before the date fixed for any annual
meeting of stockholders, and if in such case such special meeting is not called,
the holders of shares of Preferred Stock so entitled to vote shall be entitled
to fill such vacancy or vacancies at such annual meeting. If any such special
meeting required to be called as above provided shall not be called by the
Secretary within 30 days after receipt of any such request, then the holders of
record of 10% or more in number of the shares of Series A Preferred Stock and
each Other Series of Preferred Stock then outstanding may designate in writing
one of their number to call such meeting, and the person so designated may, at
the expense of the Corporation, call such meeting to be held at the place and
upon the notice above provided, and for that purpose
6
<PAGE>
shall have access to the stock books of the Corporation; no such special meeting
and no adjournment thereof shall be held on a date later than 60 days before the
annual meeting of stockholders.
(d) Nothing herein shall prevent the directors or stockholders from taking
any action to increase the number of authorized shares of Series A Preferred
Stock, or increasing the number of authorized shares of Preferred Stock of the
same class as the Series A Preferred Stock or the number of authorized shares of
Common Stock, or changing the par value of the Common Stock or Preferred Stock,
or issuing options, warrants or rights to any class of stock of the Corporation
as authorized by the Restated Articles of Incorporation of the Corporation, as
it may hereafter be amended.
(e) Except as set forth herein, holders of shares of Series A Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote as set forth in the
Restated Articles of Incorporation of the Corporation or herein or by law) for
taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(a) Whenever any dividends or other distributions payable on the Series A
Preferred Stock as provided in Section 2 hereof are in arrears, thereafter and
until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Preferred Stock outstanding shall have been paid
in full, the Corporation shall not, directly or indirectly:
(i) declare or pay dividends on, or make any other distributions
with respect to, any shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred
Stock;
(ii) declare or pay dividends on, or make any other distributions
with respect to any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on shares of the Series A
Preferred Stock and all such parity stock on which dividends are payable or
in arrears in proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (both as to dividends and upon
liquidation, dissolution or winding up) the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such junior stock in exchange for shares of any stock
of the Corporation ranking junior (both as to dividends and upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
7
<PAGE>
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of Directors)
to all holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (a) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. Such
shares may not be reissued as part of any series of preferred stock including
Series A Preferred Stock).
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
--------------------------------------
dissolution or winding up of the Corporation, no distribution shall be made to:
(a) the holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A Preferred Stock shall
have received the greater of (i) $40.00 per share ($.01 per one four-thousandth
of a share), plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment, or
(ii) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 4,000 times the aggregate amount to be
distributed per share to holders of shares of Common Stock (the "Series A
Liquidation Preference"); or
(b) the holders of shares of Preferred Stock regardless of series, except
distributions made ratably on the Series A Preferred Stock and all other
Preferred Stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or winding up.
8
<PAGE>
In the event that the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise) into a greater or lesser number of
shares of Common Stock, then and in each such event, the amount to which holders
of shares of Series A Preferred Stock were entitled immediately prior to such
event under clause (ii) at paragraph (a) of this Section 6 shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event, and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In the event that the Corporation
-----------------------------
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, or otherwise changed, then and in
each such event, the shares of Series A Preferred Stock shall at the same time
be similarly exchanged or changed in an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 4,000 times the
aggregate amount of stock, securities, cash and/or any other property (payable
in kind), as the case may be, into which or for which each share of Common Stock
is changed or exchanged. In the event that the Corporation shall at any time
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then and in each such event, the amount
set forth in the preceding sentence with respect to the exchange or change of
shares of Series A Preferred Stock shall be adjusted by multiplying such amount
by a fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event, and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. No Redemption. The shares of Series A Preferred Stock shall
-------------
not be redeemable. Notwithstanding the foregoing, the Corporation may acquire
shares of Series A Preferred Stock in any other manner permitted by law, the
Restated Articles of Incorporation of the Corporation or herein.
