SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One) FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-10180
COMPUTER ASSOCIATES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2857434
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
ONE COMPUTER ASSOCIATES PLAZA, ISLANDIA, NEW YORK 11788-7000
(Address of principal executive offices) (Zip Code)
(516) 342-5224
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Title of Class) (Exchange on which registered)
Common Stock, par value $.10 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
6 1/4% Convertible Subordinated Debentures of On-Line Software
International, Inc.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days: Yes _x_
No
___.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III to this
Form 10-K or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-
affiliates of the Registrant:
The aggregate market value of the voting stock held by non-affiliates
of the Registrant as at May 19, 1998 was $20,528,427,331 based on a
total of 363,334,997 shares held by non-affiliates and the closing price
on the New York Stock Exchange on that date which was $56.50.
Number of shares of stock outstanding at May 19, 1998:
546,623,630 shares of Common Stock, par value $.10 per share.
Documents Incorporated by Reference:
Part III - Proxy Statement to be issued in conjunction with Registrants
Annual Stockholders Meeting.
<PAGE> 2
PART I
Item 1. Business
(a) General Development of Business
Computer Associates International, Inc. (the Company or Registrant) was
incorporated in Delaware in 1974. In December 1981, the Company completed
its initial public offering of Common Stock. The Companys Common Stock is
traded on the New York Stock Exchange under the symbol CA.
The Company supplies an extensive array of enterprise management,
information management, and business application software products for
use on a variety of hardware platforms. Because of its independence from
hardware manufacturers, the Company provides clients with integrated
solutions which are platform neutral. The Company supplies products which
can be used on all major hardware platforms, operating systems, and
application development environments.
The Companys product philosophy of internally developing products, such
as Unicenter TNGTM and OpalTM, the acquisition of key technology, the
integration of the two, and strategic alliances with over 40 business
partners has been tested and proven over time.
In June 1994, the Company acquired The ASK Group, Inc. (ASK). ASK was
primarily engaged in developing, marketing, and selling relational
database management systems, including Ingres, various data access and
connectivity products, as well as manufacturing and financial software
applications for use in client/server environments. The acquisition was
accounted for using the purchase method of accounting.
In August 1995, the Company acquired Legent Corporation (Legent). Legent
provided a broad range of computer software products for managing
information systems across several platforms and operating systems. The
acquisition was accounted for using the purchase method of accounting.
In April 1996, the Company announced a restructuring with respect to its
business applications solutions. Organizing around the concept of self-
contained operational units, the Company formed several new independent
Business Units (iBUs). These iBUs are responsible for development,
marketing, sales and support of banking, financial, and manufacturing
application offerings. In order to emphasize its commitment to delivering
quality technical support to its clients throughout the world, the
Company concentrated its technical services in a group known as GTDS
(Global Technology Delivery Services). This group serves as the bridge
between the Companys sales and development organizations, providing high-
level technical assistance and guidance to clients.
In November 1996, the Company acquired Cheyenne Software, Inc.
(Cheyenne). Cheyenne developed software solutions for NetWare, Windows
NT, UNIX, Macintosh, OS/2, Windows 3.1, and Windows 95 operating systems.
This acquisition was accounted for using the purchase method of
accounting. See Note 2 of Notes to Consolidated Financial Statements for
additional information concerning acquisitions.
(b) Financial Information About Industry Segments
The Companys business is in a single industry segment the design,
development, marketing, licensing and support of integrated computer
software products operating on a diverse range of hardware platforms and
operating systems.
See Note 4 of Notes to Consolidated Financial Statements for financial
data pertaining to geographic areas.
(c) Narrative Description of Business
General
The Company designs, develops, markets, licenses and supports
standardized computer software products for use with a broad range of
desktop, midrange, and mainframe computers from many different hardware
manufacturers including, among others, IBM, Hewlett-Packard Company (HP,
Sun Microsystems Inc. (Sun), Data General Corp. (DG) and Compaq Computer
Corporation (including the Digital Equipment and Tandem Computer
Companies).
A computer system, ranging from the most powerful mainframe to the
ubiquitous desktop, consists of hardware and software. Hardware is the
physical computer or central processing unit as well as peripheral
equipment such as disk and tape data storage devices, printers and
terminals. Software is the program, or set of instructions, which tell
the hardware what to do and how to respond to specific user requests.
The Company continues to pursue its approach of designing and developing
new software technology solutions, acquiring software technology that is
complementary to existing products and integrating internally developed
products with acquired software. The Companys service philosophy is
similarly marked by a commitment to the development of a dedicated
internal service staff, the acquisition of third-party service
organizations, the integration of the two, and long-standing alliances
with leading service providers.
<PAGE> 3
Products
The Company offers over 500 enterprise systems management, information
management, and business applications solutions to a broad spectrum of
organizations. Built upon a common infrastructure, these products provide
solutions across multiple operating systems and hardware platforms. The
Companys standardized business software products enable clients to use
their total data processing resources hardware, software, and personnel
more efficiently. Many of the Companys products provide tools to measure
and improve computer hardware and software performance and programmer
productivity. The Company provides products that effectively manage the
complex, heterogeneous systems upon which businesses depend. The Companys
solutions enable clients to use the latest technologies while preserving
their substantial investments in hardware, software and staff expertise.
By employing a common infra-structure, the Companys developers create
modular software designed to be continually and consistently improved.
This pragmatic approach protects clients investments by using scalar,
evolutionary change rather than revolutionary disruption and waste. The
Companys software architecture is specifically designed to help clients
migrate to client/server computing or build new client/server systems.
The Companys integrated distributed systems management solutions manage
this complex environment. Full-function client/server business
applications simplify customization to meet unique business needs on a
combination of platforms.
During fiscal year 1998, the Company commenced full-scale delivery of
JasmineTM. Jasmine is a true object database with an integrated
development environment and a robust multi-platform deployment facility.
Its object-oriented database engine provides the foundation to store,
manage, and maintain multimedia and business objects. The Jasmine Studio
feature provides a complete multimedia authoring and application
development environment, allowing clients to build multimedia
applications without the need to write complex programs. Jasmine also
features tools for designing and debugging sophisticated applications.
The Jasmine execution environment allows Jasmine applications to run in
standalone mode or as a plug-in to an Internet Web browser.
Since its introduction in fiscal year 1997, Unicenter TNG TM (The Next
Generation)TM has become the industrys de facto standard for enterprise
management software. In fiscal year 1998, the Company continued to extend
the features and functionality of Unicenter TNG. Unicenter TNG is an
object-oriented solution that enables organizations to visualize and
control their entire information technology infra-structure including
applications, databases, systems and networks from a business
perspective. This technology establishes a link between an organizations
information technology resources and its business policies. Through
Unicenter TNG, an organization can define its business policies, map
these policies to particular resource management requirements, and then
monitor resources for their support of specific business processes. The
flexible Business Process ViewsTM can be customized to deliver the
information based on specific roles, locations, resources, and any other
dimensions of control. To visualize the complex interactions and
interdependencies of an enterprises entire distributed environment,
Unicenter TNG employs a Real World InterfaceTM that incorporates 3-D
animation and elements of virtual reality.
With the release of Opal 2.0 as part of its information management
solutions, clients can exploit new technologies, including HTML, Java and
ActiveX, while leveraging existing technologies. Opal enables clients to
modernize legacy applications without mounting expensive full-scale
development efforts. Opal provides access to mainframe legacy
applications as well as other information sources through an advanced
graphical user interface, employing multimedia, animation, sound, and
video. Opal applications can be deployed on client/server systems as well
as on the Web.
In response to client concerns regarding the Year 2000, the Company
expanded its offerings in this area with the introduction of CA-
Fix/2000TM. CA-Fix/2000 is a COBOL-Intelligent, automated date correction
tool that helps ensure a thorough and speedy conversion of COBOL batch
and CICS applications. Its use reduces the manual effort required to
achieve Year 2000 compliance. It consists of three phases: Discover,
Find, and Fix. In the Discover phase, CA-Fix/2000 examines an application
to identify missing routines. During the Find phase, CA-Fix/2000 uses
application-wide data flow analysis to locate all likely date fields. In
the Fix phase, CA-Fix/2000 connects all source and copybooks with the
application, applying connections to each date field in accordance with
user requirements. CA-Fix/2000 is a component of CA Discovery 2000TM, an
integrated end-to-end solution which transitions legacy applications into
the 21st century.
Sales and Marketing
The Company distributes, markets, and supports its products on a
worldwide basis with its own employees and a network of independent
value-added resellers, distributors, and dealers. The Company has
approximately 5,300 sales and sales support personnel engaged in
promoting the licensing of the Companys products.
In North America, the Company operates primarily through Direct and
Indirect sales forces responsible for sales, marketing and service of the
Companys non-business application solutions. Several iBUs are responsible
for the sales and marketing activities of business application solutions.
A separate Global Accounts group provides additional service to large
clients, particularly facilities managers. Facilities managers deliver
data processing services using the Companys products to those companies
that prefer to outsource their computer processing operations.
<PAGE> 4
The Company also operates through wholly owned subsidiaries located in 43
countries outside North America. Each of these subsidiaries is structured
as an autonomous entity and markets all or most of the Companys products
in its respective territory. In addition, the Companys products are
marketed by independent distributors in those areas of the world where it
does not have a direct presence. Revenue from independent distributors
accounted for less than 1% of the Companys fiscal 1998 revenue.
The Companys marketing and marketing services groups produce
substantially all of the user documentation for its products, as well as
promotional brochures, advertising and other business solicitation
materials. The duties of these groups include the writing of the
requisite materials, editing, typesetting, photocomposition, and
printing.
Licensing
The Company does not sell or transfer title to its products to its
clients. The products are licensed on a right to use basis pursuant to
license agreements. Such licenses generally require that the client use
the product only for its internal purposes at its own computer
installation. In addition, the Company offers license agreements to
facilities managers enabling them to use the Companys software in
conjunction with their outsourcing business. Under certain circumstances,
the Company will also license, on a non-exclusive basis, clients and
other third parties as resellers of certain of the Companys products. The
Company is encouraging value-added resellers (VARs) to actively market
the Companys products. VARs often bundle the Companys products with
specialized consulting services to provide clients with a complete
solution. Such VARs generally service a particular market or sector and
provide enhanced user-specific solutions.
The Company offers several types of software licenses. Under the standard
license form, the client agrees to pay a one-time fee and an annual usage
and maintenance fee. The annual usage and maintenance fees typically
range from 9% to 20% of the then prevailing one-time fee for the product.
Payment of the usage and maintenance fee entitles the client to continue
to use, and to receive technical support for the product, as well as
receive all enhancements and improvements (other than optional features
subject to a separate charge) to the product developed by the Company
during the period covered. A significant number of the Companys clients
elect to license the Companys products under a variety of installment
payment options. These plans incorporate license, usage and
maintenance fees into annual or monthly payments ranging from one to ten
years. The Company also offers licenses for products and groups of
products based on the size of an enterprises computing power as measured
in MIPS millions of instructions per second. Under this option, the
client is free to reallocate hardware or modify user configurations
without incremental costs.
Similar licensing alternatives are available for the Companys midrange
and UNIX-based software products. Most of the Companys client/server
products, including Ingres and Unicenter TNG are licensed on a power unit
basis. Client/server products sold through third-party VARs,
distributors and dealers are generally subject to distribution licensing
agreements and end-user shrink wrap licenses. The Companys micro software
products are licensed to end users upon payment of a fixed fee.
Product revenue for licenses is recognized upon delivery of the product
to the client. Usage and maintenance fees are recognized ratably over the
term of the agreement. Where the client has elected to pay the license
fees in monthly or annual installments, the present value of the license
fee is recognized as product revenue upon delivery of the product.
Maintenance is unbundled from the selling price and ratably recognized
over the term of the agreement. See Note 1 of Notes to Consolidated
Financial Statements for further discussion of revenue recognition
policies.
Under its standard form of license agreement, the Company warrants that
its products will perform in accordance with specifications published in
the product documentation.
Competition and Risks
The computer software business is highly competitive. It is marked by
rapid, substantial technological change as well as the steady emergence
of new companies and products. In addition, it is affected by such issues
as the Year 2000 date change and the introduction by the European
Monetary Union of the Euro, a new currency which seeks to replace certain
country currencies. There are many companies, including IBM, Sun, HP,
Compaq, and other large computer manufacturers, which have substantially
greater resources, as well as the ability to develop and market software
programs similar to and competitive with the products offered by the
Company. Competitive products are also offered by numerous independent
software companies, which specialize in specific aspects of the highly
fragmented software industry. Some, like Microsoft, Oracle Corporation,
and SAP AG, are the leading developers and vendors in their specialized
markets.
IBM, HP, Sun, and Compaq are by far the largest suppliers of systems
software, and are the manufacturers of the computer hardware systems used
by most of the Companys clients. Historically, these hardware
manufacturers have modified or introduced new operating systems, systems
software, and computer hardware. Such new products could in the future
incorporate features which are currently performed by the Companys
products or could require substantial modification of the Companys
products to maintain compatibility with these companies hardware or
software. Although the Company has to date been able to adapt its
products and its business to changes introduced by hardware
manufacturers, there can be no assurance that it will be able to do so in
the future.
<PAGE> 5
In the past, licensees using proprietary operating systems were furnished
with source code, which makes the operating system generally
understandable to programmers, or object code,which directly controls the
hardware, and other technical documentation. Since the availability of
source code facilitated the development of systems and applications
software which must interface with the operating systems, independent
software vendors such as the Company were able to develop and market
compatible software. IBM and other hardware vendors have a policy of
restricting the use or availability of the source code for some of its
operating systems. To date, this policy has not had a material effect on
the Company. However, such restrictions may, in the future, result in
higher research and development costs for the Company in connection with
the enhancement and modification of the Companys existing products and
the development of new products. Although the Company does not expect
such restrictions will have this effect on its products, there can be no
assurance that such restrictions or other restrictions will not have a
material adverse effect on the Companys business.
The Company anticipates ongoing use of microcode or firmware provided by
hardware manufacturers. Microcode and firmware are basically software
programs in hardware form, and therefore are less flexible than pure
software. The Company believes that such continued use will not have a
significant impact on the Companys operations and that its products will
remain compatible with any changes to such code. However, there can be no
assurance that future technological developments will not have an adverse
impact on the Companys operations.
Although no company competes with the Company across its entire software
product line or a significant portion thereof, the Company considers at
least 75 firms to be directly competitive with one or more of the
Companys systems software packages. In database management, graphics and
applications software for the desktop, midrange and mainframe
environments, there are hundreds of companies, whose primary business
focus is on at least one but not all of these solutions. Certain of these
companies have substantially larger operations than the Companys in these
specific niches. Many companies, large and small, use their own technical
personnel to develop programs similar to those of the Company; these may
rightly be seen as competitors of the Company. The Company believes that
the most important considerations for potential purchasers of software
packages are: product capabilities; ease of installation and use;
dependability and quality of technical support; documentation and
training; the experience and financial stability of the vendor;
integration of the product line; and, to a lesser extent, price. Price is
a stronger factor in the client/server and microcomputer marketplace.
Moreover, as the client/server market continues to expand and develop,
competitors could be expected to form strategic alliances or acquire
other companies to increase their presence in this market.
The Companys future operating results may be adversely affected by a
number of factors, including, but not limited to: its responsiveness to
client needs; successful implementation of newly introduced products;
uncertainties relative to global economic conditions; market acceptance
of competing technologies; the availability and cost of new solutions;
its ability to successfully maintain or increase market share in its core
business while expanding its product base into other markets; its ability
to recruit and retain qualified personnel; the strength of its
distribution channels; its ability either internally or through third-
party service providers to support client implementation of the Companys
products; its ability to effectively manage fixed and variable expense
growth relative to revenue growth; possible disruptions resulting from
organizational changes; and its ability to effectively integrate acquired
products and operations. There can be no assurance that the Companys
products will continue to compete favorably or that it will be successful
in the face of increasing competition from new and existing competitors.
Year 2000
The millennium date change poses a challenge for software companies since
many existing computer hardware and software systems may not support
four-digit dates. This can result in errors in calculating date
information and in system failures. The Company has designed the current
versions of most of its existing programs to be Year 2000 compliant.
There can be no assurances that there will not be claims asserted against
it for damages for business interruption from products that were not Year
2000 ready. The Company has taken appropriate measures to prepare its
internal systems for the Year 2000 and is not aware of any material
operational issues or costs involved with this action. While the Company
does not believe that matters relating to the Year 2000 would have a
material impact on its business, financial condition or results of
operation, it is uncertain whether or to what extent the Company may be
affected by such matters.
Product Protection
The products of the Company are treated as trade secrets and confidential
information. The Company relies for protection upon its contractual
agreements with clients as well as its own security systems and
confidentiality procedures. In addition to obtaining patent protection
for new technology, the Company protects its products, their
documentation, and other written materials under copyright law. The
Company also obtains trademark protection for its various product names.
The Company from time to time receives notices from third parties
claiming infringement by the Companys products of third-party proprietary
rights. The Company expects that software will be subject to such claims
more frequently as the number of products and competitors in the Companys
industry grows and the functionality of products overlap. Such claims
could result in litigation, which can be costly, or licensing
arrangements on terms not favorable to the Company, including the payment
of royalties to third parties. The Companys business could be affected by
such litigation and licensing arrangements and by its ability to develop
substitute technology.
<PAGE> 6
Clients
No individual client accounted for a material portion of the Companys
revenue during any of the past three fiscal years. Since the majority of
the Companys software is used with relatively expensive com-
puter hardware, most of its revenue is derived from companies which have
the resources to make a substantial commitment to data processing and
their computer installations. The majority of the worlds major companies
use one or more of the Companys software packages. The Companys software
products are generally used in a broad range of industries, businesses
and applications. The Companys clients include manufacturers, financial
service providers, banks, insurance companies, educational institutions,
hospitals, and government agencies. The Companys products are also sold
to and through microcomputer distributors and value-added resellers.
Product Development
The history of the computer industry has seen rapid changes in hardware
and software technology. The Company must maintain the usefulness of its
products as well as modify and enhance its products to accommodate
changes to, and to ensure compatibility with, hardware and software.
To date, the Company has been able to adapt its products to such changes
and, as described more fully in Narrative Description Of Business
Products, the Company believes that it will be able to do so in the
future. Computer software vendors must also continually ensure that their
products meet the needs of clients in the ever-changing marketplace.
Accordingly, the Company has the policy of continually enhancing,
improving, adapting and adding new features to its products, as well as
developing additional products. The Company offers a facility for many of
its software products whereby problem diagnosis, program fixes and other
mainframe services can be provided online between the clients
installation and the support facilities of the Company. Another service,
CA-TCCSM (Total Client Care)SM, provides a major extension to existing
support services of the Company by offering access to the Companys client
support database. In addition, the Company offers support services online
via the Internet. These services have contributed to the Companys ability
to provide maintenance more efficiently.
Product development work is primarily done at the Companys facilities in
Alameda, California; San Diego, California; Santa Clara, California;
Maitland, Florida; Chicago, Illinois; Andover, Massachusetts;
Marlborough, Massachusetts; Mount Laurel, New Jersey; Princeton, New
Jersey; Islandia, New York; Columbus, Ohio; Pittsburgh, Pennsylvania;
Dallas, Texas; Herndon, Virginia; and Bellevue, Washington. The Company
also performs product development in Sydney, Australia; Vienna, Austria;
Brussels, Belgium; Vancouver, Canada; Slough, England; Paris, France;
Darmstadt, Germany; Tel Aviv, Israel; and Milan, Italy. For its fiscal
years ended March 31, 1998, 1997, and 1996, product development and
enhancements charged to operations were $369 million, $318 million, and
$285 million, respectively. In fiscal years 1998, 1997, and 1996, the
Company capitalized $23 million, $18 million, and $16 million,
respectively, of internally developed software costs.
Certain of the Companys products were acquired from other companies and
individuals. The Company continues to seek synergistic companies,
products and partnerships. The purchase price of acquired products is
capitalized and amortized over the useful life of such purchase or a
period not exceeding five years.
Employees
As of March 31, 1998, the Company had approximately 11,400 employees of
whom approximately 2,250 were located at its headquarters facilities in
Islandia, New York; approximately 4,700 were located at other offices in
the United States, and approximately 4,450 were located at its offices in
foreign countries. Of the total employees, approximately 3,700 were
engaged in product development efforts and 5,300 were engaged in sales
and sales support functions. The Company believes its employee relations
are excellent.
(d) Financial Information About Foreign and Domestic Operations and
Export Revenue
See Note 4 of Notes to Consolidated Financial Statements for financial
data pertaining to the geographic distribution of the Companys
operations.
Item 2. Properties
The principal properties of the Company are geographically distributed to
meet sales and operating requirements. All of the properties of the
Company are considered to be both suitable and adequate to meet current
operating requirements.
The Company leases approximately 50 office facilities throughout the
United States, and approximately 95 office facilities outside the United
States. Expiration dates on material leases range from fiscal 1999 to
2021.
The Company owns a 700,000 square-foot headquarters in Islandia, New
York. The Companys subsidiary in Germany owns two buildings totaling
approximately 120,000 square feet. The Company also owns various office
facilities in the United States ranging from 50,000 to 250,000 square
feet. The Company has begun construction of a significant facility in the
United Kingdom.
<PAGE> 7
The Company owns various computer, telecommunications and electronic
equipment. It also leases IBM, DEC, HP, and DG computers located at the
Companys facilities in Islandia, New York; Princeton, New Jersey; San
Diego, California; and Chicago, Illinois. This equipment is used for the
Companys internal product development, for technical support efforts and
for administrative purposes. In addition, each of the Companys
subsidiaries outside the U.S. leases certain computer hardware enabling
them to communicate with all other offices of the Company through a
dedicated worldwide network. The Company considers its computer and other
equipment to be adequate for its needs. See Note 7 of Notes to
Consolidated Financial Statements for information concerning lease
obligations.
Item 3. Legal Proceedings
The Company, various subsidiaries and certain current and former officers
have been named as defendants in various claims and lawsuits arising in
the normal course of business. The Company believes that the facts do not
support the plaintiffs claims and intends to vigorously contest each of
them.
Item 4. Submission of Matters to Vote of Security Holders
None.
Executive Officers of the Registrant
The name, age, present position, and business experience of all executive
officers of the Company as of
May 19, 1998 are listed below:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Charles B. Wang (1) 53 Chairman, Chief Executive Officer and
Director
Sanjay Kumar (1) 36 President, Chief Operating Officer and
Director
Russell M. Artzt (1) 51 Executive Vice President Research and
Development and Director
Charles P. McWade 53 Senior Vice President Business Development
Peter A. Schwartz 54 Senior Vice President Finance and Chief
Financial Officer
Ira Zar 36 Senior Vice President Finance
Michael A. McElroy 53 Vice President and Secretary
Lisa Savino 32 Vice President and Treasurer
<FN>
(1) Member of the Executive Committee.
Mr. Charles B. Wang has been Chief Executive Officer and a Director of
the Company since June 1976 and Chairman of the Board since April 1980.
Mr. Kumar joined the Company with the acquisition of UCCEL in August
1987. He was elected President, Chief Operating Officer and a Director
effective January 1994, having previously served as Executive Vice
President Operations from January 1993 to December 1993, and Senior Vice
President Planning from April 1989 to December 1992.
Mr. Artzt has been with the Company since June 1976. He has been
Executive Vice President Research and Development of the Company since
April 1987 and a Director of the Company since November 1980.
Mr. McWade has been Senior Vice President Business Development of the
Company since April 1998, having previously served in various financial
positions including Treasurer from April 1988 to March 1994. Mr. McWade
joined the Company in October 1983.
Mr. Schwartz has been Senior Vice President Finance and Chief Financial
Officer of the Company since April 1987. He has served in various
financial roles since joining the Company in July 1983.
Mr. Zar has been Senior Vice President Finance since November 1997,
having previously served as Senior Vice President and Treasurer from
April 1994 to October 1997, and as Vice President Finance since April
1990. Mr. Zar joined the Company in June 1982.
Mr. McElroy was elected Secretary of the Company effective January 1997,
and has been a Vice President of the Company since April 1989. He joined
the Company in January 1988 and served as Secretary from April 1988
through April 1991.
Ms. Savino was elected Vice President and Treasurer effective November
1997, having previously served as Assistant Treasurer since April 1995.
Ms. Savino joined the Company in May 1990.
The officers are appointed annually and serve at the discretion of the
Board of Directors.
<PAGE> 8
PART II
Item 5. Market for Registrants Common Equity and Related Stockholder
Matters
The Companys Common Stock is listed on the New York Stock Exchange.
The following table sets forth, for the quarters indicated, the
quarterly high and low closing prices on the New York Stock Exchange.
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year 1998 Fiscal Year 1997
High Low High Low
<S> <C> <C> <C> <C>
Fourth Quarter $ 58.06 $ 45.44 $ 32.67 $ 25.42
Third Quarter $ 56.94 $ 45.83 $ 44.83 $ 32.50
Second Quarter $ 48.88 $ 36.13 $ 42.09 $ 27.00
First Quarter $ 38.92 $ 25.33 $ 36.05 $ 29.33
</TABLE>
On March 31, 1998, the closing price for the Companys Common Stock
on the New York Stock Exchange was $ 57.75. The Company currently has
approximately 10,000 record stockholders.
The Company has paid cash dividends in July and January of each year
since July 1990 and intends to continue that policy. The Companys most
recent dividend, paid in January 1998, was $ .04 per share.
References to prices per share have been adjusted to reflect three-
for-two stock splits effective June 19, 1996 and November 5, 1997.
Item 6. Selected Financial Data
The information set forth below should be read in conjunction with
Managements Discussion and Analysis of Financial Condition and
Results of Operations and the financial statements and related notes
included elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Year Ended March 31,
------------------------------------------
INCOME STATEMENT DATA 1998(1) 1997(2) 1996(3) 1995(4) 1994
------------------------------------------
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenue $4,719 $4,040 $3,505 $2,623 $2,148
Net income (loss) 1,169 366 (56) 432 401
- - Basic earnings (loss)
- - Per common share (5) $ 2.14 $ .67 $ (.10) $ .80 $ .72
- - Diluted earnings (loss)
- - Per common share (5) 2.06 .64 (.10) .76 .69
Dividends declared
Per common share(5) .073 .065 .061 .059 .041
</TABLE>
<TABLE>
<CAPTION>
March 31,
------------------------------------------
BALANCE SHEET DATA 1998(1) 1997(2) 1996(3) 1995(4) 1994
------------------------------------------
(in millions)
<S> <C> <C> <C> <C> <C>
Cash from operations $ 1,040 $ 790 $ 619 $ 489 $ 480
Working capital(deficiency) 379 53 (53) 300 451
Total assets 6,706 6,084 5,016 3,269 2,492
Long-term debt
(less current maturities) 1,027 1,663 945 50 71
Stockholders' equity 2,481 1,503 1,482 1,578 1,243
<FN>
(1) Includes an after-tax charge of $21 million related to the Companys
unsuccessful tender offer for Computer Sciences Corporation.
<FN>
(2) Includes an after-tax write-off of $598 million related to the
acquisition of Cheyenne Software, Inc. in November 1996. See Note 2 of
Notes to Consolidated Financial Statements for additional information.
<FN>
(3) Includes an after-tax write-off of $808 million related to the
acquisition of Legent Corporation in August 1995. See Note 2 of Notes
to Consolidated Financial Statements for additional information.
<FN>
(4) Includes an after-tax write-off of $154 million related to the
acquisition of The ASK Group, Inc. in June 1994.
<FN>
(5) Adjusted to reflect three-for-two stock splits effective August 21,
1995, June 19, 1996 and November 5, 1997.
</TABLE>
Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The Annual Report on Form 10-K contains certain forward-looking
statements and information relating to the Company that are based on
the beliefs and assumptions made by the Companys management as well as
information currently available to management. When used in this
document, the words anticipate, believe, estimate, expect
and similar expressions, are intended to identify forward-looking
statements. Such statements reflect the current views of the Company
with respect to future events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described
herein as anticipated, believed, estimated or expected. The Company
does not intend to update these forward-looking statements.
<PAGE> 9
Fiscal Year 1998
Total revenue for fiscal year 1998 was $4.7 billion, an increase of 17%
over the $4.0 billion recorded in fiscal year 1997. The growth is
attributable to greater revenue derived from licensing fees on the
midrange platforms as well as a modest increase in mainframe product
revenue related to the continued demand for less restrictive enterprise
licensing pricing options. The client/server business, including CA
Arcserve R , Ingres, and Unicenter, showed strong growth, increasing 44%
over fiscal year 1997. Unicenter TNG (The Next Generation), a family of
integrated business solutions for monitoring and administering computer
systems across platform environments, accounted for 23% of the Companys
overall revenue. Total North American revenue increased 28% for fiscal
year 1998 as a result of strong acceptance of the Companys client/server
software solutions and enterprise pricing options. International revenue
remained unchanged in fiscal year 1998 compared with fiscal year 1997 due
partially to a strengthening of the U.S. Dollar against most currencies.
This unfavorable foreign exchange environment decreased international
revenue by $124 million when compared to fiscal year 1997. Maintenance
revenue declined 1%, or $7 million in fiscal year 1998. This decrease
reflects the Companys expanded client/server licensing which has
generated lower maintenance revenues and the ongoing trend of site
consolidations. Price changes did not have a material impact in either
year.
Selling, marketing, and administrative expenses for fiscal year 1998
increased to 37% of revenue compared to 36% in fiscal year 1997. The
increase represents an investment by the Company in additional service
and support personnel, as well as major promotional events, including the
product launch for Jasmine, a pure object database solution, and the
Unicenter TNGTM FrameworkTM release. In fiscal year 1998, new and
existing product enhancement, research and development expenditures
increased $51 million, or 16%. Continued emphasis on adapting and
enhancing products for the client/server environment, in particular
Unicenter TNG and Jasmine, a full fiscal year of Cheyenne product
development personnel costs and broadening of the Companys
Internet/Intranet product offerings were largely responsible for the
increase. Commissions and royalties were approximately 5% of total
revenue for both fiscal year 1998 and 1997. Depreciation and amortization
expense decreased $75 million, or 18% in fiscal year 1998 over fiscal
year 1997. The decrease was primarily due to completion of the
amortization associated with the On-Line Software International, Inc. and
Pansophic Systems, Inc. acquisitions, as well as the scheduled reduction
in amortization associated with The ASK Group, Inc. and Legent
Corporation acquisitions. This decrease was partially offset by a full
year of purchased software amortization related to the Cheyenne Software,
Inc. acquisition. For fiscal year 1998, net interest expense was $143
million, an increase of $41 million over fiscal year 1997. The increase
is attributable to non-recurring financing charges associated with the
unsuccessful Computer Sciences Corporation tender offer and higher debt
levels associated with the Cheyenne acquisition. Fiscal year 1998 pre-tax
profit was $1.87 billion compared to $932 million in fiscal year 1997.
The pre-tax amount for fiscal year 1997 includes an after-tax charge of
$598 million relating to the acquisition of Cheyenne for a write-off of
purchased research and development technology (R&D) that had not reached
the working model stage and had no alternative future use. Net income per
share in fiscal year 1998, excluding the Computer Sciences Corporation
pre-tax charge of $34 million, would have been $2.10 per share on a
diluted basis, a 24% increase over fiscal year 1997 net income of $1.69
per share, excluding the Cheyenne purchased R&D charge of $598 million.
The consolidated effective tax rate for fiscal year 1998, was 37.6%
versus 37% in fiscal year 1997 (excluding the research and development
charge).
A total of 20.25 million restricted shares were made available for grant
to three key executives under the 1995 Key Employee Stock Ownership Plan
(the 1995 Stock Plan) approved by the stockholders at the August 1995
Annual Meeting. An initial grant of 6.75 million restricted shares was
made to the executives at inception of the 1995 Stock Plan. In January
1996, based on the achievement of a price target for the Companys common
stock, 1.35 million shares (20%) of the initial grant vested, subject to
continued employment of the executives through March 31, 2000.
Accordingly, the Company began recognizing compensation expense
associated with the 1.35 million shares over the employment period.
Annual compensation expense of $7 million has been charged against income
for each of the years ended March 31, 1998, 1997, and 1996. Additional
grants of the remaining 13.5 million shares available under the 1995
Stock Plan were made based on the achievement of certain price targets.
These additional grants and the unvested portion of the initial grant are
subject to risk of forfeiture through March 31, 2000, and further subject
to significant limitations on transfer during the seven years following
vesting.
If the closing price of the Companys stock on the New York Stock Exchange
exceeds $53.33 for 60 trading days within any twelve-month period, all
20.25 million shares under the 1995 Stock Plan will vest immediately, and
will no longer be subject to forfeiture. A one-time pre-tax charge of
approximately $1.2 billion will be recorded in the period in which the
sixtieth trading day occurs. As of May 19, 1998, the closing price of the
Companys common stock had exceeded $53.33 for 58 trading days beginning
October 21, 1997.
Fiscal Year 1997
Total revenue for fiscal year 1997 was $4.0 billion, an increase of 15%
over the $3.5 billion recorded in fiscal year 1996. This increase
reflects the expanded demand for the Companys products, particularly its
Unicenter family. The Cheyenne desktop and local area network products
acquired in November 1996 contributed marginally to the increase. Revenue
in North America increased 40% for fiscal year 1997 due to strong
acceptance of the Companys client/server software solutions and the
ongoing increases in client computing capacity needs (as measured in
MIPS). International revenue decreased 9% in fiscal year 1997 compared
<PAGE> 10
with fiscal year 1996. This was caused by a combination of operational
difficulties experienced in refocusing the European sales and marketing
resources from mainframe to client/server sales opportunities exacerbated
by local economic conditions including a weakening of the local
currencies against the U.S. Dollar. Maintenance revenue increased 2%, or
$11 million in fiscal year 1997. This increase is due in part to the
addition of a full year of Legent maintenance revenue, partially offset
by the ongoing trend of site consolidations, and escalating client/server
revenue which generate lower maintenance revenue. Foreign exchange rate
movements negatively affected total revenue in fiscal year 1997 by
approximately $43 million or slightly more than 1%. Price changes did not
have a material impact in either year.
Selling, marketing, and administrative expenses for fiscal year 1997
decreased to 36% of revenue from 39% in fiscal year 1996. This reduction
is a function of the continued corporate-wide effort to reduce fixed and
administrative costs as well as operating efficiencies realized from
integration of the Cheyenne and Legent acquisitions. In fiscal year 1997,
net new product and enhancement research and development expenditures
increased $33 million, or 12%. The continued emphasis on adapting
products for the client/server environments and the addition of Cheyenne
development personnel were largely responsible for this increase.
Commissions and royalties were approximately 5% of total revenue for both
fiscal year 1997 and 1996. Depreciation and amortization expense
increased $20 million, or 5% in fiscal year 1997 over fiscal year 1996.
This rise is largely the result of an additional $31 million associated
with the Cheyenne acquisition partially offset by decreased amortization
from previous acquisitions. For fiscal year 1997 net interest expense was
$102 million, an increase of $31 million over fiscal year 1996. The
increase is attributable to the higher debt levels associated with
borrowings used to finance the Cheyenne acquisition.
Fiscal year 1997 had a pre-tax profit of $932 million compared to the
pre-tax loss of $100 million in fiscal year 1996. The pre-tax amounts for
both fiscal years 1997 and 1996 include a write-off of purchased research
and development technology that had not reached the working model stage
and has no alternative future use relating to the acquisitions of
Cheyenne and Legent of $598 million and $1,303 million, respectively.
Excluding these charges, pre-tax income for fiscal year 1997 was $1,530
million compared to $1,203 million in fiscal year 1996, an increase of
$327 million, or 27%. The consolidated effective tax rate, excluding the
research and development charges for fiscal year 1997 was 37% versus
37.5% in fiscal year 1996. Including the aforementioned purchased
research and development charge, net income for fiscal year 1997 was $366
million compared to a net loss of $56 million for fiscal year 1996.
Without these charges in fiscal years 1997 and 1996, net income would
have been $964 million, or $1.69 per share (diluted), and $752, or $1.32
per share (diluted), respectively.
<TABLE>
<CAPTION>
Selected Unaudited Quarterly Information on a diluted basis
(in millions, except per share amounts)
1998 Quarterly Results
June 30 Sept. 30 Dec. 31 Mar. 31(1) Total
<S> <C> <C> <C> <C> <C>
Revenue $ 891 $1,122 $1,239 $1,467 $4,719
Percent of
total revenue 19% 24% 26% 31% 100%
Net income 156 272 340 401 1,169
Basic earnings
per share(3) $ .29 $ .49 $ .62 $ .74 $ 2.14
Diluted earnings
per share(3) $ .28 $ .48 $ .60 $ .71 $ 2.06
1997 Quarterly Results
June 30 Sept. 30 Dec. 31(2) Mar. 31 Total
Revenue $ 792 $ 990 $1,053 $1,205 $4,040
Percent of
total revenue 20% 24% 26% 30% 100%
Net income (loss) 120 223 (313) 336 366
Basic earnings
(loss) per share(3) $ .22 $ .40 $(.57) $ .62 $ .67
Diluted earnings
(loss) per share(3) $ .21 $ .39 $(.57) $ .60 $ .64
<FN>
(1) Includes an after-tax charge of $21 million related to the Companys
unsuccessful tender offer for Computer Sciences Corporation.
<FN>
(2) Includes an after-tax write-off of $598 million related to the
acquisition of Cheyenne Software, Inc. in November 1996. See Note 2 of
Notes to Consolidated Financial Statements for additional information.
<FN>
(3) Adjusted to reflect three-for-two stock split effective June 19,
1996 and November 5, 1997.
</TABLE>
The Company has traditionally reported lower profit margins in the first
two quarters of each fiscal year than those experienced in the third and
fourth quarters. As part of the annual budget process, management
establishes higher discretionary expense levels in relation to projected
revenue for the first half of the year. Historically, the Companys
combined third and fourth quarter revenue have been greater than the
first half of the year, as these two quarters coincide with clients
calendar year budget periods and culmination of the Companys annual sales
plan. These historically higher second half revenue have resulted in
significantly higher profit margins since total expenses have not
increased in proportion to revenue. However, past financial performance
should not be considered to be a reliable indicator of future
performance.
<PAGE> 11
The Companys products are designed to improve the productivity and
efficiency of its clients information processing resources. Accordingly,
in a recessionary environment, the Companys products are often a
reasonable economic alternative to customers faced with the prospect of
incurring expenditures to increase their existing information processing
resources. However, a general or regional slowdown in the world economy
could adversely affect the Companys operations.
The Companys future operating results may be affected by a number of
other factors, including, but not limited to: uncertainties relative to
global economic conditions; the adequacy of the Companys internal
administrative systems to efficiently process transactions, store and
retrieve data subsequent to the year 2000; the Companys increasing
reliance on a single family of products for a material portion of its
sales; market acceptance of competing technologies; the availability and
cost of new solutions; delays in delivery of new products or features;
the Companys ability to update its business application products to
conform with the new, common European currency known as the Euro; the
Companys ability to successfully maintain or increase market share in its
core business while expanding its product base into other markets; the
strength of its distribution channels; the ability either internally or
through third-party service providers to support client implementation of
the Companys products; the Companys ability to manage fixed and variable
expense growth relative to revenue growth; and the Companys ability to
effectively integrate acquired products and operations.
The Company may experience further uncertainties and unanticipated costs
regarding Year 2000 compliance of its products. The Company has designed
the current version of the vast majority of its product offerings to be
Year 2000 compliant. However, there is currently a small minority of its
product offerings that have not been updated to Year 2000 compliance
specifications. The Company is making its best efforts to address this
issue and will continue to update and test its products for Year 2000
compliance. The Company has publicly identified any products that will
not be updated to be Year 2000 compliant and has been encouraging clients
using these products to migrate to compliant versions or products. There
can be no assurance that all the Companys products will be Year 2000
compliant prior to January 1, 2000 nor can there be assurances that the
Companys currently compliant products do not contain undetected problems
associated with Year 2000 compliance. Such problems may negatively affect
future operating results.
The Company recognizes the significance of the Year 2000 problem as it
relates to its internal systems. It has an overall plan and a systematic
process in place to make its internal financial and administrative
systems Year 2000-ready within the next 12 to 18 months. The cost of this
exercise is not viewed to have a material effect on the Companys results
of operations or liquidity. Contingency plans have also been developed
such that any failure to convert will not adversely affect overall
performance.
Foreign Currency Exchange
Continued uncertainty in world economies and currency markets caused an
additional strengthening of the U.S. Dollar during fiscal year 1998.
Approximately 34% of the Companys total revenue in fiscal year 1998, 40%
in fiscal year 1997, and 50% in fiscal year 1996, was derived from sales
outside of North America. Western Europe is the Companys most important
foreign market. The Company believes that its operations outside the U.S.
are located in countries which are politically and economically stable,
with the possible exception of financial volatility in certain Asian
markets. The net income effect of foreign currency exchange rate
fluctuations versus the U.S. Dollar on international revenue is largely
offset to the extent expenses of the Companys international operations
are incurred and paid for in the same currencies as those of its revenue.
During fiscal year 1998, the net income effect of foreign exchange
transaction losses was approximately $9 million. A foreign currency
translation adjustment of $84 million was charged to Stockholders Equity
in fiscal year 1998. As part of its risk management strategy and
consistent with prior years, the Company did not enter into any foreign
exchange derivative transactions during fiscal year 1998.
Liquidity and Capital Resources
The Companys cash, cash equivalents, and marketable securities of $310
million at March 31, 1998 increased by approximately $111 million from
the prior fiscal year. Cash generated from operations totaled $1,040
million for the fiscal year ended March 31, 1998, a 32% increase over the
prior year. The increase was driven by higher net income. Accounts
receivable balances increased during fiscal 1998, as customers continued
to demonstrate a preference for financing their licensing fees. The
Company offers installment payment plans as a competitive advantage
during the sales process. The Company used cash generated from operations
primarily for bank debt repayments of $630 million and for treasury stock
purchases of $163 million.
At March 31, 1998, the cumulative number of shares purchased under the
Companys various open market Common Stock repurchase programs was
approximately 121 million shares, including approximately 3.7 million
shares for the year just ended. The remaining number of shares authorized
for repurchase under these programs at March 31, 1998 is approximately 42
million. All references to number of shares reflect the November 1997
three-for-two stock split.