Section 9. Amendment. The Restated Articles of Incorporation of the
---------
Corporation shall not be amended in any manner that would materially and
adversely alter or change the powers, preferences or special rights of the
Series A Preferred Stock without the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single series.
9
<PAGE>
Section 10. Fractional Shares. Series A Preferred Stock may be issued in
-----------------
fractions of a share (in one four-thousandth (1/4000) of a share and integral
multiples thereof) that shall entitle the holder thereof, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of shares of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate of
Amendment and do affirm the foregoing as true under the penalties of perjury
this 1st day of August, 1996.
/s/Hayward D. Fisk
----------------------------
Hayward D. Fisk
Vice President
/s/Stephen E. Johnson
----------------------------
Stephen E. Johnson
Assistant Secretary
10
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF GIBSON, DUNN & CRUTCHER LLP]
October 12, 1999
Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, California 90245
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to Computer Sciences Corporation, a Nevada
corporation (the "Company"), in connection with the preparation of the
Company's Registration Statement on Form S-4 (the "Registration Statement"),
filed with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), for the registration of the
issuance by the Company of up to 7,588,341 shares of Common Stock, par value
$1.00 per share, of the Company (the "Shares") to the shareholders of Nichols
Research Corporation, a Delaware corporation, in connection with the merger of
the Company's wholly owned subsidiary, Nevada Acquisition Corporation, a
Delaware corporation, with and into Nichols Research Corporation, as more fully
described in the Registration Statement.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have made such inquiries as we have deemed
appropriate for the purpose of rendering this opinion.
We have assumed the genuineness of all signatures, the legal capacity of
natural persons, the authenticity of all documents submitted to us as
originals, and the conformity to original documents of all documents submitted
to us as copies and the authenticity of the originals of such copied documents.
We have assumed that, when the shares are issued and delivered, the
registration statement shall have been declared effective and such
effectiveness shall not have been terminated or rescinded. In addition, we have
assumed that the number of Shares to be offered and sold under the Registration
Statement will not exceed the number of shares thereof authorized in the
Company's Articles of Incorporation, less the number of shares thereof
authorized and reserved for issuance and issued and outstanding on the date on
which the Shares are authorized, issued and delivered.
On the basis of and in reliance upon the foregoing examination, inquiries
and assumptions, and such other matters of fact and upon the examination of
such other questions of law as we deem appropriate, and subject to the
assumptions, exceptions, qualifications and limitations contained herein, we
are of the opinion that upon issuance and delivery of the Shares in the manner
contemplated by the Registration Statement, such Shares will be validly issued,
fully paid and nonassessable.
<PAGE>
The Company is a Nevada corporation. We are not admitted to practice in
Nevada. However, we are generally familiar with the Nevada General Corporation
Law and have made such review thereof as we consider necessary for the purpose
of this opinion. Subject to the foregoing, this opinion is limited to Nevada
and federal law.
This opinion may not be quoted in whole or in part without the prior written
consent of Gibson, Dunn & Crutcher LLP.
We hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement and to the reference to our firm under the
heading "Legal Matters" contained in the Prospectus that is a part thereof. In
giving this consent, we do not admit that we are within the category of persons
whose consent is required under Section 7 of the Act or the General Rules and
Regulations of the Commission.
Very truly yours,
/s/ Gibson, Dunn & Crutcher LLP
Gibson, Dunn & Crutcher LLP
RSB/JBC/JAL/RAT
<PAGE>
EXHIBIT 8.1
[Letterhead of Gibson, Dunn & Crutcher LLP]
October 12, 1999
(213) 229-7000 C 16084-00117
Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, California 90245
Re: Acquisition of Nichols Research Corporation
Ladies and Gentlemen:
We have acted as counsel for Computer Sciences Corporation, a Nevada
corporation ("CSC"), in connection with the preparation and execution of the
Agreement and Plan of Merger dated as of September 19, 1999 (the "Merger
Agreement") by and among CSC, Nichols Research Corporation, a Delaware
corporation ("Nichols"), and Nevada Acquisition Corporation, a wholly-owned
subsidiary of CSC incorporated in Delaware ("Merger Sub"). Pursuant to the
Merger Agreement, Merger Sub will merge with and into Nichols (the "Merger"),
and Nichols will become a wholly-owned subsidiary of CSC. All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").