The Company employs a variety of financial alternatives to build a
capital structure capable of supporting its strategic objectives. On June
30, 1997, the Company replaced its existing credit facilities with a $1.1
billion 364-day revolving credit facility and a $1.5 billion five-year
revolving credit facility. In the quarter ended December 31, 1997, the
Company started construction of its European headquarters in the United
<PAGE> 12
Kingdom. On February 24, 1998, Quick Access Inc., (a wholly owned
subsidiary) entered into an 85 million pound sterling (approximately U.S.
$142 million) 364-day revolving credit facility to finance this
construction. Under all of the above credit facilities, borrowings are
subject to interest primarily at the prevailing London InterBank Offered
Rate (LIBOR) subject to a fixed spread which is dependent on the
achievement of certain financial ratios. The Company is also required to
maintain certain financial conditions.
Peak borrowings under these facilities during fiscal year 1998 totaled
$2,070 million. At March 31, 1998, $1,233 million was outstanding under
these credit facilities. In addition, $320 million remains outstanding
under the Companys 6.77% Senior Notes. The weighted average interest
rate for these borrowings was 6.31%. The Company also maintains $24
million of unsecured and uncommitted multicurrency lines of credit. These
facilities were established to meet any short-term working capital
requirements for subsidiaries located outside the U.S.
In addition to the construction of the U.K. headquarters, capital
resource requirements as of March 31, 1998 consisted of lease obligations
for office space, computer equipment, mortgage or loan obligations, and
amounts due as a result of product and company acquisitions. It is
expected that existing cash, cash equivalents, short-term marketable
securities, the availability of borrowings under credit lines, as well as
cash provided from operations, will be sufficient to meet ongoing cash
requirements. Refer to Notes 6 and 7 of Notes to Consolidated Financial
Statements for details concerning commitments.
On April 24, 1998, the Company issued $1.75 billion of unsecured Senior
Notes. Amounts borrowed, rates and maturities for each issue were $575
million at 6-1/4% due April 15, 2003, $825 million at 6-3/8% due April
15, 2005 and $350 million at 6-1/2% due April 15, 2008. Proceeds were
used to repay borrowings under the Companys revolving credit facilities
and for general corporate purposes. These Senior Notes enabled the
Company to extend the maturity of its debt, commit to an attractive fixed
rate of interest and broaden the Companys sources of liquidity. Debt
ratings for the Companys senior unsecured notes and its bank credit
facilities are Baa1 and A- from Moodys Investor Services and Standard &
Poors, respectively.
Item 8. Financial Statements and Supplementary Data
The Financial Statements of the Company are listed in the Index to
Financial Statements filed as part of this Form 10-K.
The Supplementary Data specified by Item 302 of Regulation S-K as it
relates to selected quarterly data is included in Item 7. Managements
Discussion and Analysis of Financial Condition and Results of Operations.
Information on the effects of changing prices is not required.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Reference is made to the Registrants definitive proxy statement to be
filed with the Securities and Exchange Commission within 120 days after
the end of the Registrants fiscal year for information concerning
directors and to Part I, page 7, of this Annual Report on Form 10-K for
information concerning executive officers under the caption Executive
Officers of the Registrant.
Item 11. Executive Compensation
Reference is made to the Registrants definitive proxy statement to be
filed with the Securities and Exchange Commission within 120 days after
the end of the Registrants fiscal year for information concerning
executive compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Reference is made to the Registrants definitive proxy statement to be
filed with the Securities and Exchange Commission within 120 days after
the end of the Registrants fiscal year for information concerning
security ownership of each person known by the Company to own
beneficially more than 5% of the Companys outstanding shares of Common
Stock, of each director of the Company and all executive officers and
directors as a group.
Item 13. Certain Relationships and Related Transactions
Reference is made to the Registrants definitive proxy statement to be
filed with the Securities and Exchange Commission within 120 days after
the end of the Registrants fiscal year for information concerning certain
relationships and related transactions.
<PAGE> 13
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
(a) (1) The Registrants financial statements together with a separate
table of contents are annexed hereto.
(2) Financial Statement Schedules are listed in the separate
table of contents annexed hereto.
(3) Exhibits.
<TABLE>
<CAPTION>
REGULATION S-K
EXHIBIT NUMBER
- --------------
<S> <C> <C>
3(i) Restated Certificate of Previously filed as Exhibit 3.1
Incorporation, as (a)(f) to the Companys 10-Q for
amended. the fiscal quarter ended September
30, 1996 and incorporated herein
by reference.
3(ii) By-Laws. Previously filed as Exhibit to the
Companys Form 10-Q for the fiscal
quarter ended September 30, 1993 and
incorporated herein by reference.
4(a) Indenture dated as of Previously filed as Exhibit 4.1 to
March 1, 1987 between On-Line Software International,
On-Line Software Inc.s Registration Statement on
International, Inc. and Form S-2 (No. 33-12488) and
Manufacturers Hanover incorporated herein by reference.
Trust Company with
respect to the 6 1/4%
Convertible Subordinated
Debentures due 2002 of
the Companys wholly
owned subsidiary.
4(b) Supplemental Indenture Previously filed as Exhibit A to the
dated as of September Company's Annual Report on Form 10-K
25,1991 between On-Line for the fiscal year ended March 31,
Software International, 1992 (File No. 0-10180) and
Inc. and Manufacturers incorporated herein by reference.
Hanover Trust Company
with respect to the 6 1/4%
Convertible Subordinated
Debentures due 2002 of the
Companys wholly owned
subsidiary.
4(c) Certificate of Previously filed as Exhibit 3 to the
Designation of Series One Companys Current Report on Form 8-K
Junior Participating dated June 18, 1991 and incorporated
Preferred Stock, Class herein by reference.
A of the Company.
4(d) Rights Agreement dated as Previously filed as Exhibit 4 to the
of June 18, 1991 between Company's Current Report on Form 8-K
the Company and dated June 18, 1991 and
Manufacturers Hanover incorporated herein by reference.
Trust Company.
4(e) Amendment No.1 dated May Previously filed as Exhibit C to the
17, 1995 to Rights Company's Annual Report on Form 10-K
Agreement dated as of for the fiscal year ended March 31,
June 18, 1991. 1995 and incorporated herein
by reference.
<PAGE> 14
4(f) Indenture, with respect Filed herewith.
To the Companys $1.75
Billion Senior Notes
Dated April 24, 1998
Between the Company and
The Chase Manhattan Bank,
as Trustee.
4(g) Registration Rights Filed herewith.
Agreement between the
Company and the initial
Purchasers of the
Senior Notes.
10(a) 1981 Incentive Stock Previously filed as Exhibit 10.5 to
Option Plan. the Company's Registration Statement
on Form S-1 (Registration 2-74618)
and incorporated herein by reference.
10(b) 1987 Non-Statutory Stock Previously filed as Appendix C to
Option Plan. the Company's definitive Proxy
Statement dated July 1, 1987 and
incorporated herein by reference.
10(c) Amendment No. 1 to the Previously filed as Exhibit C to the
1987 Non-Statutory Stock Company's Annual Report on Form 10-K
Option Plan dated for the fiscal year ended March 31,
October 20, 1993. 1994 and incorporated herein by
reference.
10(d) 1991 Stock Incentive Plan Previously filed as Exhibit 1 to the
,as amended. Companys Form 10-Q for the fiscal
quarter ended September 30, 1997 and
incorporated herein by reference.
10(e) 1993 Stock Option Plan Previously filed as Annex 1 to the
for Non-Employee Companys definitive Proxy State-
Directors. Ment dated July 7, 1993 and
incorporated herein by reference.
10(f) Amendment No. 1 to the Previously filed as Exhibit E to the
1993 Stock Option Plan Companys Annual Report on Form 10-K
for Non-Employee for the fiscal year ended March
Directors dated October 31, 1994 and incorporated herein
20, 1993. By reference.
10(g) 1994 Annual Incentive Previously filed as Exhibit A to the
Compensation Plan, as Companys definitive Proxy Statement
Amended. dated July 7, 1995 and incorporated
herein by reference.
10(h) 1995 Key Employee Stock Previously filed as Exhibit B to the
Ownership Plan. Companys definitive Proxy State-
ment dated July 7, 1995 and
incorporated herein by reference.
<PAGE> 15
10(i) Amended and Restated Previously filed as Exhibit 1 to
$1.5 billion the Companys Form 10-Q for the
Credit Agreement dated fiscal quarter ended June 30, 1997
as of June 30, 1997 and incorporated herein by reference.
among the Company
various banks and
financial institutions
and Credit Suisse, as
agent.
10(j) Amended and Restated Previously filed as Exhibit 2
$1.1 billion to the Companys Form 10-Q for
Credit Agreement dated the fiscal quarter ended June
as of June 30, 1997 30, 1997 and incorporated
among the Companys herein by reference.
various banks and
financial institutions
and Credit Suisse, as
Agent.
10(k) Note Purchase Agreement Previously filed as Exhibit D
dated as of April 1, to the Companys Annual Report
1996. on Form 10-K for the fiscal
year ended March 31, 1996 and
incorporated herein by reference.
10(l) 1996 Deferred Stock Plan Previously filed as Exhibit D
for Non-Employee to the Companys Annual Report
Directors. on Form 10-K for the fiscal
year ended March 31, 1996 and
incorporated herein by
reference.
21 Subsidiaries of the Filed herewith.
Registrant.
23 Consent of Ernst & Young Filed herewith.
LLP.
27 Financial Data Schedule, Filed electronically only.
including Restated
Financial Data Schedule.
<PAGE> 16
(b) Reports on Form 8-K.
The Registrant filed a Report on Form 8-K on April 23, 1998
reporting its expected revenue and earnings results for its fourth
fiscal quarter and year ended March 31, 1998.
(c) Exhibits: See Index to Exhibits.
(d) Financial Statement Schedules: The response to this portion of Item
14 is submitted as a separate section of this report.
For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act
of 1933, as amended, the undersigned Registrant hereby undertakes as
set forth in the following paragraph, which undertaking shall be
incorporated by reference into Registrants Registration Statements on
Form S-8 Nos. 333-19071 (filed December 31, 1996), 33-64377 (filed
November 17, 1995), 33-53915 (filed May 31, 1994), 33-53572(filed
October 22, 1992), 33-34607 (filed April 27, 1990), 33-18322 (filed
December 4, 1987), 33-20797 (filed December 19, 1988), 2-92355 (filed
July 23, 1984), 2-87495 (filed October 28, 1983) and 2-79751 (filed
October 6, 1982).
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 Securities Act of 1933 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 Act and will be governed by
the final adjudication of such issue.
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
COMPUTER ASSOCIATES INTERNATIONAL, INC.
By /s/ CHARLES B. WANG
-------------------
Charles B. Wang
Chairman
Chief Executive Officer
By /s/ PETER A. SCHWARTZ
----------------------
Peter A. Schwartz
Senior Vice President Finance
Principal Financial and
Accounting Officer
Dated: May 19, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated:
Name Title
/s/ CHARLES B. WANG Chairman, Chief Executive
- -------------------- Officer, and Director
Charles B. Wang
/s/ SANJAY KUMAR Director
- -------------------
Sanjay Kumar
/s/ RUSSELL M. ARTZT Director
- --------------------
Russell M. Artzt
/s/ WILLEM F.P. de VOGEL Director
- ---------------------
Willem F.P. de Vogel
/s/ IRVING GOLDSTEIN Director
- ---------------------
Irving Goldstein
/s/ RICHARD A. GRASSO Director
- ---------------------
Richard A. Grasso
/s/ SHIRLEY STRUM KENNY Director
- -----------------------
Shirley Strum Kenny
Dated: May 19, 1998
<PAGE> 18
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
ISLANDIA, NEW YORK
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND ITEM 14(d)
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED MARCH 31, 1998
Page
The following consolidated financial statements of
Computer Associates International, Inc. and subsidiaries
are included in Item 8:
Report of Independent Auditors 19
Consolidated Balance Sheets March 31, 1998 and 1997 20
Consolidated Statements of Operations
Years Ended March 31, 1998, 1997, and 1996 22
Consolidated Statements of Stockholders
Equity Years Ended March 31, 1998, 1997, And 1996 23
Consolidated Statements of Cash Flows
Years Ended March 31, 1998, 1997, and 1996 24
Notes to Consolidated Financial Statements 25
The following consolidated financial statement
schedule of Computer Associates International, Inc.
and subsidiaries is included in Item 14(d):
Schedule II Valuation and Qualifying Accounts 35
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and
therefore have been omitted.
<PAGE> 19
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Computer Associates International, Inc.
We have audited the accompanying consolidated balance sheets of Computer
Associates International, Inc. and subsidiaries as of March 31, 1998 and
1997, and the related consolidated statements of operations, stockholders
equity and cash flows for each of the three years in the period ended
March 31, 1998. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and the
schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements and
the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Computer Associates International, Inc. and subsidiaries at
March 31, 1998 and 1997, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended
March 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in
fiscal year 1997, the Company changed its method of accounting for
deferred income taxes relating to in-process research and development
acquired in purchase business combinations.
ERNST & YOUNG LLP
New York, New York
May 19, 1998
<PAGE> 20
</TABLE>
<TABLE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31,
1998 1997
--------- ---------
(Dollars in millions)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 251 $ 143
Marketable securities 59 56
Trade and installment accounts
Receivable, net 1,859 1,514
Other current assets 86 67
--------- ---------
TOTAL CURRENT ASSETS 2,255 1,780
INSTALLMENT ACCOUNTS RECEIVABLE,
net, due after one year 2,490 2,200
PROPERTY AND EQUIPMENT
Land and buildings 357 349
Equipment, furniture and improvements 501 438
--------- ---------
858 787
Allowance for depreciation and amortization 399 349
--------- ---------
TOTAL PROPERTY AND EQUIPMENT 459 438
PURCHASED SOFTWARE PRODUCTS, net of accumulated
amortization of $1,305 and $1,079 289 440
EXCESS OF COST OVER NET ASSETS ACQUIRED, net of
accumulated amortization of $205 and $139 1,099 1,159
OTHER ASSETS 114 67
--------- ---------
TOTAL ASSETS $ 6,706 $ 6,084
========= =========
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 21
<TABLE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
--------- ---------
(Dollars in millions)
<S> <C> <C>
CURRENT LIABILITIES
Loans payable and current portion of
long-term debt $ 571 $ 548
Accounts payable 153 124
Salaries, wages and commissions 157 140
Accrued expenses and other liabilities 297 324
Taxes, other than income taxes 76 66
Federal, state and foreign income taxes payable 345 265
Deferred income taxes 277 260
--------- ---------
TOTAL CURRENT LIABILITIES 1,876 1,727
LONG-TERM DEBT, net of current portion 1,027 1,663
DEFERRED INCOME TAXES 952 853
DEFERRED MAINTENANCE REVENUE 370 338
STOCKHOLDERS' EQUITY
Common Stock, $.10 par value, 1,100,000,000 shares
authorized, 630,920,576 shares issued* 63 63
Additional paid-in capital 523 497
Retained earnings 2,886 1,757
Equity adjustment (104) (27)
Treasury stock, at cost-84,869,026 shares for
1998 and 87,967,888 shares for 1997* (887) (787)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 2,481 1,503
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,706 $ 6,084
========= =========
<FN>
*Share amounts adjusted for three-for-two stock splits effective June 19,
1996 and November 5, 1997.
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 22
<TABLE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended March 31,
1998 1997 1996
------- ------- -------
(In millions, except per share amounts)
<S> <C> <C> <C>
Product revenue and other related income $ 3,986 $ 3,300 $ 2,776
Maintenance fees 733 740 729
------- ------- -------
TOTAL REVENUE 4,719 4,040 3,505
Costs and Expenses:
Selling, marketing and administrative 1,751 1,465 1,368
Product development and enhancements 369 318 285
Commissions and royalties 233 201 174
Depreciation and amortization 349 424 404
Interest expense, net 143 102 71
Purchased research and development - 598 1,303
------- ------- -------
TOTAL COSTS AND EXPENSES 2,845 3,108 3,605
------- ------- -------
Income (loss) before income taxes 1,874 932 (100)
Income taxes (benefit) 705 566 ( 44)
------- ------- -------
NET INCOME (LOSS) $ 1,169 $ 366 $ ( 56)
======= ======= =======
BASIC EARNINGS (LOSS) PER SHARE $ 2.14 $ .67 $ (.10)
======= ======= =======
Basic weighted average shares used
In computation* 546 546 543
DILUTED EARNINGS (LOSS) PER SHARE $ 2.06 $ .64 $ (.10)
======= ======= =======
Diluted weighted average shares
Used in computation* 566 569 543
<FN>
*Share amounts adjusted for three-for-two stock splits effective
August 21, 1995, June 19, 1996 and November 5, 1997.
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 23
<TABLE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
<CAPTION>
Additional Total
Common Paid-In Retained Equity Treasury Stockholders
Stock(2) Capital(2) Earnings Adjustment Stock Equity
-------- ---------- -------- ---------- -------- -------------
(Dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1995 $ 63 $ 479 $ 1,516 $ 57 $ (537) $ 1,578
Net loss (56) (56)
Dividends declared
($.061 per share)(2) (34) (34)
Exercise of Common Stock
options and other (7) 7 32 32
401(k) discretionary contribution 10 5 15
Translation adjustment in 1996 (25) (25)
Net change attributable to
unrealized gain on marketable
securities 2 2
Purchases of treasury stock (30) (30)
-------- ----------- -------- ---------- -------- ------------
Balance at March 31, 1996 63 482 1,426 41 (530) 1,482
Net income 366 366
Dividends declared
($.065 per share)(2) (35) (35)
Exercise of Common Stock
options and other 2 7 57 66
401(k) discretionary contribution 13 3 16
Translation adjustment in 1997 (74) (74)
Net change attributable to
unrealized loss on marketable
securities ( 1) ( 1)
Purchases of treasury stock (317) (317)
-------- ----------- -------- ---------- -------- ------------
Balance at March 31, 1997 63 497 1,757 (27) (787) 1,503
Net income 1,169 1,169
Dividends declared
($.073 per share)(2) (40) (40)
Exercise of Common Stock
options and other 18 7 59 84
401(k) discretionary contribution 8 4 12
Translation adjustment in 1998 (84) (84)
Purchases of treasury stock (163) (163)
-------- ----------- -------- ---------- -------- ------------
Balance at March 31, 1998 $ 63 $ 523 $ 2,886 $ (104)(1) $ (887) $2,481
======== =========== ======== ========== ======== ============
<FN>
(1) Represents foreign currency translation adjustment of $(124) million
and $20 million of restricted
stock.
<FN>
(2) Amounts adjusted for three-for-two stock splits effective
August 21, 1995 and June 19, 1996 and November 5, 1997.
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 24
<TABLE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended March 31,
1998 1997 1996
------- ------- ------
(Dollars in millions)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $1,169 $ 366 $ (56)
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 349 424 404
Provision for deferred income taxes (benefit) 141 221 (290)
Charge for purchased research and development 598 1,303
Compensation expense related to stock and pension plans 21 22 19
Increase in noncurrent installment accounts receivable, net (377) (575) (590)
Increase (decrease) in deferred maintenance revenue 41 (23) 37
Foreign currency transaction (gain) loss-before taxes 15 11 (2)
Changes in other operating assets and liabilities,
net of effects of acquisitions:
Increase in trade and installment receivables (409) (341) (262)
Other changes in operating assets and liabilities 90 87 56
------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1040 790 619
INVESTING ACTIVITIES:
Acquisitions, primarily purchased software, marketing rights
and intangibles (61) (1,191) (1,787)
Purchases of property and equipment (84) (53) (21)
Purchases of marketable securities (42) (51) (54)
Sales of marketable securities 39 99 136
Increase in capitalized development costs and other (23) (18) (16)
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (171) (1,214) (1,742)
FINANCING ACTIVITIES:
Dividends (40) (35) (34)
Purchases of treasury stock (163) (317) (30)
Proceeds from borrowings 23 1,480 1,720
Repayments of borrowings (630) (710) (570)
Exercise of common stock options and other 62 53 22
------- ------- -------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (748) 471 1,108
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS BEFORE EFFECT OF EXCHANGE
RATE CHANGES ON CASH 121 47 (15)
Effect of exchange rate changes on cash (13) (1) (5)
------- ------- -------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 108 46 (20)
CASH AND CASH EQUIVALENTS-
BEGINNING OF YEAR 143 97 117
------- ------- -------
CASH AND CASH EQUIVALENTS-END OF YEAR $ 251 $ 143 $ 97
======= ======= =======
<FN>
See Notes to Consolidated Financial Statement
</TABLE>
<PAGE> 25
Note 1 Significant Accounting Policies
Description of Business: Computer Associates International, Inc. and
subsidiaries (the Company) designs, develops, markets, licenses, and
supports a wide range of integrated computer software products.
Principles of Consolidation: Significant intercompany items and
transactions have been eliminated in consolidation. The Company has
various investments which it accounts for under the equity method of
accounting. These investments are not significant either individually or
when considered collectively. The Companys share of investment income or
loss is included in selling, marketing and administrative expenses.
Basis of Revenue Recognition: Product license fee revenue is recognized
after both acceptance by the client and delivery of the product.
Maintenance revenue, whether bundled with product license or priced
separately, is recognized ratably over the maintenance period. Accounts
receivable resulting from product sales with extended payment terms are
discounted to present value. The amounts of the discount credited to
revenue for the years ended March 31, 1998, 1997, and 1996 were $356
million, $271 million, and $215 million, respectively.
Marketable Securities: The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents.