You have requested our opinion regarding certain United States federal
income tax consequences of the Merger. In delivering this opinion, we have
reviewed the Merger Agreement, the Registration Statement on Form S-4 filed with
the Securities and Exchange Commission (the "Registration Statement") and such
other documents pertaining to the Merger as we have deemed necessary or
appropriate. We have relied upon the truth and accuracy at all relevant times
of the statements, covenants, representations and warranties contained in the
Merger Agreement, the Registration Statement, and the representation letters
from CSC, Nichols, Merger Sub, and certain shareholders of the Nichols, copies
of which are attached hereto and made a part hereof. We have also assumed the
authenticity of original documents submitted to us, the conformity to the
originals of documents
<PAGE>
Computer Sciences Corporation
October 12, 1999
Page 2
submitted to us as copies, and the due and valid execution and delivery of all
such documents where due execution and delivery are a prerequisite to the
effectiveness thereof.
Based upon the foregoing, and subject to the limitations,
qualifications, assumptions and caveats set forth herein and in the Registration
Statement, if the Merger is consummated in accordance with the Merger Agreement
(and without any waiver, breach or amendment of any of the provisions thereof),
then we are of the opinion that:
(i) the Merger will constitute a "reorganization" within the
meaning of Section 368(a); and
(ii) the description under the caption "The Merger -- Material
Federal Income Tax Consequences of the Merger" in the Registration Statement is
accurate in all material respects insofar as it describes matters of law or
legal conclusions.
This opinion represents our best judgment regarding the application of
federal income tax laws under the Code, existing judicial decisions,
administrative regulations and published rulings and procedures. Our opinion is
not binding upon the Internal Revenue Service or the courts, and there is no
assurance that the Internal Revenue Service will not successfully assert a
contrary position. Furthermore, no assurance can be given that future
legislative, judicial or administrative changes, on either a prospective or
retroactive basis, would not adversely affect the accuracy of the conclusions
stated herein. We undertake no responsibility to advise you of any new
developments in the application or interpretation of the federal income tax
laws. Furthermore, in the event any one of the statements, representations,
warranties or assumptions upon which we have relied to issue this opinion is
incorrect, our opinion might be adversely affected and may not be relied upon.
This opinion addresses only the matters described above, and does not address
any other federal, state, local or foreign tax consequences that may result from
the Merger or any other transaction (including any transaction undertaken in
connection with the Merger).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the heading "The Merger
- -- Material Federal Income Tax Consequences of the Merger." In giving such
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Gibson, Dunn & Crutcher LLP
Gibson, Dunn & Crutcher LLP
<PAGE>
EXHIBIT 8.2
[LETTERHEAD OF WEIL, GOTSHAL & MANGES LLP]
October 12, 1999
Nichols Research Corp.
Executive Floor
4090 South Memorial Pkwy Bldg. 5
Huntsville, AL 35802
Ladies & Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of the merger (the "Merger") of Nevada Acquisition Corporation, a
Delaware corporation ("Acquisition") and a direct, wholly owned subsidiary of
Computer Sciences Corporation, a Nevada corporation ("Parent"), with and into
Nichols Research Corporation, a Delaware corporation ("Company").
In formulating our opinion, we examined such documents as we deemed
appropriate, including the Agreement and Plan of Merger, dated as of September
19, 1999 by and among Company, Parent and Acquisition (the "Merger Agreement"),
the Proxy Statement/Prospectus (the "Proxy Statement/Prospectus") filed by
Company with the Securities and Exchange Commission (the "SEC"), and the
Registration Statement filed on Form S-4 by Parent with the SEC on October 12,
1999, in which the Proxy Statement/Prospectus is included as a part (with all
the amendments thereto, the "Registration Statement"). In addition, we have
obtained such additional information as we deemed relevant and necessary through
consultation with various officers and representatives of Parent, Company and
Acquisition.