The Company has evaluated its investment policies consistent with
Financial Accounting Standards Board Statement No. 115, Accounting for
Certain Investments in Debt and Equity Securities (FASB 115), and
determined that all of its investment securities are to be classified as
available-for-sale. Available-for-sale securities are carried at fair
value, with the unrealized gains and losses reported in Stockholders
Equity under the caption Equity Adjustment. The amortized cost of debt
securities is ad-justed for amortization of premiums and accretion of
discounts to maturity. Such amortization is included in interest income.
Realized gains and losses and declines in value judged to be other-than-
temporary on available-for-sale securities are included in interest
income. The cost of securities sold is based on the specific
identification method. Interest and dividends on securities classified as
available-for-sale are included in interest income.
Property and Equipment: Land, buildings, equipment, furniture, and
improvements are stated at cost. Depreciation and amortization are
provided over the estimated useful lives of the assets by the straight-
line method. Building and improvements are generally estimated to have
30-40 year lives and the remaining property and equipment are estimated
to have 5-7 year lives.
Intangibles: Excess of cost over net assets acquired is being amortized
by the straight-line method over 20 years. Costs of purchased software,
acquired rights to market software products, and software development
costs (costs incurred after development of a working model or a detailed
program design) are capitalized and amortized by the straight-line method
over five years or based on the products useful economic life, commencing
with product release. Unamortized capitalized development costs included
in other assets at March 31, 1998 and 1997 were $62 million and $54
million, respectively. Amortization of capitalized development costs was
$15 million, $17 million, and $19 million for the fiscal years ended
March 31, 1998, 1997, and 1996, respectively.
Net Income per Share: The Company adopted the Financial Accounting
Standards Board Statement of Financial Accounting Standards (SFAS) No.
128, Earnings per Share as of December 31, 1997. SFAS No. 128 requires
the Company to present basic and diluted earnings per share (EPS) on the
face of the income statement. Basic earnings per share is computed by
dividing net income by the weighted-average number of common shares
outstanding for the period. Diluted earnings per share is computed by
dividing net income by the sum of the weighted-average number of common
shares outstanding for the period plus the assumed exercise of all
dilutive securities, such as stock options. Diluted earnings per share
for the periods presented is not materially different from Net Income per
share reported under Accounting Principles Board Opinion No. 15.
<PAGE> 26
Note 1 Significant Accounting Policies (Continued)
<TABLE>
<CAPTION>
Year Ended March 31,
1998 1997 1996
(In millions, except per share amounts)
<S> <C> <C> <C>
Net income (loss) $1,169 $366 $ (56)
Diluted Earnings Per Share*
Weighted average shares
outstanding and,common
share equivalents 566 569 543(1)
------ ----- -----
Diluted Earnings Per Share $ 2.06 $.64 $(.10)
------ ----- -----
Diluted Share Computation:
Average common shares outstanding 546 546 543(1)
Average options outstanding net 19 22
1995 Stock Plan average shares
outstanding net 1 1
------ ----- -----
Weighted average shares outstanding and,
common share equivalents 566 569 543(1)
====== ====== ======
<FN>
(1) For the year ended March 31, 1996, the Company reported a net loss.
Common share equivalents are anti-dilutive and are, therefore, not
reported.
<FN>
*Share and per share amounts adjusted to reflect three-for-two stock
splits effective August 21, 1995, June 19, 1996, and November 5, 1997.
</TABLE>
Statement of Cash Flows: Interest payments for the years ended March 31,
1998, 1997, and 1996 were $157 million, $89 million, and $76 million,
respectively. Income taxes paid for these fiscal years were $470 million,
$300 million, and $144 million, respectively.
Translation of Foreign Currencies: In translating financial statements of
foreign subsidiaries, all assets and liabilities are translated using the
exchange rate in effect at the balance sheet date. All revenue, costs and
expenses are translated using an average exchange rate. Net income (loss)
includes exchange gains (losses) of approximately $(9) million in 1998,
$(7) million in 1997, and $1 million in 1996.
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Although these estimates are
based on managements knowledge of current events and actions it may
undertake in the future, they may ultimately differ from actual results.
New Accounting Pronouncements: In October 1997, the Accounting Standards
Executive Committee issued Statement of Position (SOP) 97-2, Software
Revenue Recognition, as amended in March 1998 by Statement of Position
98-4. These SOPs provide guidance on applying generally accepted
accounting principles in recognizing revenue on software transactions and
are effective for the Companys transactions entered into subsequent to
March 31, 1998. Definitive, detailed implementation guidelines for the
new standards have not been issued. This guidance could lead to
unanticipated changes in the Companys operational and revenue accounting
practices. Such changes may affect sales or revenue recognition
practices, increase administrative costs, and otherwise adversely modify
existing operations.
During fiscal 1997, the Company has adopted the disclosure only
provisions of Statement of Financial Accounting Standards (FAS) No. 123,
Accounting for Stock-Based Compensation. In accordance with the
provisions of FAS No. 123, the Company applies APB 25 and related
interpretations in accounting for its stock based plans.
Emerging Issues Task Force No. 96-7, Accounting for Deferred Taxes on In-
Process Research and Development Activities Acquired in a Purchase
Business Combination, became effective on May 23, 1996. As provided
therein, deferred taxes will no longer be provided on the initial
differences between the amounts assigned to in-process research and
development costs acquired in a business purchase combination for
financial reporting and tax purposes, and in-process research and
development will be charged to expense on a gross basis at acquisition.
<PAGE> 27
The effect of this change was to decrease net income by $221 million, or
$.39 per share on a diluted basis, in fiscal year 1997 as a result of not
providing a deferred tax benefit.
Note 2 Acquisitions
On November 11, 1996, the Company acquired 98% of the issued and
outstanding shares of common stock of Cheyenne Software, Inc. (Cheyenne),
and on December 2, 1996 merged into Cheyenne one of its wholly owned
subsidiaries. The aggregate purchase price of approximately $1.2 billion
was funded from drawings under the Companys $2 billion credit agreements.
Cheyenne was engaged in the design, development, marketing, and support
of storage, management, security, and communications software for
desktops and distributed enterprise networks. The acquisition was
accounted for as a purchase. The results of Cheyennes operations have
been combined with those of the Company since the date of acquisition.
The Company recorded a $598 million after-tax charge against earnings for
the write-off of purchased Cheyenne research and development technology
that had not reached the working model stage and had no alternative
future use. Research and development charges are generally based upon a
discounted cash flow analysis. Had this charge not been taken during the
quarter ended December 31, 1996, net income and diluted earnings per
share for the year ended March 31, 1997 would have been $964 million, or
$1.69 per share.
On August 1, 1995, the Company acquired 98% of the issued and outstanding
shares of Common Stock of Legent Corporation (Legent), and on November 6,
1995 merged into Legent one of its wholly owned subsidiaries. The
aggregate purchase price of approximately $1.8 billion was funded from
drawings under the Companys $2 billion credit agreement dated as of July
24, 1995. Legent was engaged in the design, development, marketing, and
support of a broad range of computer software products for the management
of information systems used to manage mainframe, midrange, server,
workstation and PC systems deployed throughout a business enterprise. The
acquisition was accounted for as a purchase. The results of Legents
operations have been combined with those of the Company since the date of
the acquisition.
The Company recorded an $808 million after-tax charge against earnings
for the write-off of purchased Legent research and development technology
that had not reached the working model stage and has no alternative
future use. Had this charge not been taken, net income for the fiscal
year ended March 31, 1996 would have been $752 million, or diluted
earnings per share of $1.32.
The following table reflects pro forma combined results of operations of
the Company, Legent, and Cheyenne on the basis that the acquisitions had
taken place at the beginning of fiscal year 1996. The after-tax charges
of $598 million and $808 million related to the Cheyenne and Legent
acquisitions are reflected in only the fiscal year 1996 pro forma
combined results of operations:
<TABLE>
<CAPTION>
Year Ended March 31,
1998(1) 1997 1996
(Amounts in millions, except per share amounts)
<S> <C> <C> <C>
Revenue $ 4,719 $ 4,175 $ 3,789
Net income (loss) 1,169 920 (775)
Basic earnings(loss) per share $ 2.14 $ 1.68 $ (1.43)
Shares used in computation* 546 546 543
Diluted earnings (loss)per share $ 2.06 $ 1.62 $ (1.43)
Shares used in computation* 566 569 543
<FN>
(1) There were no significant acquisitions in fiscal year 1998. Fiscal
year 1998 results include full year operations of the Company,Legent and
Cheyenne and are presented for comparison purposes only.
<FN>
*Adjusted for three-for-two stock splits effective August 21, 1995,
June 19, 1996, and November 5, 1997.
</TABLE>
In managements opinion, the pro forma combined results of operations are
not indicative of the actual results that would have occurred had the
acquisitions been consummated at the beginning of fiscal year 1996 or of
future operations of the combined companies under the ownership and
operation of the Company.
<PAGE> 28
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Note 3 - Investments
The following is a summary of cash equivalents and marketable
securities classified as available-for-sale securities as
required by FASB 115:
<TABLE>
<CAPTION>
Gross Estimated
Unrealized Fair
Cost Gains Value
------ ------------- ------------
(Dollars in millions)
<S> <C> <C> <C>
March 31, 1998:
Debt securities $ 59 $ 59
March 31, 1997:
Debt securities $ 56 $ 56
March 31, 1996:
Debt securities $ 104 $1 $ 105
==== ==== =====
<FN>
For years ended March 31, 1998, 1997, and 1996, no debt securities were
deemed to be Cash and Cash Equivalents.
</TABLE>
The gross and net realized gains on sales of available-for-sale
securities totaled $3 million for the years ended March 31, 1998, and $1
million each for the years ended March 31, 1997 and 1996. No unrealized
gains or losses existed at March 31, 1998 and an unrealized gain of $1
million existed at March 31, 1997.
The amortized cost and estimated fair value based on published closing
prices of debt securities at March 31, 1998, by contractual maturity,
are shown below. Expected maturities will differ from contractual
maturities because the issuers of the securities may have the right to
prepay obligations without prepayment penalties.
<TABLE>
<CAPTION>
March 31, 1998
Estimated
Fair
Cost Value
------ -----------
Available-for-Sale: (Dollars in millions)
<S> <C> <C>
Due in one year or less $ 9 $ 9
Due one through three years 29 29
Due in three through five years 11 11
Due after five years 10 10
---- ----
$ 59 $ 59
</TABLE>
<PAGE> 29
<TABLE>
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Note 4 - Geographic Area Information & Foreign Operations
<CAPTION>
United States Foreign (a) Eliminations Total
--------------- ------------ ------------ --------
(Dollars in millions)
<S> <C> <C> <C> <C>
March 31, 1998:
Revenue:
To unaffiliated customers $ 2,994 $ 1,725 $ 4,719
Between geographic areas (b) 373 $ (373)
---------- ----------- ---------- ----------
Total Revenue 3,367 1,725 (373) 4,719
Net income 990 179 1,169
Identifiable assets 5,326 1,874 (494) 6,706
Total liabilities 3,373 1,346 (494) 4,225
March 31, 1997:
Revenue:
To unaffiliated customers $ 2,315 $ 1,725 $ 4,040
Between geographic areas (b) 335 $ (335)
---------- ----------- ---------- ----------
Total Revenue 2,650 1,725 (335) 4,040
Net income 101 265 366
Identifiable assets 4,584 2,014 (514) 6,084
Total liabilities 3,791 1,304 (514) 4,581
March 31, 1996:
Revenue:
To unaffiliated customers $ 1,678 $ 1,827 $ 3,505
Between geographic areas (b) 403 $ (403)
---------- ----------- ---------- ----------
Total Revenue 2,081 1,827 (403) 3,505
Net (loss) income (281) 225 (56)
Identifiable assets 3,709 1,897 (590) 5,016
Total liabilities 2,767 1,357 (590) 3,534
<FN>
(a) The Company operates wholly owned subsidiaries in Canada and 42
foreign countries located in the Middle East, Africa, Europe (22),
South America (6) and the Pacific Rim (12).
<FN>
(b) Represents royalties from foreign subsidiaries generally
determined as a percentage of certain amounts invoiced
to customers.
</TABLE>
For the years ended March 31, 1998, 1997, and 1996, $14 million, $36
million, and $39 million, respectively, of export sales to unaffiliated
customers are included in United States revenue.
<PAGE> 30
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Note 5 - Trade and Installment Accounts Receivable
Trade and installment accounts receivable consist of the following:
<TABLE>
<CAPTION>
March 31,
1998 1997
------- ------
(Dollars in millions)
<S> <C> <C>
Current receivables $ 2,655 $ 2,220
Less: Allowance for uncollectible amounts (210) (191)
Unamortized discount and maintenance fees (586) (515)
-------- --------
$ 1,859 $ 1,514
======== ========
Non-current receivables $ 3,719 $ 3,244
Less: Allowance for uncollectible amounts (36) (36)
Unamortized discount and maintenance fees (1,193) (1,008)
-------- --------
$ 2,490 $ 2,200
======== ========
</TABLE>
The provisions for uncollectible amounts for the years ended March 31,
1998, 1997 and 1996 were $71 million, $110 million, and $71 million,
respectively, and are included in selling, marketing and administrative
expenses.
Note 6 Debt
In fiscal year 1998, the Company replaced $2 billion of its unsecured
credit facilities with a $1.1 billion 364-day credit facility and a $1.5
billion five-year revolving credit facility. These credit facilities
provide for interest at the prevailing London InterBank Offered Rate
(LIBOR) plus a margin, and require the Company to maintain certain
financial ratios. Interest margins and committment fees are based upon
the Companys achievement of certain financial ratios. At March 31, 1998
and March 31, 1997, $1,210 million and $1,840 million, respectively, was
outstanding under the credit facilities then available. The effective
pre-tax interest rate at March 31, 1998 was approximately 6%.
On February 24, 1998, Quick Access Inc., (a wholly owned subsidiary of
the Company) entered into an 85 million pounds sterling (approximately
U.S. $142 million) 364-day revolving credit facility to finance the
construction of a European headquarters in the United Kingdom. The
facility requires the Company to maintain certain financial conditions,
and borrowing costs and fees are based upon achievement of certain
financial ratios. The credit facilitys interest is calculated at the
prevailing LIBOR for pounds sterling plus a margin. At March 31, 1998,
$14 million pounds sterling (approximately U.S. $23 million) was
outstanding under this credit facility with an interest rate of
approximately 7.8%.
At March 31, 1998 and 1997, the Company had $320 million of unsecured
Senior Notes outstanding at a fixed rate of interest of 6.77%. The final
maturity of this debt (less required amortization) is due in the year
2003.
Unsecured and uncommitted multicurrency credit facilities of $24 million
are also available to meet any short-term working capital requirements
and can be drawn upon, up to a predefined limit, by most subsidiaries.
Under these multicurrency facilities, approximately $3 million and $5
million was drawn at March 31, 1998 and 1997, respectively.
At March 31, 1998 and 1997, the Company had various other fixed rate debt
obligations outstanding carrying annual interest rates ranging from 6% to
7-1/2% totaling approximately $42 million and $46 million, respectively.
The Company conducts an ongoing review of its capital structure and debt
obligations as part of its risk management strategy. To date, the Company
has not entered into any form of derivative transactions related to its
debt instruments. The fair market value of long-term debt approximates
its carrying value.
The maturities of long-term debt outstanding for the next five fiscal
years are as follows: 1999-$571 million, 2000-$738 million, 2001-$69
million, 2002-$80 million, and 2003-$65 million.
Interest expense for the years ended March 31, 1998, 1997, and 1996 was
$147 million, $104 million, and $81 million, respectively.
On April 24, 1998, the Company issued $1.75 billion of unsecured Senior
Notes in a transaction governed by Rule 144A under the Securities Act of
1933. The Company intends to promptly register the Notes with the
Securities and Exchange Commission. $575 million of the Notes are due
2003, $825 million of the Notes are due 2005, and $350 million of the
Notes are due 2008. The 2003 Notes pay interest at 6-1/4%, the 2005 Notes
pay interest at 6-3/8%, and the 2008 Notes pay interest at 6-1/2%. All
interest is paid semiannually. The proceeds were used to repay all
indebtedness outstanding under the Companys $1.1 billion and $1.5 billion
credit facilities and for other general corporate purposes.
<PAGE> 31
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Note 7 - Commitments and Contingencies
The Company leases real estate and certain data processing and other
equipment with lease terms expiring through 2021. The leases are
operating leases and generally provide for renewal options and
additional rental based on escalation in operating expenses and real
estate taxes. The Company has no material capital leases. The Company
has begun construction of a facility in the United Kingdom with an
estimated total cost of $142 million.
Rental expense under operating leases for the years ended March 31,
1998, 1997, and 1996 was $140 million, $132 million, and $165 million,
respectively. Future minimum lease payments are: 1999-$89 million; 2000-
$71 million; 2001-$56 million; 2002-$42 million; 2003-$35 million; and
thereafter-$101 million.
Financial instruments that potentially subject the Company to
concentration of credit risk consist primarily of marketable securities
and accounts receivable. The Companys marketable securities consist
primarily of high quality debt securities with limited exposure to any
single instrument. The Companys accounts receivable balances have
limited exposure to concentration of credit risk due to the diverse
client base and geographic areas covered by operations.
The Company, various subsidiaries and certain current and former
officers have been named as defendants in various claims and lawsuits
arising in the normal course of business. The Company believes that the
facts do not support the plaintiffs claims and intends to vigorously
contest each of them.
Note 8 - Income Taxes
The amounts of income (loss) before income taxes attributable to
domestic and foreign operations are as
follows:
<TABLE>
<CAPTION>
Year Ended March 31,
1998 1997 1996
------ ------ ------
(Dollars in millions)
<S> <C> <C> <C>
Domestic $1,611 $ 520 $ (464)
Foreign 263 412 364
------ ------ ------
$1,874 $ 932 $ (100)
====== ===== ======
</TABLE>
The provision for income taxes (benefit) consists of the following:
<TABLE>
<CAPTION>
Year Ended March 31,
1998 1997 1996
------ ------ ------
(Dollars in millions)
<S> <C> <C> <C>
Current:
Federal $ 446 $ 256 $ 160
State 44 38 30
Foreign 74 51 56
------ ------ ------
564 345 246
====== ====== ======
Deferred:
Federal 119 106 (337)
State 12 19 ( 36)
Foreign 10 96 83
------ ------ ------
141 221 (290)
====== ====== ======
Total:
Federal 565 362 (177)
State 56 57 (6)
Foreign 84 147 139
------ ------ ------
$ 705 $ 566 $ (44)
====== ====== ======
</TABLE>
<PAGE> 32
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -
Continued
Note 8 - Income Taxes (Continued)
Under Financial Accounting Standards Board Statement No. 109, deferred
income taxes have been provided for the differences between financial
statement and tax basis of assets and liabilities. The cumulative
impact of temporary differences, primarily due to the modified accrual
basis (approximately $1.2 billion in 1998 and $.9 billion in 1997) is
shown on the Consolidated Balance Sheets under the captions Deferred
Income Taxes.
The provision for income taxes (benefit) is reconciled to the tax
provision computed at the federal statutory rate as follows:
<TABLE>
<CAPTION>
Year Ended March 31,
1998 1997 1996
------ ------ ------
(Dollars in millions)
<S> <C> <C> <C>
Statutory rate $ 656 $ 326 $ (35)
State taxes, net of
federal tax effect 36 37 (4)
Purchased research and development 209
Other, net 13 (6) (5)
------ ------ ------
$ 705 $ 566 $ (44)
</TABLE>
Note 9 - Stock Plans
The Company has a 1981 Incentive Stock Option Plan (the 1981 Plan)
pursuant to which options to purchase up to 27 million shares of Common
Stock of the Company were available for grant to employees (including
officers of the Company). The 1981 Plan expired on October 23, 1991.
Therefore, from and after that date no new options can be granted under
the 1981 Plan. Pursuant to the 1981 Plan, the exercise price could not
be less than the Fair Market Value (FMV) of each share at the date of
grant. Options granted thereunder may be exercised in annual increments
commencing one year after the date of grant and become fully exercisable
after the expiration of five years. All options expire ten years from
date of grant unless otherwise terminated. All of the 800,000 options
which are outstanding under the 1981 Plan were exercisable at March 31,
1998 at $2.22-$4.09 per share.
The Company has a 1987 Non-Statutory Stock Option Plan (the 1987
Plan) pursuant to which options to purchase up to 17 million shares
of Common Stock of the Company may be granted to select officers and key
employees of the Company. Pursuant to the 1987 Plan, the exercise price
shall not be less than the FMV of each share at the date of the grant.
The option period shall not exceed 12 years. Each option may be
exercised only in accordance with a vesting schedule established by the
Stock Option and Compensation Committee. As of March 31, 1998, 30,375
shares of the Companys Common Stock were available for future grants.
All of the 7.9 million options which are outstanding under the 1987 Plan
were exercisable as of that date. These options are exercisable at $2.22-
$4.26 per share.
The Companys 1991 Stock Incentive Plan (the 1991 Plan) provides
that stock appreciation rights and/or options, both qualified and non-
statutory, to purchase up to 67.5 million shares of Common Stock of
the Company may be granted to employees (including officers of the
Company) under conditions similar to the 1981 Plan. As of March 31,
1998, no stock appreciation rights have been granted under this plan and
45.4 million options have been granted. At March 31, 1998, 7.9 million
of the 33.8 million options which are outstanding under the 1991 Plan
were exercisable. These options are exercisable at $3.33-$47.25
per share.
The 1993 Stock Option Plan for Non-Employee Directors (the 1993
Plan) provides for non-statutory options to purchase up to a total of
337,500 shares of Common Stock of the Company to be available for
grant to each member of the Board of Directors who is not otherwise an
employee of the Company. Pursuant to the 1993 Plan, the exercise price
shall be the FMV of the shares covered by the option at the date of
grant. The option period shall not exceed ten years, and each option may
be exercised in whole or in part on the first anniversary date of its
grant. As of March 31, 1997, 141,750 options have been granted under this
plan. 74,250 of the 94,500 options which are outstanding under the 1993
Plan were exercisable as of that date. These options are exercisable at
$7.59-$43.08 per share.
<PAGE> 33
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Note 9 - Stock Plans (Continued)
<TABLE>
<CAPTION>
The following table summarizes the activity under these plans (shares in
millions):
1998 1997 1996
----------------- ---------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 40.2 $13.96 41.2 $ 8.71 38.8 $ 5.52
Granted 8.9 37.58 9.3 31.51 9.3 19.34
Exercised (5.8) 10.46 (7.9) 6.71 (5.1) 3.98
Terminated (.7) 15.82 (2.4) 16.62 (1.8) 8.21
------- ------- -------
End of year 42.6 19.36 40.2 13.96 41.2 8.71
Options exercisable
at end of year 16.7 $ 7.84 15.8 $ 7.06 14.7 $ 3.83
</TABLE>
<TABLE>
<CAPTION>
The following table summarizes information about these plans at March
31, 1998 (shares in millions):
Options Outstanding Options Exercisable
------------------- -------------------
Weighted-
Average Weighted
Range of Remaining Average Weighted
Exercise Contractual Exercise Average
Prices Shares Life Price Shares Exercise Price
- ---------- -------- ------------- ---------- --------- --------------
<S> <C> <C> <C> <C> <C>
$ 2.22 -$10.00 19.8 4.9 years $ 6.04 14.2 $ 5.04
$10.01 -$20.00 7.3 7.1 years 19.16 1.7 18.89
$20.01 -$30.00 4.9 9.0 years 29.27 .1 25.85
$30.01 -$40.00 6.5 8.1 years 34.97 .7 34.59
$40.01 -$47.25 4.1 9.9 years 47.14 40.88
------ -----
42.6 16.7
</TABLE>
Under the 1995 Key Employee Stock Ownership Plan (1995 Stock Plan), 20.25
million restricted shares are available for grant to three key
executives. An initial grant of 6.75 million restricted shares was made
to the executives at inception of the 1995 Stock Plan. In January 1996,
based on the achievement of a price target for the Companys common stock,
1.35 million shares of the initial grant vested, subject to continued
employment of the executives through March 31, 2000. Accordingly, the
Company began recognizing compensation expense associated with the 1.35
million shares over the employment period. Annual compensation expense of
$7 million has been charged against income for each of the years ended
March 31, 1998,1997 and 1996. Additional grants of the remaining 13.5
million shares available under the 1995 Stock Plan have been reserved
pending the achievement of the certain price targets. These additional
grants and the unvested portion of the initial grant are subject to risk
of forfeiture through March 31, 2000, and further subject to significant
limitations on transfer during the seven years following vesting.
If the closing price of the Companys stock on the New York Stock Exchange
exceeds $53.33 for 60 trading days within any twelve-month period, all
20.25 million shares under the 1995 Stock Plan will vest immediately, and
will no longer be subject to forfeiture. A one-time charge of
approximately $1.2 billion will be recorded in the period in which the
sixtieth trading day occurs. As of May 19, 1998, the closing price of the
Companys common stock had exceeded $53.33 for 58 trading days beginning
October 21, 1997.
<PAGE> 34
COMPUTER ASSOCIATES INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Note 9 - Stock Plans (Continued)
If the Company had elected to recognize compensation expense based on the
fair value of stock plans as prescribed by FAS No. 123, net income (loss)
and net income (loss) per share would have been reduced to the pro forma
amounts in the table below:
<TABLE>
<CAPTION>
Year ended March 31,
1998 1997 1996
------ ------ ------
(Amounts in millions, except per share amounts)
<S> <C> <C> <C>
Net income (loss)-as reported $1169 $ 366 $ (56)
Net income (loss)-pro forma 1085 301 (94)
Basic earnings (loss)
per share $2.14 $ .67 $(.10)
Basic earnings (loss)
per share-pro forma 1.99 .55 (.18)
Diluted earnings (loss)
per share $2.06 $ .64 $(.10)
Diluted earnings (loss)
per share-pro forma 1.94 .54 (.18)
</TABLE>
The weighted-average fair value at date of grant for options granted in
1997 and 1996 were $20.44, $19.34, $10.52, respectively. The fair value
of each option grant is estimated on the date of grant using the Black-
Scholes option pricing model. The following weighted average assumptions
were used for option grants in 1998,1997 and 1996, respectively; dividend
yield of .22%,.19% and .34%; expected volatility factors of .50; risk-
free interest rates of 6.2%,6.5% and 6.5% and an expected life of six
years. The compensation expense and pro forma net income (loss) may not
be indicative of amounts to be included in future periods.
All references to the number of shares under option and option prices
have been adjusted to reflect three-for-two stock splits effective
August 21, 1995, June 19, 1996 and November 5, 1997.
Note 10 Profit Sharing Plan
The Company maintains a profit sharing plan, the Computer Associates
Savings Harvest Plan (CASH Plan), for the benefit of employees of the
Company. The CASH Plan is intended to be a qualified plan under Section
401(a) of the Internal Revenue Code of 1986 (the Code) and contains a
qualified cash or deferred arrangement as described under Section 401(k)
of the Code. Pursuant to the CASH Plan, eligible participants may elect
to contribute a percentage of their annual gross salary. Matching
contributions to the CASH Plan for each of the years ended March 31,
1998, 1997, and 1996 were $5 million. In addition, the Company may make
discretionary contributions to the CASH Plan. Discretionary contributions
to the CASH Plan for each of the years ended March 31, 1998, 1997, and
1996 approximated $17 million.
Note 11 Rights Plan
Each outstanding share of the Companys Common Stock carries a stock
purchase right issued under the Companys Rights Agreement, dated June 18,
1991 and amended May 17, 1995 (the Rights Agreement). Under certain
circumstances, each right may be exercised to purchase one one-thousandth
of a share of Series One Junior Participating Preferred Stock, Class A,
for $300. Under certain circumstances, following (i) the acquisition of
20% or more of the Companys outstanding Common Stock by an Acquiring
Person (as defined in the Rights Agreement), (ii) the commencement of a
tender offer or exchange offer which would result in a person or group
owning 20% or more of the Companys outstanding common stock or (iii) the
determination by the Companys Board of Directors and a majority of the
Disinterested Directors (as defined in the Rights Agreement) that a 15%
stockholder is an Adverse Person (as defined in the Rights Agreement),
each right (other than rights held by an Acquiring Person or Adverse
Person) may be exercised to purchase common stock of the Company or a
successor company with a market value of twice the $300 exercise price.
The rights, which are redeemable by the Company at one cent per right,
expire in June 2001.
<PAGE> 35
SCHEDULE II
COMPUTER ASSOCIATES INTERNATIONAL, INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at charged to Charged Balance
beginning costs and to other at end
Description of period expenses accounts(a) Deductions(b) of period
- -------------- --------- ---------- ----------- ------------- ---------
(Dollars in millions)
Reserves and allowances
deducted from assets to
which they apply:
Allowance for uncollectible amounts
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1998 $ 227 $ 71 $ 2 $ 54 $ 246
Year ended March 31, 1997 $ 182 $ 110 $ 13 $ 78 $ 227
Year ended March 31, 1996 $ 182 $ 71 $ 5 $ 76 $ 182
<FN>
(a) Reserves of acquired companies.
<FN>
(b) Write-offs of amounts against allowance provided.
</TABLE>
<TABLE>
Exhibit A
Subsidiaries of the Registrant
Name of Subsidiary Jurisdiction of Incorporation
<S> <C>
ACCPAC International, Inc. Delaware
AI Ware, Inc. Ohio
C.A. Caribbean, Inc. Puerto Rico
C.A. Computer Associates GmbH Germany
C.A. Computer Associates Israel Ltd. Israel
C.A. Computer Associates S.A. Spain
C.A. Computer Associates India Private Limited India
CA Islandia Realty, Inc. New York
CA Management, Inc. Delaware
CA Real Estate, Inc. Delaware
CA Research, Inc. Delaware
CA Services, Inc. Delaware
CA Think, Inc. Delaware
Cheyenne Software, Inc. Delaware
Computer Associates AG Switzerland
Computer Associates Canada Ltd. Canada
Computer Associates CIS Ltd. Russia
Computer Associates de Argentina S.A. Argentina
Computer Associates do Brasil Ltda. Brazil
Computer Associates de Chile Ltd. Chile
Computer Associates de Colombia S.A. Colombia
Computer Associates de Mexico, S.A. de C.V. Mexico
Computer Associates de Venezuela, C.A. Venezuela
Computer Associates Finland OY Finland
Computer Associates, Inc. Delaware
Computer Associates International (China) Ltd. China
Computer Associates International G.m.b.H. Austria
Computer Associates International GmbH Hungary
Computer Associates International
GmbH Organizaeni Slozka The Czech Republic
Computer Associates International Limited Hong Kong
Computer Associates Japan Ltd. Japan
Computer Associates Korea Ltd. Korea
Computer Associates Ltd. Sti. Turkey
Computer Associates (M) Sdn. Bhd. Malaysia
Computer Associates Middle East WLL Bahrain
Computer Associates Norway A/S Norway
Computer Associates (N.Z.) Ltd. New Zealand
Computer Associates Plc United Kingdom
Computer Associates Products Nederland B.V. The Netherlands
Computer Associates Pte. Ltd. Indonesia Indonesia
Computer Associates Pte. Ltd. Singapore
Computer Associates Pty. Ltd. Australia
Computer Associates Real Estate BV Netherlands
Computer Associates S.A. Belgium
Computer Associates S.A. France
Computer Associates Scandinavia A/S Denmark
Computer Associates Africa (Pty.) Ltd. South Africa
Computer Associates S.p.A. Italy
Computer Associates Sp. z o.o. Poland
Computer Associates Sucursal en Portugal Portugal
Computer Associates Sweden AB Sweden
Computer Associates Taiwan Ltd. Taiwan
Computer Associates (Thailand) Co. Ltd. Thailand
Cullinet Software, Inc. Massachusetts
Infresco Corporation Delaware
Ingres Corporation Delaware
Legent Corporation Delaware
On-Line Software International, Inc. Delaware
Pansophic Systems, Incorporated Illinois
Philippine Computer Associates International, Inc. Philippines
Quick Access, Inc. Delaware
Shanmore Ltd. Ireland
The ASK-Group, Inc. Delaware
<FN>
All of the subsidiaries are 100%-owned by the Registrant or by a wholly
owned subsidiary of the Registrant other than directors qualifying
shares which are held in trust for the Registrant or for such wholly
owned subsidiary.
</TABLE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 333-19071 pertaining to the Cheyenne Software,
Inc. 1987 Non-Qualified Stock Option Plan and the Cheyenne Software, Inc.
1992 Stock Option Plan for Outside Directors; Form S-8 No. 33-53915
pertaining to the Computer Associates International, Inc. 1993 Non-
Employee Director Stock Option Plan; Form S-8 Nos. 33-64377 and 33-53572
pertaining to the Computer Associates International, Inc. 1991 Stock
Incentive Plan; Form S-4, No. 33-30347, and Form S-8 Nos. 33-34607, 33-
18322, 2-92355, 2-87495 and 2-79751 pertaining to the 1981 Incentive
Stock Option Plan, Non-Statutory Stock Option Plan and Affiliated Plans;
and Form S-8 No 33-20797 pertaining to the Computer Associates Savings
Harvest Plan) of Computer Associates International, Inc. and related
prospectuses of our report dated May 19, 1998, with respect to the
consolidated financial statements and schedule of Computer Associates
International, Inc. included in its Annual Report on Form 10-K for the
year ended March 31, 1998.
ERNST & YOUNG LLP
May 19, 1998
New York, New York
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 251
<SECURITIES> 59
<RECEIVABLES> 1859
<ALLOWANCES> 0
<INVENTORY> 86
<CURRENT-ASSETS> 2255
<PP&E> 858
<DEPRECIATION> 399
<TOTAL-ASSETS> 6706
<CURRENT-LIABILITIES> 1876
<BONDS> 1027
0
0
<COMMON> 63
<OTHER-SE> 2418
<TOTAL-LIABILITY-AND-EQUITY> 6706
<SALES> 3986
<TOTAL-REVENUES> 4719
<CGS> 0
<TOTAL-COSTS> 2845
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 143
<INCOME-PRETAX> 1874
<INCOME-TAX> 705
<INCOME-CONTINUING> 1169
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1169
<EPS-PRIMARY> 2.14
<EPS-DILUTED> 2.06
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<RESTATED>
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1998 MAR-31-1998
<PERIOD-START> APR-01-1997 APR-01-1997 APR-01-1997
<PERIOD-END> DEC-31-1997 SEP-30-1997 JUN-30-1997
<CASH> 175 127 132
<SECURITIES> 60 59 57
<RECEIVABLES> 1720 1486 1314
<ALLOWANCES> 0 0 0
<INVENTORY> 71 68 60
<CURRENT-ASSETS> 2026 1740 1563
<PP&E> 457 446 437
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 6429 6098 5879
<CURRENT-LIABILITIES> 1799 1693 1558
<BONDS> 1258 1307 1494
0 0 0
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 2123 1896 1648
<TOTAL-LIABILITY-AND-EQUITY> 6429 6098 5879
<SALES> 2707 1651 712
<TOTAL-REVENUES> 3252 2013 891
<CGS> 0 0 0
<TOTAL-COSTS> 2024 1329 642
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 90 61 32
<INCOME-PRETAX> 1228 684 249
<INCOME-TAX> 461 256 93
<INCOME-CONTINUING> 767 428 156
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 767 428 156
<EPS-PRIMARY> 1.41 0.78 0.29
<EPS-DILUTED> 1.36 0.76 0.28
<FN>
THIS STATEMENT HAS BEEN RESTATED AS A RESULT OF SFAS 128, EARNINGS PER
SHARE, AND APPLICABLE STOCK SPLITS.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1997 MAR-31-1997 MAR-31-1997
<PERIOD-START> APR-01-1996 APR-01-1996 APR-01-1996 APR-01-1996
<PERIOD-END> MAR-31-1997 DEC-31-1996 SEP-30-1996 JUN-30-1996
<CASH> 143 199 116 101
<SECURITIES> 56 41 85 102
<RECEIVABLES> 1514 1341 1129 987
<ALLOWANCES> 0 0 0 0
<INVENTORY> 67 74 63 58
<CURRENT-ASSETS> 1780 1655 1393 1248
<PP&E> 787 451 422 422
<DEPRECIATION> 349 0 0 0
<TOTAL-ASSETS> 6084 6041 5142 4876
<CURRENT-LIABILITIES> 1727 1658 1494 1381
<BONDS> 1663 1666 740 845
0 0 0 0
0 0 0 0
<COMMON> 63 0 0 0
<OTHER-SE> 1440 1512 1813 1593
<TOTAL-LIABILITY-AND-EQUITY> 6084 6041 5142 4876
<SALES> 3300 2272 1403 603
<TOTAL-REVENUES> 4040 2835 1782 792
<CGS> 0 0 0 0
<TOTAL-COSTS> 3108 2436 1237 602
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 102 70 44 23
<INCOME-PRETAX> 932 399 545 190
<INCOME-TAX> 566 369 202 70
<INCOME-CONTINUING> 366 30 343 120
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 366 30 343 120
<EPS-PRIMARY> 0.67 0.06 0.63 0.22
<EPS-DILUTED> 0.64 0.05 0.60 0.21
<FN>
THIS STATEMENT HAS BEEN RESTATED AS A RESULT OF SFAS 128, EARNINGS PER
SHARE, AND APPLICABLE STOCK SPLITS.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1996 MAR-31-1996 MAR-31-1996
<PERIOD-START> APR-01-1995 APR-01-1995 APR-01-1995 APR-01-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995 SEP-30-1995 JUN-30-1995
<CASH> 97 55 78 65
<SECURITIES> 105 107 130 182
<RECEIVABLES> 1182 1148 969 665
<ALLOWANCES> 0 0 0 0
<INVENTORY> 64 68 68 60
<CURRENT-ASSETS> 1448 1378 1245 972
<PP&E> 720 426 438 334
<DEPRECIATION> 300 0 0 0
<TOTAL-ASSETS> 5016 4882 4674 3168
<CURRENT-LIABILITIES> 1501 1532 1478 686
<BONDS> 945 1146 1247 48
0 0 0 0
0 0 0 0
<COMMON> 63 0 0 0
<OTHER-SE> 1419 1222 1016 1665
<TOTAL-LIABILITY-AND-EQUITY> 5016 4882 4674 3168
<SALES> 2776 1849 1027 397
<TOTAL-REVENUES> 3505 2394 1390 577
<CGS> 0 0 0 0
<TOTAL-COSTS> 3605 2919 2279 437
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 71 46 19 1
<INCOME-PRETAX> (100) (525) (889) 141
<INCOME-TAX> (44) (203) (341) 52
<INCOME-CONTINUING> (56) (321) (549) 89
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (56) (321) (549) 89
<EPS-PRIMARY> (0.10) (.59) (1.01) 0.16
<EPS-DILUTED> (0.10) (.59) (1.01) 0.16
<FN>
THIS STATEMENT HAS BEEN RESTATED AS A RESULT OF SFAS 128, EARNINGS PER
SHARE, AND APPLICABLE STOCK SPLITS.
</TABLE
</TABLE>
INDENTURE, dated as of April 24, 1998, between
Computer Associates International, Inc., a Delaware
corporation (the Company), and The Chase Manhattan
Bank, a New York banking corporation, as trustee (the
Trustee).
Each party agrees as follows for the benefit of the
other party and for the equal and ratable benefit of
(i) Holders of the Companys 61/4% Senior Notes Due
2003 (the 2003 Initial Securities) and, if and when
issued in exchange for 2003 Initial Securities as
provided in the Registration Rights Agreement (as
hereinafter defined), the Companys Series B 61/4%
Senior Notes Due 2003 (the 2003 Exchange Securities)
and if and when issued pursuant to a private exchange
for 2003 Initial Securities, the Companys Series C
61/4% Senior Notes Due 2003 (the 2003 Private
Exchange Securities and, together with the 2003
Initial Securities and the 2003 Exchange Securities,
the 2003 Securities), (ii) Holders of the Companys
6 3/8% Senior Notes Due 2005 (the 2005 Initial
Securities) and, if and when issued in exchange for
2005 Initial Securities as provided in the
Registration Rights Agreement, the Companys Series B
6 3/8% Senior Notes Due 2005 (the 2005 Exchange
Securities) and, if and when issued pursuant to a
private exchange for 2005 Initial Securities, the
Companys Series C 6 3/8%
Senior Notes Due 2005(the 2005 Private Exchange
Securities and, together with the
2005 Initial Securities and the 2005 Exchange
Securities, the 2005 Securities) and (iii) Holders of
the Companys 61/2% Senior Notes Due 2008 (the 2008
Initial Securities) and, if and when issued in
exchange for 2008 Initial Securities as provided in
the Registration Rights Agreement, the Companys
Series B 61/2% Senior Notes Due 2008 (the 2008
Exchange Securities) and, if and when issued
pursuant to a private exchange for 2008 Initial
Securities, the Companys Series C 61/2% Senior Notes
Due 2008 (the 2008 Private Exchange Securities and,
together with the 2008 Initial Securities and the
2008 Exchange Securities, the 2008 Securities):
ARTICLE I
Definitions and Incorporation by Reference
SECTION I.1. Definitions.
Additional Interest shall have the meaning
assigned to such term in the Registration Rights
Agreement.
Board of Directors means, with respect to any
Person, the Board of Directors of such Person or any
committee thereof duly authorized to act on behalf of
such Board of Directors.
Business Day means a day which is not, in New
York City, a Saturday, Sunday, legal holiday or other
day on which banking institutions are authorized or
obligated by law to close.
Code means the Internal Revenue Code of 1986,
as amended.
<PAGE> 2
Consolidated Net Assets means as of any
particular time the aggregate amount of assets at the
end of the most recently completed fiscal quarter
after deducting therefrom all current liabilities
except for (a) notes and loans payable, (b) current
maturities of long-term debt and (c) current
maturities of obligations under capital leases, all
as set forth on the most recent quarter end (which
may be year end) consolidated balance sheet of
the Company and its consolidated Subsidiaries and
computed in accordance with GAAP.
Default means any event which is, or after notice
or passage of time or both would be, an Event of
Default.
Exchange Act means the Securities Exchange Act
of 1934, as amended.
Exchange Securities means collectively the 2003
Exchange Securities, the 2005 Exchange Securities and
the 2008 Exchange Securities.
GAAP means generally accepted accounting
principles in the United States of America as in
effect as of the Issue Date.
Holder or Securityholder means the Person in
whose name a Security is registered on the
Registrar's books.
Indenture means this Indenture, as amended or
supplemented from time to time.