Our opinion set forth below assumes (1) the accuracy of the statements
and facts concerning the Merger set forth in the Merger Agreement, the Proxy
Statement/Prospectus and the Registration Statement, (2) the consummation of the
Merger in the manner contemplated by, and in accordance with, the terms set
forth in, the Merger Agreement, (3) the accuracy of the representations made by
Company, which are set forth in the certificate delivered to us by Company and
dated the date hereof, (4) the accuracy of the representations made by Parent
and Acquisition which are set forth in the certificate delivered to us by Parent
and dated the date hereof, (5) the accuracy of the representations made by
certain stockholders of Company which are set forth in the certificates
delivered to us by such stockholders and dated the date hereof, and (6) that any
representations made in such certificates or in the Merger Agreement "to the
knowledge of" or similarly qualified are true, correct and complete without such
qualifications.
<PAGE>
Based upon the facts and statements set forth above, our examination
and review of the documents referred to above and subject to the assumptions set
forth herein, we are of the opinion that, for federal income tax purposes, the
Merger will be treated as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
We express no opinion concerning any tax consequences of the Merger
other than that specifically set forth herein.
Our opinion is based on current provisions of the Code, the Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or facts and circumstances
surrounding the Merger, or any inaccuracy in the statements, facts, assumptions
and representations on which we have relied, may affect the continuing validity
of the opinion set forth herein. We assume no responsibility to inform you of
any such change or inaccuracy that may occur or come to our attention.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
Weil, Gotshal & Manges LLP
2
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Computer Sciences Corporation on Form S-4 of our report dated May 26, 1999,
appearing in the Annual Report on Form 10-K/A of Computer Sciences Corporation
for the year ended April 2, 1999 and to the reference to us under the heading
"Experts" in the Proxy Statement/Prospectus, which is part of this Registration
Statement.
Deloitte & Touche LLP
Los Angeles, California
October 12, 1999
<PAGE>
EXHIBIT 23.4
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated October 7, 1998, except for the restatement related
to acquired in-process technology referred to in Note 11, as to which the date
is January 7, 1999, with respect to the consolidated financial statements of
Nichols Research Corporation incorporated by reference in the Proxy Statement
Prospectus of Nichols Research Corporation that is made a part of the
Registration Statement (Form S-4 No. 333-00000) and Prospectus of Computer
Sciences Corporation for the registration of common stock to be issued pursuant
to the proposed merger of Computer Sciences Corporation with Nichols Research
Corporation.
Ernst & Young LLP
Birmingham, Alabama
October 11, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF GOLDMAN, SACHS & CO.
October 12, 1999
Board of Directors
Nichols Research Corporation
4090 South Memorial Parkway
Huntsville, AL 35815
Re: Registration Statement on Form S-4 of Computer Sciences Corporation
Ladies and Gentlemen:
Reference is made to our opinion letter dated September 19, 1999 with respect
to the fairness from a financial point of view to the holders of the
outstanding shares of Common Stock, par value $0.01 per share, of Nichols
Research Corporation (the "Company") of the Exchange Ratio (as defined in our
opinion letter) pursuant to the Agreement and Plan of Merger, dated as of
September 19, 1999, among Computer Sciences Corporation ("Buyer"), Nevada
Acquisition Corporation, a wholly owned subsidiary of Buyer, and the Company.
The foregoing opinion letter is provided for the information and assistance
of the Board of Directors of the Company in connection with its consideration
of the transaction contemplated therein and is not to be used, circulated,
quoted or otherwise referred to for any other purpose, nor is it to be filed
with, included in or referred to in whole or in part in any registration
statement, proxy statement or any other document, except in accordance with our
prior written consent. We understand that the Company has determined to include
our opinion in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "SUMMARY--Reasons for the Merger", "SUMMARY--Opinion of
Nichols' Financial Advisor", "THE MERGER--Background of the Merger", "THE
MERGER--Reasons for the Merger" and "THE MERGER--Opinion of Nichols' Financial
Advisors" and to the inclusion of the foregoing opinion in the Proxy Statement-
Prospectus included in the above-mentioned Registration Statement. In giving
such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ Goldman, Sachs & Co.
_____________________________________
GOLDMAN, SACHS & CO.
<PAGE>
EXHIBIT 23.6
CONSENT OF THE ROBINSON-HUMPHREY COMPANY, LLC
We hereby consent to the inclusion of our opinion letter dated September 18,
1999 to the Board of Directors of Nichols Research Corporation as Appendix C to
the proxy statement/prospectus of Nichols Research Corporation and in the
Registration Statement on Form S-4 of Computer Sciences Corporation, of which
the proxy statement/prospectus is a part, filed with the Securities and
Exchange Commission, and to the references to our firm and to the description
of such opinion in such proxy statement/prospectus under the headings
"Summary--Reasons for the Merger," "Summary--Opinion of Nichols' Financial
Advisors," "The Merger--Background of the Merger," "The Merger--Reasons for the
Merger," and "The Merger--Opinion of Nichols' Financial Advisors." In giving
such consent, we do not admit that we come within the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended
or the rules and regulations of the Securities and Exchange Commission
thereunder and we do not thereby admit that we are experts with respect to any
part of the Registration Statement under the meaning of the term "expert" as
used in the Securities Act.
/s/ The Robinson-Humphrey Company, LLC
_____________________________________
THE ROBINSON-HUMPHREY COMPANY, LLC
Atlanta, GA
October 12, 1999
<PAGE>
EXHIBIT 99.1
[Nichols logo]
Dear Stockholder:
Enclosed is the Proxy Statement/Prospectus relating to Nichols
Research Corporation's Special Meeting of Stockholders to be held on
November 16, 1999. This Proxy Statement/Prospectus provides a
detailed explanation of the proposed merger of Nevada Acquisition
Corporation, a direct wholly owned subsidiary of Computer Sciences
Corporation, with and into Nichols Research Corporation. The board of
directors recommends that holders of Nichols Research Corporation
common stock vote FOR the approval of the merger agreement among
Nichols Research Corporation, Computer Sciences Corporation and Nevada
Acquisition Corporation.
Your vote is important to us. Please complete, sign and return
the attached proxy card in the accompanying postage-paid envelope
whether or not you expect to attend the meeting.
Patsy L. Hattox
Corporate Secretary
- --------------------------------------------------------------------------------
PROXY NICHOLS RESEARCH CORPORATION PROXY
Proxy Solicited by the Board of Directors
The undersigned stockholder of Nichols Research Corporation (the "Company")
hereby appoints Chris Horgen and Patsy L. Hattox and each of them as proxies,
each with full power of substitution, to represent the undersigned at the
Special Meeting of Stockholders of the Company to be held on November 16, 1999,
and at any adjournment thereof, with authority to vote at such meeting all
shares of common stock of the Company owned by the undersigned on November 16,
1999, in accordance with the directions indicated herein.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. UNLESS OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR APPROVAL OF THE AGREEMENT AND PLAN OF MERGER, DATED AS OF
---
SEPTEMBER 19, 1999.
<PAGE>
Nichols Research Corporation
c/o Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072
fold and detach here
- --------------------------------------------------------------------------------
[x] Please mark your vote as indicated by this example.
The Board of Directors recommends that you vote FOR item 1 and recommends
---
consent to item 2.
1. Approval of the Agreement and Plan of Merger, dated as of September 19,
1999, among Nichols Research Corporation, Computer Sciences Corporation and
Nevada Acquisition Corporation, a direct wholly owned subsidiary of Computer
Sciences Corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the named proxies are authorized to vote upon such
other business as may properly be raised at the meeting or any adjournments
or postponements.
Dated , 1999
------------------
---------------------------------
SIGNATURE
---------------------------------
SIGNATURE IF SHARES HELD JOINTLY
Please sign exactly as name
appears opposite. Executors,
trustees, and administrators and
other fiduciaries should so
indicate.