Initial Purchasers means Credit Suisse First
Boston Corporation, Bear, Stearns & Co. Inc.,
BancAmerica Robertson Stephens Inc., Chase Securities
Inc. and NationsBanc Montgomery Securities LLC.
Initial Securities means collectively the 2003
Initial Securities, the 2005 Initial Securities and
the 2008 Initial Securities.
Issue Date means the date on which the Initial
Securities are originally issued.
Nonrecourse Obligation means indebtedness or
other obligations substantially related to (i) the
acquisition of assets not previously owned by the
Company or any Restricted Subsidiary or (ii) the
financing of a project involving the development or
expansion of properties of the Company or any
Restricted Subsidiary, as to which the obligee with
respect to such indebtedness or obligation has no
recourse to the Company or any Restricted Subsidiary
or any assets of the Company or any Restricted
Subsidiary other than the assets which were acquired
with the proceeds of such transaction or the project
financed with the proceeds of such transaction (and
the proceeds thereof).
Officer means the Chairman of the Board, the
President, any Vice President, the Treasurer, any
assistant Treasurer, the Controller, any assistant
Controller, the Secretary or any Assistant Secretary
of the Company, as applicable.
Officers Certificate means a certificate signed by
any two Officers.
<PAGE> 3
Opinion of Counsel means a written opinion from
Howard, Darby & Levin or any other legal counsel to
the Company who is reasonably acceptable to the
Trustee. The counsel may be an employee of or
counsel to the Company.
Person means any individual, corporation,
partnership, limited liability company, joint
venture, association, joint-stock company, trust,
unincorporated organization or government or any
agency or political subdivision thereof.
Principal of a Security means the principal of the
Security plus the premium, if any, payable on the
Security which is due or overdue or is to become due
at the relevant time; provided, however, that for
purposes of calculating any such premium, the
term principal shall not include the premium with
respect to which such calculation is being made.
Principal Property shall mean the land, land
improvements, buildings and fixtures (to the extent
they constitute real property interests) (including
any leasehold interest therein)constituting the
principal corporate office, any manufacturing plant
or any manufacturing facility (whether now owned or
hereafter acquired) which: (a) is owned by the
Company or any Subsidiary; (b) is located within any
of the present 50 States of the United States of
America (or the District of Columbia); (c) has not
been determined in good faith by the Board of
Directors of the Company not to be materially
important to the total business conducted by
the Company and its Subsidiaries taken as a whole;
and (d) has a book value on the date as of which the
determination is being made in excess of 0.75% of
Consolidated Net Assets of the Company as most
recently determined on or prior to such date
(including for purposes of such calculation the land,
land improvements, buildings and such fixtures
comprising such office, plant or facility, as the
case may be).
Private Exchange Securities means collectively the
2003 Private Exchange Securities, the 2005 Private
Exchange Securities and the 2008 Private Exchange
Securities.
Registration Rights Agreement means the
Registration Rights Agreement dated as of April 21,
1998 among the Company and the Initial Purchasers.
Restricted Subsidiary shall mean any Subsidiary
which owns any Principal Property; provided, however,
that the term Restricted Subsidiary shall not include
(a) any Subsidiary which is principally engaged in
leasing or in financing receivables,or which is
principally engaged in financing the Companys
operations outside the United States of America; or
(b) any Subsidiary less than 80% of the voting stock
of which is owned, directly or indirectly, by the
Company or by one or more other Subsidiaries, or by
the Company and one or more other Subsidiaries
if the common stock of such Subsidiary is traded on
any national securities exchange or quoted on the
Nasdaq National Market or in the over-the-counter
market. For purposes of this definition, voting
stock has the meaning specified in the definition of
Subsidiary, below.
SEC means the U.S. Securities and Exchange
Commission, or any successor agency.
<PAGE> 4
Securities means the Initial Securities, the
Exchange Securities and the Private Exchange
Securities issued or to be issued under this
Indenture.
Stated Maturity means, with respect to any
security, the date specified in such security as the
fixed date on which the payment of principal of such
security is due and payable,including pursuant to any
mandatory redemption provision (but excluding any
provision providing for the repurchase of such
security at the option of the holder thereof upon the
happening of any contingency beyond the control of
the Company unless such contingency has occurred).
Subsidiary means a Person (other than an
individual), a majority of the outstanding voting
stock, partnership interests, membership interests or
other equity interest, as the case may be, of which
is owned or controlled, directly or indirectly, by
the Company or by one or more other Subsidiaries of
the Company. For the purposes of this definition,
voting stock means stock having voting power for the
election of directors, trustees or managers, as the
case may be, whether at all times or only so long
as no senior class of stock has such voting power by
reason of any contingency.
TIA means the Trust Indenture Act of 1939 (15
U.S.C. 77aaa-77bbbb) as in effect on the date of
this Indenture; provided, however, that, in the event
the Trust Indenture Act of 1939 is amended after such
date, TIA means, to the extent required by any such
amendments, the Trust Indenture Act of 1939
as so amended.
Trustee means the party named as such in this
Indenture until a successor replaces it and,
thereafter, means such successor.
Trust Officer means, when used with respect to
the Trustee, any officer in the office of the Trustee
including any Senior Trust Officer, vice president,
assistant vice president,assistant secretary,
treasurer, assistant treasurer, or any other
officer of the Trustee who customarily performs
functions similar to those performed by the Persons
who at the time shall be such officers, respectively,
or to whom any corporate trust matter is
referred because of such officers knowledge of and
familiarity with the particular subject.
Uniform Commercial Code means the New York Uniform
Commercial Code as in effect from time to time.
U.S. Government Obligations means direct obliga-
tions (or certificates representing an ownership
interest in such obligations) of the United States of
America (including any agency or instrumentality
thereof) for the payment of which the full faith
and credit of the United States of America is pledged
and which are not callable or redeemable at the
issuers option.
<PAGE> 5
SECTION I.2. Other Definitions.
Defined in
Term Section
Affiliate 10.6
Appendix 2.1
Attributable Debt 4.3
Authenticating Agent 2.2
Bankruptcy Law 6.1
covenant defeasance option 8.1(b)
Custodian 6.1
Event of Default 6.1
legal defeasance option 8.1(b)
Registrar 2.3
Sale and Lease-Back 4.3
Successor Company 5.1
SECTION I.3. Incorporation by Reference of Trust
Indenture Act. This Indenture is subject to the
mandatory provisions of the TIA which are
incorporated by reference in and made a part of this
Indenture. The following TIA terms have the
following meanings:
Commission means the SEC.
indenture securities means the Securities.
indenture security holder means a Holder.
indenture to be qualified means this Indenture.
indenture trustee or institutional trustee means
the Trustee.
obligor on the indenture securities means the
Company and any other obligor on the indenture
securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by the TIA reference to
another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION I.4. Rules of Construction. Unless the
context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has
the meaning assigned to it in accordance with GAAP;
<PAGE> 6
(3) or is not exclusive;
(4) including means including without limitation;
(5) words in the singular include the plural and
words in the plural include the singular;
(6) all references to the date the Securities were
originally issued shall refer to the date the Initial
Securities were originally issued.
SECTION I.5. One Class of Securities.
(a) The 2003 Initial Securities, the 2003 Private
Exchange Securities and the 2003 Exchange Securities
shall vote and consent together on all matters as one
class and none of the 2003 Initial Securities, the
2003 Private Exchange Securities or the 2003 Exchange
Securities shall have the right to vote or consent as
a separate class on any matter. The 2003 Initial
Securities, the 2003 Private Exchange Securities and
the 2003 Exchange Securities shall together be
deemed to be a separate series under this Indenture.
(b) The 2005 Initial Securities, the 2005 Private
Exchange Securities and the 2005 Exchange Securities
shall vote and consent together on all matters as one
class and none of the 2005 Initial Securities, the
2005 Private Exchange Securities or the 2005 Exchange
Securities shall have the right to vote or consent as
a separate class on any matter. The 2005 Initial
Securities, the 2005 Private Exchange Securities and
the 2005 Exchange Securities shall together be deemed
to be a separate series under this Indenture.
(c) The 2008 Initial Securities, the 2008 Private
Exchange Securities and the 2008 Exchange Securities
shall vote and consent together on all matters as one
class and none of the 2008 Initial Securities, the
2008 Private Exchange Securities or the 2008 Exchange
Securities shall have the right to vote or consent as
a separate class on any matter. The 2008 Initial
Securities, the 2008 Private Exchange Securities and
the 2008 Exchange Securities shall together be deemed
to be a separate series under this Indenture.
ARTICLE II
The Securities
SECTION II.1. Form and Dating. Certain
provisions relating to the Initial Securities, the
Private Exchange Securities and the Exchange
Securities are set forth in the Rule 144A/Regulation
S Appendix attached hereto (the Appendix), which is
hereby incorporated in and expressly made a part of
this Indenture. The Initial Securities and the
Trustees certificate of authentication shall be
substantially in the form of Exhibit 1 to the
Appendix, which is hereby incorporated in and
expressly made a part of this Indenture. The
Exchange Securities, the Private Exchange Securities
and the Trustees certificate of authentication
shall be substantially in the form of Exhibit A,
which is hereby incorporated by reference and
expressly made a part of this Indenture. The
Securities may have notations, legends or
<PAGE> 7
endorsements required by law, rule of any securities
exchange or over the counter market on which such
Securities are then listed or quoted, or usage, which
shall be provided by the Company in writing in
addition to those set forth on the Appendix and
Exhibit A. The Company and the Trustee shall approve
the forms of the Securities and any notation,
endorsement or legend on them in writing and the
Company shall deliver to the Trustee in writing the
form of such notation, endorsement or legend. Each
Security shall be dated the date of its
authentication. The terms of the Securities
set forth in the Appendix and Exhibit A are part of
the terms of this Indenture and, to the extent
applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly
agree to be bound by such terms.
SECTION II.2. Execution and Authentication.
Two Officers shall sign the Securities for the
Company by manual or facsimile signature and may be
imprinted or otherwise reproduced.
If an Officer whose signature is on a Security no
longer holds that office at the time the Trustee
authenticates the Security, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized
signatory of the Trustee manually authenticates the
Security. The signature of the Trustee on a Security
shall be conclusive evidence that such Security has
been duly and validly authenticated and issued under
this Indenture.
The Trustee may appoint an agent (the Authenticating
Agent) reasonably acceptable to the Company to
authenticate the Securities. Unless limited by the
terms of such appointment, any such Authenticating
Agent may authenticate Securities whenever the
Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes
authentication by such agent.
SECTION II.3. Registrar and Paying Agent. The
Company shall maintain an office or agency where
Securities may be presented for registration of
transfer or for exchange (the Registrar) and an
office or agency where Securities may be
presented for payment (the Paying Agent). The
Registrar shall keep a register of the Securities and
of their transfer and exchange. The Company may have
one or more additional paying agents. The term
Paying Agent includes any such additional paying
agent.
In the event the Company shall retain any Person not
a party to this Indenture as an agent hereunder, the
Company shall enter into an appropriate agency
agreement with any Registrar or Paying Agent not a
party to this Indenture, which shall incorporate
the terms of the TIA. The agreement shall implement
the provisions of this Indenture that relate to such
agent. The Company shall notify the Trustee of the
name and address of each such agent. If the Company
fails to maintain a Registrar or Paying Agent, the
Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section
7.7. The Company shall be responsible for the fees
and compensations of all agents appointed or approved
by it. The Company or any of its domestically
incorporated wholly owned Subsidiaries may act as
Paying Agent.
<PAGE 8>
The Company initially appoints the Trustee as
Registrar and Paying Agent for the Securities.
SECTION II.4. Paying Agent To Hold Money in
Trust. By no later than 1:00 p.m. (New York City
time) on the date on which any Principal or interest
(including any Additional Interest) on any Security
is due and payable, the Company shall deposit with
the Paying Agent a sum sufficient to pay such
Principal or interest (including any Additional
Interest) when due. The Company shall require each
Paying Agent (other than the Trustee) to agree in
writing that such Paying Agent shall hold in trust
for the benefit of Securityholders or the Trustee all
money held by such Paying Agent for the payment of
Principal of or interest (including any Additional
Interest) on the Securities and shall notify the
Trustee of any default by the Company in making any
such payment. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate the money held by it
as Paying Agent and hold it as a separate trust fund.
The Company at any time may require a Paying Agent
(other than the Trustee) to pay all money held by it
to the Trustee and to account for any funds disbursed
by such Paying Agent. Upon complying with this
Section, the Paying Agent (if other than the Company
or a Subsidiary) shall have no further liability for
the money delivered to the Trustee. Upon any
bankruptcy, reorganization or similar proceeding with
respect to the Company, the Trustee shall serve as
Paying Agent for the Securities.
SECTION II.5. Securityholder Lists. The Trustee
shall preserve in as current a form as is reasonably
practicable the most recent list available to it of
the names and addresses of Securityholders. If the
Trustee is not the Registrar, the Company shall cause
the Registrar to furnish to the Trustee, in writing
at least five Business Days before each interest
payment date and at such other times as the Trustee
may request in writing, a list in such form and as of
such date as the Trustee may reasonably require of
the names and addresses of Securityholders.
SECTION II.6. Business Days. If a payment date is
on a date that is not a Business Day, payment shall
be made on the next succeeding day that is a Business
Day, and no interest shall accrue on such payment for
the intervening period. If a regular record date is
on a day that is not a Business Day, the record date
shall not be affected.
SECTION II.7. Replacement Securities.
If a mutilated Security is surrendered to the
Registrar or if the Holder of a Security shall
provide the Company and the Trustee with evidence to
their satisfaction that the Security has been lost,
destroyed or wrongfully taken, the Company shall
issue and the Trustee shall authenticate a
replacement Security if the requirements of Section
8-405 of the Uniform Commercial Code are met and the
Holder satisfies any other reasonable requirements
of the Trustee. In addition, such Holder shall
furnish an indemnity bond sufficient in the judgment
of the Company and the Trustee to protect the
Company, the Trustee, the Paying Agent and the
Registrar from any loss which any of them may suffer
if a Security is replaced. The Company and the
Trustee may charge the Holder for their expenses in
replacing a Security, including reasonable fees
and expenses of counsel. Every replacement Security
is an additional obligation of the Company.
<PAGE 9>
SECTION II.8. Outstanding Securities. Securities
outstanding at any time are all Securities
authenticated by the Trustee except for those
canceled, those delivered for cancellation
and those described in this Section 2.8 as not
outstanding. A Security does not cease to be
outstanding because the Company or an Affiliate of
the Company holds the Security.
If a Security is replaced pursuant to Section 2.7, it
ceases to be outstanding unless the Trustee and the
Company receive proof satisfactory to them that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in
accordance with this Indenture, on a redemption date
or maturity date money sufficient to pay all
Principal and interest payable on that date with
respect to the Securities (or portions thereof) to be
redeemed or maturing, as the case may be, then on and
after that date such Securities (or portions thereof)
cease to be outstanding and interest on them ceases
to accrue.
SECTION II.9. Temporary Securities. Until
definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary
Securities shall be substantially in the form of
definitive Securities but may have variations that
the Company considers appropriate for temporary
Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate
definitive Securities. After the preparation of
definitive Securities, the temporary Securities shall
be exchangeable for definitive Securities upon
surrender of the temporary Securities at any office
or agency maintained by the Company for that purpose
and such exchange shall be without charge to the
Holder. Upon surrender for cancellation of any one
or more temporary Securities, the Company shall
execute, and the Trustee shall authenticate and
deliver in exchange therefor, one or more definitive
Securities representing an equal principal amount of
Securities. Until so exchanged, the Holder of
temporary Securities shall in all respects
be entitled to the same benefits under this Indenture
as a Holder of definitive Securities.
SECTION II.10. Cancellation. The Company at
any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent
shall forward to the Trustee for cancellation any
Securities surrendered to them for registration of
transfer or exchange or payment. The Trustee and no
one else shall cancel and destroy (subject to the
record retention requirements of the Exchange Act)
all Securities surrendered for registration of
transfer or exchange, payment or cancellation and
deliver a certificate of such destruction to the
Company. The Company may not issue new Securities to
replace Securities it has redeemed, paid or delivered
to the Trustee for cancellation, which shall not
prohibit the Company from issuing Exchange Securities
or Private Exchange Securities in exchange for
Initial Securities.
SECTION II.11. Defaulted Interest. If the Company
defaults in a payment of interest on the Securities,
the Company shall pay defaulted interest plus
interest on such defaulted interest to the extent
lawful at the rate specified therefor in the
Securities in any lawful manner. The Company may pay
the defaulted interest to the Persons who are
Securityholders on a subsequent special record date.
The Company shall fix or cause to be fixed any such
special record date and payment date to the
reasonable satisfaction of the Trustee which
<PAGE 10>
specified record date shall not be less than 10 days
prior to the payment date for such defaulted interest
and shall promptly mail or cause to be mailed to
each Securityholder a notice that states the special
record date, the payment date and the amount of
defaulted interest to be paid. The Company shall
notify the Trustee in writing of the amount of
defaulted interest proposed to be paid on each
Security and the date of the proposed payment, and at
the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such
defaulted interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money
when so deposited to be held in trust for the benefit
of the Person entitled to such defaulted interest as
provided in this Section 2.11.
SECTION II.12. CUSIP Numbers. The Company in
issuing the Securities may use CUSIP numbers (if
then generally in use) and, if so, the Trustee shall
use CUSIP numbers in notices of redemption as a
convenience to Holders, provided, however, that any
such notice may state that no representation is
made as to the correctness of such numbers either as
printed on the Securities or as contained in any
notice of a redemption and that reliance may be
placed only on the other identification numbers
printed on the Securities, and any such redemption
shall not be affected by any defect in or omission of
such numbers.
ARTICLE III
Redemption
SECTION III.1. Notices to Trustee. If the
Company elects to redeem Securities pursuant to
Section 5 of the Securities, it shall notify the
Trustee in writing of the redemption date and the
principal amount of Securities to be redeemed.
The Company shall give each notice to the Trustee
provided for in this Section at least 60 days (45
days in the case of redemption of all the Securities
of any series) before the redemption date unless the
Trustee consents to a shorter period. Such notice
shall be accompanied by an Officers Certificate from
the Company to the effect that such redemption will
comply with the conditions herein. The record date
relating to such redemption shall be selected by the
Company and set forth in the related notice given to
the Trustee, which record date shall be not less than
15 days prior to the date selected for redemption by
the Company.
SECTION III.2. Selection of Securities To Be
Redeemed. If fewer than all the Securities of any
series then outstanding are to be redeemed, the
Trustee shall select the Securities of such series to
be redeemed by a method that complies with applicable
legal and securities exchange requirements, if any,
and that the Trustee considers to be fair and
appropriate in accordance with methods generally used
at the time of selection by fiduciaries in similar
circumstances. The Trustee shall make the
selection from outstanding Securities of such series
not previously called for redemption. The Trustee
may select for redemption portions of the principal
of Securities that have denominations larger than
$1,000. Securities and portions of them that the
Trustee selects shall be in amounts of $1,000 or a
<PAGE 11>
whole multiple of $1,000. Provisions of this
Indenture that apply to Securities called for
redemption also apply to portions of Securities
called for redemption. The Trustee shall notify the
Company of the Securities or portions of Securities
to be redeemed.
SECTION III.3. Notice of Redemption. At least 30
days but not more than 60 days before a date for
redemption of Securities, notice of redemption shall
be mailed by first-class mail to each Holder of
Securities to be redeemed.
The notice shall identify the Securities to be
redeemed and shall state:
(1) the redemption date;
(2) the redemption price (or the method of
calculating such price) and the amount of accrued
interest to be paid, if any;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be
surrendered to the Paying Agent to collect the
redemption price plus accrued and unpaid interest, if
any;
(5) if fewer than all the outstanding Securities of
any series are to be redeemed, the Bond No. (if
certificated) and principal amounts of the particular
Securities to be redeemed;
(6) that, unless the Company defaults in making
such redemption payment, interest on Securities (or
portion thereof) called for redemption ceases to
accrue on and after the redemption date;
(7) the CUSIP number, if any, printed on the
Securities being redeemed; and
(8) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any,
listed in such notice or printed on the Securities.
At the Companys request, the Trustee shall give the
notice of redemption in the Companys name and at the
Companys expense. In such event, the Company shall
provide the Trustee with the information required by
this Section 3.3.
SECTION III.4. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance
with Section 3.3, Securities called for redemption
shall become due and payable on the redemption date
and at the redemption price as stated in the
notice. Upon surrender to the Paying Agent on or
after the redemption date, such Securities shall be
paid at the redemption price stated in the notice,
plus accrued and unpaid interest to the redemption
date; provided that the Company shall have deposited
the redemption price with the Paying Agent or the
Trustee on or before 1:00 p.m. (New York City time)
on the date of redemption; provided, further, that if
the redemption date is after a regular record date
and on or prior to the interest payment date, the
accrued and unpaid interest shall be payable to the
<PAGE 12>
Securityholder of the redeemed Securities registered
on the relevant record date. Failure to give notice
or any defect in the notice to any Holder shall
not affect the validity of the notice to any other
Holder.
SECTION III.5. Deposit of Redemption Price. By
no later than 1:00 p.m. (New York City time) on the
date of redemption, the Company shall deposit with
the Paying Agent (or, if the Company or a Subsidiary
is the Paying Agent, shall segregate and hold in
trust) money sufficient to pay the redemption price
of and accrued and unpaid interest on all Securities
to be redeemed on that date other than Securities or
portions of Securities called for redemption which
are owned by the Company or a Subsidiary and
have been delivered by the Company or such Subsidiary
to the Trustee for cancellation.
Unless the Company defaults in the payment of such
redemption price, interest on the Securities to be
redeemed will cease to accrue on and after the
applicable redemption date, whether or not such
Securities are presented for payment.
SECTION III.6. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in
part, the Company shall execute and the Trustee shall
authenticate for the Holder thereof (at the Companys
expense) a new Security of the same series, equal in
a principal amount to the unredeemed portion of the
Security surrendered.
ARTICLE IV
Covenants
SECTION IV.1. Payment of Securities. The
Company shall promptly pay the Principal of and
interest (including Additional Interest) on the
Securities on the dates and in the manner provided in
the Securities and in this Indenture. Principal
and interest (including Additional Interest) shall be
considered paid on the date due if, on or before 1:00
p.m. (New York City time) on such date, the Trustee
or the Paying Agent (or, if the Company or a
Subsidiary is the Paying Agent, the segregated
account or separate trust fund maintained by the
Company or such Subsidiary pursuant to Section 2.4)
holds in accordance with this Indenture money
sufficient to pay all Principal and interest
(including Additional Interest) then due. If any
Additional Interest is due, the Company
shall deliver an Officers Certificate to the Trustee
setting forth the Additional Interest per $1,000
aggregate principal amount of Securities.
The Company shall pay interest on overdue principal
at the rate specified therefor in the Securities, and
it shall pay interest on overdue installments of
interest at the same rate to the extent lawful as
provided in Section 2.11.
Notwithstanding anything to the contrary contained
in this Indenture, the Company or the Paying Agent
may, to the extent it is required to do so by law,
deduct or withhold income or other similar taxes
imposed by the United States of America or
other domestic or foreign taxing authorities from
Principal or interest payments hereunder.
<PAGE 13>
SECTION IV.2. Limitations on Liens. (a) So long
as any Securities remain outstanding, the Company
will not, nor will it permit any Restricted
Subsidiary to, issue, incur, create, assume or
guarantee any debt for borrowed money(hereinafter in
this Article 4 referred to as Debt) secured by a
mortgage, security interest, pledge, lien, charge or
other encumbrance (mortgages, security interests,
pledges, liens, charges and other encumbrances
being hereinafter in this Article 4 referred to as
mortgage or mortgages) upon any Principal Property of
the Company or any Restricted Subsidiary or upon any
shares of stock or Debt of any Restricted Subsidiary
(whether such Principal Property, shares of
stock or Debt are now existing or owed or hereafter
created or acquired) without in any such case
effectively providing, concurrently with the
issuance, incurrence, creation, assumption or
guaranty of any such secured Debt, or the grant of a
mortgage with respect to any such Debt to be so
secured, that the Securities (together with, if the
Company shall so determine, any other indebtedness of
or guarantee by the Company or such Restricted
Subsidiary ranking equally with the Securities) shall
be secured equally and ratably with (or, at the
Companys option, prior to) such Debt to be so
secured; provided, however, that the foregoing
restrictions shall not apply to:
(1) mortgages on property, shares of stock
or indebtedness or other assets of any corporation
existing at the time such corporation becomes a
Restricted Subsidiary, provided that such mortgages
or liens are not incurred in anticipation of such
corporation becoming a Restricted Subsidiary;
(2) mortgages on property, shares of stock
or indebtedness existing at the time of acquisition
thereof by the Company or a Restricted Subsidiary
(which may include property previously leased by the
Company and leasehold interests thereon; provided
that the lease terminates prior to or upon the
acquisition) or mortgages thereon to secure the
payment of all or any part of the purchase price
thereof, or mortgages on property, shares of stock or
indebtedness to secure any Debt incurred prior to, at
the time of, or within 270 days after, the latest of
the acquisition thereof, or, in the case of property,
the completion of construction, the completion of
improvements or the commencement of substantial
commercial operation of such property for the
purpose of financing all or any part of the purchase
price thereof, such construction or the making of
such improvements;
(3) mortgages securing Debt owing to the Company or
to a Restricted Subsidiary;
(4) mortgages existing on the Issue Date;
(5) mortgages on property or other assets of
a corporation existing at the time such corporation
is merged into or consolidated with the Company or a
Restricted Subsidiary or at the time of a sale, lease
or other disposition of the properties of a
corporation as an entirety or substantially as an
entirety to the Company or a Restricted Subsidiary,
provided that such mortgage was not incurred in
anticipation of such merger or consolidation or
sale, lease or other disposition;
<PAGE 14>
(6) mortgages in favor of the United States
of America or any State, territory or possession
thereof (or the District of Columbia), or any
department, agency, instrumentality or political
subdivision of the United States of America or any
State, territory or possession thereof (or
the District of Columbia), to secure partial,
progress, advance or other payments pursuant to any
contract or statute or to secure any Debt incurred
for the purpose of financing all or any part of the
purchase price or the cost of construction or
improvement of the property subject to such
mortgages;
(7) mortgages created in connection with a
project financed with, and created to secure, a
Nonrecourse Obligation;
(8) mortgages securing all of the Securities; or
(9) any extension, renewal or replacement
(or successive extensions, renewals or replacements),
in whole or in part, of any mortgage referred to in
the foregoing clauses (1) to (8), inclusive, without
increase of the principal of the Debt secured
thereby; provided, however, that such extension,
renewal or replacement shall be limited to all or a
part of the property which secured the mortgage
extended, renewed or replaced (plus improvements on
such property).
(b) Notwithstanding the foregoing provisions of this
Section 4.2, the Company and any one or more
Restricted Subsidiaries may (without equally and
ratably securing the Securities) issue, incur,
create, assume or guarantee Debt secured by mortgages
which would otherwise be subject to the foregoing
restrictions (Exempted Secured Debt), in an
aggregate amount which, together with all other
outstanding Debt of the Company and its Restricted
Subsidiaries secured by mortgages which (if
originally issued, incurred, created, assumed or
guaranteed at such time) would otherwise be subject
to the foregoing restrictions (not including such
Debt which is permitted to be secured under any of
clauses (1) through (9) above), does not at the time
exceed the greater of $300,000,000 and 10% of
Consolidated Net Assets of the Company.
SECTION IV.3. Limitation on Sale and Lease-Back
Transactions. (a) So long as any Securities remain
outstanding the Company will not, nor will it permit
any Restricted Subsidiary to, enter into any direct
or indirect arrangement with any person that provides
for the leasing to the Company or any Restricted
Subsidiary of any Principal Property (except for such
transactions (i) entered into prior to the Issue
Date; (ii) between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries; (iii)
under which the rent payable pursuant to such
lease is to be reimbursed under a contract with the
United States Government or any instrumentality or
agency thereof; (iv) involving leases for no longer
than three years; or (v) in which the lease for
the property or asset is entered into within 270 days
after the later of the date of acquisition,
completion of construction or commencement of full
operations of such property or asset), which
<PAGE 15>
Principal Property has been or is to be sold or
transferred by the Company or such Restricted
Subsidiary to such person (subject to such exceptions
in the preceding clauses (i) through (v), such
arrangement being referred to as a "Sale and Lease-
Back"), unless:
(1) the Company or such Restricted
Subsidiary would be entitled, pursuant to the
provisions of Section 4.2, to issue, incur, create,
assume or guarantee Debt secured by a mortgage upon
such property at least equal in amount to the
Attributable Debt in respect of such Sale and Lease-
Back without equally and ratably securing the
Securities; or
(2) the proceeds of the sale of the Principal
Property to be leased are at least equal to their
fair market value and such proceeds are applied
within 180 days of the effective date of such Sale
and Lease-Back to the purchase, construction,
development or acquisition of assets or to the
repayment of indebtedness of the Company.
(b) For the purposes of this Section 4.3, the term
Attributable Debt with respect to a Sale and Lease-
Back involving a Principal Property means, at the
time of determination, the lesser of:
(1) the fair value of the property which is
the subject of such Sale and Lease-Back (as
determined in good faith by the Board of Directors of
the Company); or
(2) the present value of the total net amount
of rent required to be paid under such Sale and
Lease-Back during the remaining term thereof
(including any renewal term or period for which such
lease has been extended), discounted at the rate of
interest set forth or implicit in the terms of such
Sale and Lease-Back or, if not practicable to
determine such rate, the weighted average interest
rate per annum borne by the Securities of each series
outstanding pursuant to this Indenture compounded
semi-annually in either case as determined by the
principal accounting or financial officer of the
Company. For purposes of this definition, rent shall
not include amounts required to be paid by the
lessee, whether or not designated as rent or
additional rent, on account of or contingent upon
maintenance and repairs, insurance, taxes,
assessments, water rates and similar charges. In the
case of any lease which is terminable by the lessee
upon the payment of a penalty, such net amount shall
be the lesser of (i) the net amount determined
assuming termination upon the first date such lease
may be terminated (in which case the net amount
shall also include the amount of the penalty, but no
rent shall be considered as required to be paid under
such lease subsequent to the first date upon which it
may be so terminated) or (ii) the net amount
determined assuming no such termination.
SECTION IV.4. Compliance Certificate. The
Company shall deliver to the Trustee within 120 days
after the end of each fiscal year of the Company an
Officers Certificate signed by the chief executive
officer, the chief financial officer or the chief
accounting officer stating that in the course of the
performance by the signers of their duties as
<PAGE 16>
Officers of the Company they would normally have
knowledge of any Default or Event of Default and
whether or not the signers know of any Default or
Event of Default that occurred during such period.
If they do, the certificate shall describe the
Default or Event of Default, its status and what
action the Company is taking or proposes to take with
respect thereto. The Company also shall comply with
TIA 314(a)(4).
SECTION IV.5. Further Instruments and Acts.
Upon reasonable request of the Trustee, the Company
will execute and deliver such further instruments and
do such further acts as may be reasonably necessary
or proper to carry out more effectively the
purpose of this Indenture.
SECTION IV.6. Maintenance of Office or Agency.
The Company shall maintain the office or agency
required under Section 2.3. The Company shall give
prior written notice to the Trustee of the location,
and any change in the location, of such office or
agency. If at any time the Company shall fail to
maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands
may be made or served at the address of the
Trustee set forth in Section 10.2.
SECTION IV.7. Corporate Existence. Except as
otherwise permitted by Article V, the Company shall
do or cause to be done all things necessary to
preserve and keep in full force and effect its
corporate existence.
SECTION IV.8. SEC Reports. The Company will
comply with all the applicable provisions of TIA
314(a).
ARTICLE V
Successor Company
SECTION V.1. When the Company May Merge or
Transfer Assets. The Company will not consolidate
with or sell, lease or convey its assets as, or
substantially as, an entirety, to, or merge with or
into, in one transaction or a series of related
transactions, any other Person, unless:
(i) the Company shall be the continuing entity, or
the resulting, surviving or transferee Person (the
Successor) shall be a Person organized and existing
under the laws of the United States of America, any
State thereof or the District of Columbia and the
Successor (if not the Company) shall expressly
assume, by supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the
Securities and this Indenture;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default shall
have occurred and be continuing; and
<PAGE 17>
(iii) the Company shall have delivered to the Trustee
an Officers Certificate and an Opinion of
Counsel, each stating that such consolidation, merger
or transfer and such supplemental indenture (if any)
comply with this Indenture and that such supplemental
indenture constitutes the legal valid and binding
obligation of the Company subject to customary
exceptions.
Upon any consolidation or merger, or any sale or
lease of the assets of the Company as, or
substantially as, an entirety in accordance with the
provisions of this Indenture, the entity formed by
such consolidation or into which the Company
shall have been merged or to which such sale or lease
shall have been made shall succeed to and be
substituted for the Company with the same effect as
if it had been named in the Indenture as a
party thereto and thereafter from time to time such
successor entity may exercise each and every right
and power of the Company under the Indenture in the
name of the Company or in its own name; and
any act or proceeding by any provision of the
Indenture required or permitted to be done by the
Board of Directors or any Officer of the Company may
be done with like force and effect by the like
board (or other governing body) or officer (or
comparable authorized person) of any entity that
shall at the time be the successor of the Company
hereunder. In the event of the sale by
the Company of its assets as, or substantially as, an
entirety upon the terms and conditions of the
Indenture, the Company shall be released from all its
liabilities and obligations under the Indenture and
the Securities, but the predecessor Company in the
case of a lease of all its assets or substantially
all its assets will not be released from the
obligation to pay the Principal of and interest on
the Securities.
ARTICLE VI
Defaults and Remedies
SECTION VI.1. Events of Default. An Event of
Default occurs with respect to any series of
Securities if:
(1) the Company defaults in any payment of interest
on any Security of such series when the same becomes
due and payable, and such default continues for a
period of 30 days;
(2) the Company defaults in the payment of the
principal of any Security of such series when the
same becomes due and payable at its Stated Maturity,
upon optional redemption, upon declaration or
otherwise;
(3) the Company fails to comply with any of its
agreements in the Securities of such series or this
Indenture as it relates to such series (other than
those referred to in (1) or (2) above) and such
failure continues for 90 days after the notice
specified below;
(4) the Company fails to make any payment at
maturity, including any applicable grace period, in
respect of obligations (other than the Securities of
such series or non-recourse obligations) of the
Company for borrowed money or evidenced by bonds,
<PAGE 18>
debentures, notes or similar instruments
(Indebtedness) in an amount in excess of
$25,000,000 or the equivalent thereof in any other
currency or composite currency and such failure shall
have continued for 30 days after the notice specified
below;
(5) a default with respect to any Indebtedness,
which default results in the acceleration of
Indebtedness in an amount in excess of $25,000,000 or
the equivalent thereof in any other currency or
composite currency without such Indebtedness having
been discharged or such acceleration having been
cured, waived, rescinded or annulled for a period of
30 days after the notice specified below;
(6) the Company pursuant to or within the meaning
of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for
relief against it in an involuntary case in which it
is the debtor;
(C) consents to the appointment of a Custodian of it
or for any substantial part of its property; or
(D) makes a general assignment for the benefit of
its creditors; or takes any comparable action under
any foreign laws relating to insolvency;
(7) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(A) is for relief against the Company in an
involuntary case;
(B) appoints a Custodian of the Company or
for any substantial part of its property; or
(C) orders the winding up or liquidation of the
Company;(or any similar relief is granted under any
foreign laws) and the order, decree or relief remains
unstayed and in effect for 60 consecutive days;
The foregoing will constitute Events of Default
whatever the reason for any such Event of Default and
whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or
regulation of any administrative or governmental
body.
The term Bankruptcy Law means Title 11, United
States Code, or any similar Federal or state law for
the relief of debtors. The term Custodian means any
receiver, trustee,assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
<PAGE 19>
If any failure, default or acceleration referred to
in clauses (4) or (5) above shall cease or be cured,
waived, rescinded or annulled, then the Event of
Default hereunder by reason thereof shall be deemed
likewise to have been thereupon cured.
A Default with respect to any series of Securities
under clauses (3), (4) or (5) of this Section 6.1 is
not an Event of Default with respect to such series
until the Trustee (by notice to the Company) or the
Holders of at least 25% in aggregate principal
amount of the outstanding Securities of such series
(by notice to the Company and the Trustee) gives
notice of the Default and the Company does not cure
such Default within the time specified in said clause
(3), (4) or (5) after receipt of such notice. Such
notice must specify the Default, demand that it be
remedied and state that such notice is a Notice of
Default.
The Company shall deliver to the Trustee, within 30
days after the occurrence thereof, written notice in
the form of an Officers Certificate of any event
which with the giving of notice or the lapse of time
would become an Event of Default under clause
(3), (4) or (5) of this Section 6.1 and what action
the Company is taking or proposes to take with
respect thereto.
SECTION VI.2. Acceleration. If an Event of
Default with respect to any series of Securities
(other than an Event of Default specified in Section
6.1(6) or (7)) occurs and is continuing, the Trustee
by notice to the Company, or the Holders of at least
25% in aggregate principal amount of the outstanding
Securities of such series by notice to the Company
and the Trustee, may declare the Principal of and
accrued but unpaid interest on all the Securities of
such series to be due and payable. Upon such a
declaration, such Principal and interest shall be due
and payable immediately. If an Event of Default
specified in Section 6.1(6) or (7) occurs and is
continuing, the Principal of and accrued interest
on all the Securities of such series shall ipso facto
become and be immediately due and payable without any
declaration or other act on the part of the Trustee
or any Holders. The Holders of a majority in
aggregate principal amount of the outstanding
Securities of such series by notice to the Trustee
may rescind an acceleration and its consequences if
the rescission would not conflict with any
judgment or decree (other than a judgment or decree
for the payment of Principal or interest or monies
due on the Securities) and if all existing Events of
Default have been cured or waived except nonpayment
of Principal or interest that has become due
solely because of such acceleration and the Trustee
has been paid all amounts due to it pursuant to
Section 7.7. No such rescission shall affect any
subsequent Default or impair any right consequent
thereto.
SECTION VI.3. Other Remedies. If an Event of
Default with respect to any series of Securities
occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of Principal
of or interest on the Securities of such series or to
enforce the performance of any provision of the
Securities of such series or this Indenture.
The Trustee may maintain a proceeding even if it
does not possess any of the Securities of such series
or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any
Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair
the right or remedy or constitute a waiver of or
<PAGE 20>
acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available
remedies are, to the extent permitted by law,
cumulative.
SECTION VI.4. Waiver of Past Defaults. The
Holders of a majority in aggregate principal amount
of the Securities of any series then outstanding by
notice to the Trustee may waive any past or existing
Default with respect to such series and its
consequences except (i) a Default in the payment of
the Principal of or interest on a Security of such
series or (ii) a Default in respect of a provision
that under Section 9.2 cannot be amended without the
consent of each Securityholder affected. When a
Default is waived, it is deemed cured, and any Event
of Default arising therefrom shall be deemed to have
been cured, but no such waiver shall extend to any
subsequent or other Default or impair any consequent
right.
SECTION VI.5. Control by Majority. Upon provision
of reasonable indemnity to the Trustee satisfactory
to the Trustee, the Holders of a majority in
aggregate principal amount of the Securities of any
series then outstanding may direct the time,
method and place of conducting any proceeding for any
remedy available to the Trustee with respect to such
series or of exercising any trust or power conferred
on the Trustee with respect to such series. However,
the Trustee, which may rely on opinions of counsel,
may refuse to follow any direction that conflicts
with law or this Indenture or, subject to Section
7.1, that the Trustee determines is unduly rejudicial
to the rights of other Securityholders of such series
or any other series or would involve the Trustee in
personal liability; provided, however,
that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with
such direction.
SECTION VI.6. Limitation on Suits. A Holder of
Securities of any series may not pursue any remedy
with respect to this Indenture or the Securities of
such series unless:
(i) the Holder gives to the Trustee previous
written notice stating that an Event of
Default with respect to such series is continuing;
(ii) the Holders of at least 25% in aggregate
principal amount of the Securities of such series
then outstanding make a written request to the
Trustee to pursue the remedy;
(iii) such Holder or Holders offer to the Trustee
reasonable security or indemnity against any loss,
liability or expense;
(iv) the Trustee does not comply with the request
within 60 days after receipt of the request and the
offer of security or indemnity; and
(v) the Holders of a majority in aggregate principal
amount of the Securities of such series then
outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day
period.
<PAGE 21>
A Securityholder may not use this Indenture to
prejudice the rights of another Securityholder or to
obtain a preference or priority over another
Securityholder.
SECTION VI.7. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this
Indenture, the right of any Holder to receive payment
of Principal of and interest on the Securities held
by such Holder, on or after the respective due dates
expressed in the Securities, or to bring suit for
the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected
without the consent of such Holder.
SECTION VI.8. Collection Suit by Trustee. If an
Event of Default specified in Section 6.1(1) or (2)
occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express
trust against the Company for the whole amount then
due and owing (together with interest on any unpaid
interest to the extent lawful) and the amounts
provided for in Section 7.7.
SECTION VI.9. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other
papers or documents as may be necessary or advisable
in order to have the claims of the Trustee and the
Securityholders allowed in any judicial proceedings
relative to the Company, its creditors or its
property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any
election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by
each Holder to make payments to the Trustee and, in
the event that the Trustee shall consent to the
making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and its counsel,
and any other amounts due the Trustee under Section
7.7.
SECTION VI.10. Priorities. If the Trustee collects
any money or property pursuant to this Article VI, it
shall pay out the money or property in the following
order:
FIRST: to the Trustee for amounts due under
Section 7.7;
SECOND: to Securityholders for amounts due and
unpaid on the Securities for Principal and interest,
ratably, without preference or priority of any kind,
according to the amounts due and payable on the
Securities for Principal and interest, respectively;
and
THIRD: to the Company.
The Trustee may fix a record date and payment date
for any payment to Securityholders pursuant to this
Section 6.10. At least 15 days before such record
date, the Company shall mail to each Securityholder
and the Trustee a notice that states the record
date, the payment date and amount to be paid.
<PAGE 22>
SECTION VI.11. Undertaking for Costs. In any
suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court
in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its
discretion may assess reasonable costs, including
reasonable attorneys fees and expenses, against any
party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made
by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.7 or a suit by Holders
of more than 10% in aggregate principal amount of the
outstanding Securities of any series.
SECTION VI.12. Waiver of Stay or Extension Laws.
The Company (to the extent it may lawfully do so)
shall not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this
Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit
or advantage of any such law, and shall not
hinder, delay or impede the execution of any power
herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no
such law had been enacted.
ARTICLE VII
Trustee
SECTION VII.1. Duties of Trustee. (a) If an Event
of Default has occurred and is continuing, the
Trustee shall exercise the rights and powers vested
in it by this Indenture and use the same degree of
care and skill in their exercise as a prudent
Person would exercise or use under the circumstances
in the conduct of such Persons own affairs.
(b) Except during the continuance of an Event of
Default:
(i) the Trustee undertakes to perform such duties
and only such duties as are specifically set forth
in this Indenture and no implied covenants or
obligations shall be read into this Indenture against
the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of
the statements and the correctness of the opinions
expressed therein, upon Officers Certificates and
Opinions of Counsel furnished to the Trustee and
conforming to the requirements of this Indenture.
However, in the case of any such Officers
Certificates and Opinions of Counsel which by any
provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall examine
such Officers Certificates and Opinions of Counsel to
determine whether or not they conform to the
requirements of this Indenture.
<PAGE 23>
(c) The Trustee may not be relieved from liability
for its own negligent action, its own negligent
failure to act or its own wilful misconduct, except
that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section 7.1;
(ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust
Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with
respect to any action it takes or omits to take in
good faith in accordance with a direction received by
it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any
way relates to the Trustee is subject to paragraphs
(a), (b) and (c) of this Section.
(e) Money held in trust by the Trustee need not be
segregated from other funds except to the extent
required by law.
(f) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise
incur financial liability in the performance of any
of its duties hereunder or in the exercise of any of
its rights or powers, if it shall have reasonable
grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is
not reasonably assured to it.
(g) Every provision of this Indenture relating to
the conduct or affecting the liability of or ffording
protection to the Trustee shall be subject to the
provisions of this Section 7.1 and to the provisions
of the TIA.
SECTION VII.2. Rights of Trustee. (a) The
Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the
proper person. The Trustee need not investigate any
fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting,
it may require an Officers Certificate or an Opinion
of Counsel. The Trustee shall not be liable for any
action it takes or omits to take in good faith in
reliance on the Officers Certificate or Opinion
of Counsel.
(c) The Trustee may act through agents and shall
not be responsible for the misconduct or negligence
of any agent appointed with due care.
(d) The Trustee shall not be liable for any action
it takes or omits to take in good faith which it
believes to be authorized or within its rights or
powers; provided, however, that the Trustees conduct
does not constitute wilful misconduct or negligence.
<PAGE> 24
(e) The Trustee may consult with counsel
of its selection, and the advice or opinion of
counsel with respect to legal matters relating to
this Indenture and the Securities shall be full and
complete authorization and protection from liability
in respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by
this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities which might be incurred by it in
compliance with such request or direction.
(g) The Trustee shall not be charged with
knowledge of any Default or Event of Default with
respect to the Securities unless either (1) a Trust
Officer shall have actual knowledge of such Default
or Event of Default or (2)written notice of such
Default or Event of Default shall have been given to
a Trust Officer of the Trustee by the Company or any
other obligor on the Securities or by any Holder of
the Securities.
SECTION VII.3. Individual Rights of Trustee. The
Trustee in its individual or any other capacity may
become the owner or pledgee of Securities and may
otherwise deal with the Company with the same rights
it would have if it were not Trustee. Any Paying
Agent, Registrar or co-paying agent may do the same
with like rights. However, the Trustee must comply
with Sections 7.10 and 7.11.
SECTION VII.4. Trustees Disclaimer. The
Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this
Indenture or the Securities or any offering document,
it shall not be accountable for the Companys use of
the proceeds from the Securities, and it shall not be
responsible for any statement of the Company in this
Indenture or in any document issued in connection
with the sale of the Securities or in the Securities
other than the Trustees certificate of
authentication.
SECTION VII.5. Notice of Defaults. If a Default
or an Event of Default occurs with respect to any
series of Securities and is continuing and if it is
known to the Trustee, the Trustee shall mail to each
Securityholder of such series notice of the Default
within 90 days after it is known to a Trust Officer
or written notice of it is received by a Trust
Officer of the Trustee. Except in the case of a
Default in payment of Principal of or interest
on any Security, the Trustee may withhold the notice
if and so long as a committee of its Trust Officers
in good faith determines that withholding the notice
is not opposed to the interests of Securityholders.
SECTION VII.6. Reports by Trustee to Holders. If
required and as promptly as practicable after each
May 15 beginning with the May 15 following the date
of this Indenture, and in any event prior to July 15
in each year, the Trustee shall mail to each
Securityholder a brief report dated as of such May 15
that complies with TIA 313(a). The Trustee also
shall comply with TIA 313(b). The Trustee shall
promptly deliver to the Company a copy of any report
it delivers to Holders pursuant to this Section 7.6.
<PAGE> 25
A copy of each report at the time of its mailing to
Securityholders shall be filed by the Trustee with
the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify
promptly the Trustee whenever the Securities become
listed on any stock exchange and of any delisting
thereof.
SECTION VII.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to
time such compensation for its services as the
Company and the Trustee shall from time to time agree
in writing. The Trustees compensation shall not be
limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the
Trustee upon request for all reasonable out of pocket
expenses incurred or made by it in accordance with
the provisions of this Indenture, including costs of
collection, in addition to such compensation for its
services, except any such expense, disbursement or
advance as may arise from its negligence, wilful
misconduct or bad faith. Such expenses shall include
the reasonable compensation and expenses,
disbursements and advances of the Trustees agents
and counsel. The Trustee shall provide the Company
reasonable notice of any expenditure not in the
ordinary course of business; provided that
prior approval by the Company of any such expenditure
shall not be a requirement for the making of such
expenditure nor for reimbursement by the Company
thereof. The Company shall indemnify each of the
Trustee, its officers, directors, employees and
any predecessor Trustees against any and all loss,
damage, claim, liability or expense (including
reasonable attorneys fees and expenses) (other than
taxes applicable to the Trustees compensation
hereunder) incurred by it in connection with the
acceptance or administration of this trust and the
performance of its duties hereunder. The Trustee
shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the
Trustee so to notify the Company shall not relieve
the Company of its obligations hereunder. The
Company shall defend the claim and, if (in the
opinion of counsel to the Trustee) the facts and/or
issues surrounding the claim are reasonably likely to
create a conflict with the Company, the Company shall
pay the reasonable fees and expenses of separate
counsel to the Trustee. The Company need
not reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee
through the Trustees own wilful misconduct,
negligence or bad faith.
To secure the Companys payment obligations in this
Section 7.7, the Trustee shall have a lien prior to
the Securities on all money or property held or
collected by the Trustee other than money or property
held in trust to pay Principal of and interest on
particular Securities.
The Companys payment obligations pursuant to this
Section 7.7 shall survive the resignation or removal
of the Trustee and any discharge of this Indenture
including any discharge under any bankruptcy law.
When the Trustee incurs expenses after the occurrence
of a Default specified in Section 6.1(6) or (7) with
respect to the Company, the expenses are intended to
constitute expenses of administration under the
Bankruptcy Law.
SECTION VII.8. Replacement of Trustee. The
Trustee may resign at any time with 30 days notice to
the Company. The Holders of a majority in principal
amount of the Securities of any series then
outstanding, may remove the Trustee with respect to
such series with 30 days notice to the Trustee and
<PAGE> 26
may appoint a successor Trustee. The Company shall
remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a receiver or other public officer takes
Charge of the Trustee or its property; or
(iv) the Trustee otherwise becomes incapable of
acting.
If the Trustee resigns, is removed by the Company
or by the Holders of a majority in principal amount
of the Securities of any series and such Holders do
not reasonably promptly appoint a successor Trustee
with respect to such series, or if a vacancy
exists in the office of Trustee for any reason (the
Trustee in such event being referred to herein as the
retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written
acceptance of its appointment to the retiring Trustee
and to the Company and the Company shall pay all
amounts due and owing to the Trustee under Section
7.7 of the Indenture. Thereupon the resignation or
removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all
the rights, powers and duties of the Trustee under
this Indenture. The successor Trustee shall mail a
notice of its succession to Securityholders of
any series affected by such resignation or removal.
The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor
Trustee, subject to the lien provided for in Section
7.7.
If a successor Trustee does not take office with
respect to any series of Securities within 30 days
after the retiring Trustee resigns or is removed, the
retiring Trustee or the Holders of 10% in principal
amount of the Securities of such series may
petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent
jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee
pursuant to this Section 7.8, the Companys
obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION VII.9. Successor Trustee by Merger. If
the Trustee consolidates with, merges or converts
into, or transfers all or substantially all its
corporate trust business or assets to, another
corporation or banking association, the resulting,
surviving or transferee corporation without any
further act shall be the successor Trustee, provided
that such corporation shall be eligible under this
Article Seven and TIA Section 3.10(a).
<PAGE> 27
In case at the time such successor or successors by
merger, conversion or consolidation to the Trustee
shall succeed to the trusts created by this Indenture
any of the Securities shall have been authenticated
but not delivered, any such successor to the
Trustee may adopt the certificate of authentication
of any predecessor trustee, and deliver such
Securities so authenticated; and in case at that time
any of the Securities shall not have been
authenticated, any successor to the Trustee may
authenticate such Securities either in the name of
any predecessor hereunder or in the name of the
successor to the Trustee; and in all such
cases such certificates shall have the full force
which it is anywhere in the Securities or in this
Indenture provided that the certificate of the
Trustee shall have.
SECTION VII.10. Eligibility; Disqualification. The
Trustee shall at all times satisfy the requirements
of TIA 310(a). The Trustee shall have a combined
capital and surplus of at least $250,000,000 as set
forth in its most recent published annual report
of condition. The Trustee shall comply with TIA
310(b); provided, however, that there shall be
excluded from the operation of TIA 310(b)(1), with
respect to any series, this Indenture with respect to
any other series of Securities and any indenture or
indentures under which other securities or
certificates of interest or participation in other
securities of the Company are outstanding if
the requirements for such exclusion set forth in TIA
310(b)(1) are met.
SECTION VII.11. Preferential Collection of Claims
Against Company. The Trustee shall comply with TIA
311(a), excluding any creditor relationship listed in
TIA 311(b). A Trustee who has resigned or been
removed shall be subject to TIA 311(a) to the extent
indicated.
ARTICLE VIII
Discharge of Indenture; Defeasance
SECTION VIII.1. Discharge of Liability on
Securities; Defeasance. With respect to any series
of Securities, (a) when (i) the Company delivers to
the Trustee all outstanding Securities of such series
(other than Securities replaced pursuant to
Section 2.7) for cancellation or (ii) all outstanding
Securities of such series have become due and
payable, whether at maturity or as a result of the
mailing of a notice of redemption pursuant to Article
3 hereof or the Securities of such series will become
due and payable at their Stated Maturity within one
year, or the Securities of such series are to be
called for redemption within one year under
arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company, and, in
each case of this clause (ii), the Company
irrevocably deposits or causes to be deposited with
the Trustee funds sufficient to pay at maturity or
upon redemption all outstanding Securities of such
series, including interest thereon to maturity or
such redemption date (other than Securities replaced
pursuant to Section 2.7), and if in either case the
Company pays all other sums payable hereunder by the
Company, then this Indenture shall, subject to
Section 8.1(c), cease to be of further effect with
respect to such series. The Trustee shall
acknowledge satisfaction and discharge of this
Indenture with respect to such series on demand of
the Company accompanied by an Officers Certificate
and an Opinion of Counsel from the Company that all
conditions precedent provided herein for relating to
satisfaction and discharge of this Indenture have
<PAGE> 28
been complied with and at the cost and expense of the
Company.
(b) Subject to Sections 8.1(c) and 8.2, the Company
at any time may terminate (i) all of its obligations
under the Securities of any series and this Indenture
with respect to such series (legal defeasance option)
or (ii) its obligations under Sections 4.2 and 4.3
and the operation of Sections 6.1(3) (other
than any obligations under Article V hereof), 6.1(4)
and 6.1(5) with respect to such series (covenant
defeasance option). The Company may exercise its
legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option
with respect to any series of Securities, payment of
the Securities of such series may not be accelerated
because of an Event of Default. If the Company
exercises its covenant defeasance option, payment of
the Securities of such series may not be accelerated
because of an Event of Default specified in Section
6.1(3) (except with respect to obligations under
Article V hereof), 6.1(4) or 6.1(5).
Upon satisfaction of the conditions set forth herein
and upon request of the Company, the Trustee shall
acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b)
above, the Companys obligations in Sections 2.3, 2.4,
2.5, 2.7, 4.1, 4.6, 4.7,7.7, 7.8, 8.4, 8.5 and 8.6
and Section 2.3 of the Appendix with respect to such
series shall survive until the Securities of such
series have been paid in full. Thereafter, the
Companys and the Trustees obligations in Sections
7.7, 8.4 and 8.5 shall survive.
SECTION VIII.2. Conditions to Defeasance. The
Company may exercise its legal defeasance option or
its covenant defeasance option with respect to any
series of Securities only if:
(i) the Company irrevocably deposits or
causes to be deposited in trust with the Trustee
money or U.S. Government Obligations which through
the scheduled payment of Principal and interest in
respect thereof in accordance with their terms will
provide cash at such times and in such amounts as
will be sufficient to pay Principal and interest when
due on all outstanding Securities of such series
(except Securities replaced pursuant to Section 2.7)
to maturity or redemption, as the case may be;
(ii) the Company delivers to the Trustee a
certificate from a nationally recognized firm of
independent accountants expressing their opinion that
the payments of Principal and interest when due and
without reinvestment on the deposited U.S. Government
Obligations plus any deposited money without
investment will provide cash at such times and in
such amounts as will be sufficient to pay Principal
and interest when due on all outstanding Securities
of such series (except Securities replaced pursuant
to Section 2.7) to maturity or redemption, as the
case may be;
<PAGE> 29
(iii) 91 days pass after the deposit is made and
during the 91-day period no Default specified in
Section 6.1(6) or (7) occurs which is continuing at
the end of the period;
(iv) the deposit does not constitute a default under
any other material agreement binding on the Company;
(v) the Company delivers to the Trustee an Opinion
of Counsel to the effect that the trust resulting
from the deposit does not constitute, or is qualified
as, a regulated investment company under the
Investment Company Act of 1940;
(vi) in the case of the legal defeasance option, the
Company shall have delivered to the Trustee an
Opinion of Counsel stating that (i) the Company has
received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the
date of this Indenture there has been a change in the
applicable federal income tax law, in either case to
the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Securityholders will
not recognize income, gain or loss for federal income
tax purposes as a result of such deposit and
defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the
same times as would have been the case if such
deposit and defeasance had not occurred;
(vii) in the case of the covenant defeasance option,
the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the
Securityholders of such series will not recognize
income, gain or loss for federal income tax purposes
as a result of such deposit and defeasance and will
be subject to federal income tax on the same amounts,
in the same manner and at the same times as would
have been the case if such deposit and defeasance had
not occurred; and
(viii) the Company delivers to the Trustee
an Officers Certificate and an Opinion of Counsel,
each stating that all conditions precedent to the
defeasance and discharge of the Securities of such
series as contemplated by this Article 8 have been
complied with.
Before or after a deposit, the Company may make
arrangements satisfactory to the Trustee for the
redemption of Securities at a future date in
accordance with Article 3.
SECTION VIII.3. Application of Trust Money. The
Trustee shall hold in trust money or U.S. Government
Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and
the money from U.S. Government Obligations either
directly or through the Paying Agent as the
Trustee may determine and in accordance with this
Indenture to the payment of Principal of and interest
on the Securities.
SECTION VIII.4. Repayment to Company. The Trustee
and the Paying Agent shall promptly turn over to the
Company upon request any excess money or securities
held by them at any time.
<PAGE> 30
Subject to any applicable abandoned property law,
the Trustee and the Paying Agent shall pay to the
Company upon written request any money held by them
for the payment of Principal or interest that remains
unclaimed for two years after the date of payment of
such Principal and interest, and, thereafter,
Securityholders entitled to the money must look to
the Company for payment as general creditors.
SECTION VIII.5. Indemnity for Government
Obligations. The Company shall pay and shall
indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against deposited U.S.
Government Obligations or the principal and interest
received on such U.S. Government Obligations other
than any such tax, fee or other charge which by law
is for the account of the Holders of the defeased
Securities; provided that the Trustee shall be
entitled to charge any such tax, fee or other charge
to such Holders account.
SECTION VIII.6. Reinstatement. If the Trustee or
Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by
reason of any order or judgment of any court or
governmental authority enjoining, restraining or
otherwise prohibiting such application, the Companys
obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit
had occurred pursuant to this Article 8 until such
time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations
in accordance with this Article 8; provided, however,
that, (a) if the Company has made any payment of
interest on or Principal of any Securities following
the reinstatement of their obligations, the Company
shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the
money or U.S. Government Obligations held by the
Trustee or Paying Agent and (b) unless otherwise
required by any legal proceeding or any order or
judgment of any court or governmental authority, the
Trustee or Paying Agent shall return all such money
and U.S. Government Obligations to the Company
promptly after receiving a written request therefor
at any time, if such reinstatement of the Companys
obligations has occurred and continues to be in
effect.
ARTICLE IX
Amendments
SECTION IX.1. Without Consent of Holders. The
Company and the Trustee may amend this Indenture or
the Securities without notice to or consent of any
Securityholder:
(i) to cure any ambiguity, omission, defect or
inconsistency;
(ii) to comply with Article 5;
(iii) to provide for uncertificated Securities in
addition to or in place of certificated Securities;
provided, however, that the uncertificated Securities
are issued in registered form for purposes of Section
<PAGE 30>
163(f) of the Code or in a manner such that the
uncertificated Securities are as described in Section
163(f)(2)(B) of the Code;
(iv) to add guarantees with respect to the
Securities of all or any series;
(v) to add security for the Securities of all or
any series;
(vi) to add to the covenants of the Company for the
benefit of the Holders of all or any series
of Securities or to surrender any right or power
herein conferred upon the Company;
(vii) to make any change that does not adversely
affect the rights of any Securityholder; and
(viii)to comply with any requirements of the SEC in
connection with qualifying this Indenture under
the TIA.
After an amendment under this Section 9.1 becomes
effective, the Company shall mail to Securityholders
of the applicable series a notice briefly describing
such amendment. The failure to give such notice to
all Securityholders of such series, or any defect
therein, shall not impair or affect the validity of
an amendment under this Section 9.1.
SECTION IX.2. With Consent of Holders. The
Company and the Trustee may amend this Indenture or
the Securities without notice to any Securityholder
but with the written consent of the Holders of at
least a majority in principal amount of the
Securities then outstanding of each series
affected thereby (including consents obtained in
connection with a tender offer or exchange for
Securities). However, without the consent of each
Securityholder affected, an amendment may not:
(i) reduce the amount of Securities whose Holders
must consent to an amendment, supplement or waiver;
(ii) reduce the rate of or extend the time for
payment of interest on any Security;
(iii) reduce the principal of or extend the Stated
Maturity of any Security;
(iv) reduce the premium payable upon the redemption
of any Security or change the time at which any
Security may be redeemed in accordance with Article
3;
(v) make any Security payable in money other than
that stated in the Security;
(vi) impair the right of any Holder to receive
payment of Principal of and interest on such
Holders Securities on or after the due dates
therefor or to institute suit for the enforcement of
any payment on or with respect to such Holders
Securities;
<PAGE> 32
(vii) make any changes that would affect the ranking
for the Securities in a manner adverse to the
Holders; or
(viii) make any change in the second sentence of this
Section 9.2.
It shall not be necessary for the consent of the
Holders under this Section 9.2 to approve the
particular form of any proposed amendment, but it
shall be sufficient if such consent approves the
substance thereof.
After an amendment under this Section 9.2
becomes effective, the Company shall mail to
Securityholders of the applicable series a notice
briefly describing such amendment. The failure to
give such notice to all Securityholders of such
series, or any defect therein, shall not impair or
affect the validity of an amendment under this
Section 9.2.
SECTION IX.3. Compliance with Trust Indenture
Act. Every amendment to this Indenture or the
Securities shall comply with the TIA as then in
effect.
SECTION IX.4. Revocation and Effect of Consents
and Waivers. A consent to an amendment or a waiver
by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion
of the Security that evidences the same debt as the
consenting Holder's Security, even if notation of the
consent or waiver is not made on the Security. After
an amendment or waiver becomes effective with respect
any series of Securities, it shall bind every
Securityholder of such series.
The Company may, but shall not be obligated to, fix
a record date for the purpose of determining the
Securityholders entitled to give their consent or
take any other action described above or required or
permitted to be taken pursuant to this Indenture. If
a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who
were Securityholders at such record date (or their
duly designated proxies), and only those Persons,
shall be entitled to give such consent or to revoke
any consent previously given or to take any
such action, whether or not such Persons continue to
be Holders after such record date.
SECTION IX.5. Notation on or Exchange of Securities.
If an amendment changes the terms of a Security, the
Trustee may require the Holder of the Security to
deliver it to the Trustee. The Company shall provide
in writing to the Trustee an appropriate notation to
be placed on the Security regarding the changed terms
and return it to the Holder. Alternatively, if the
Company or the Trustee so determine, the Company in
exchange for the Security shall issue and the Trustee
shall authenticate a new Security that reflects the
changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect
the validity of such amendment.
<PAGE> 33
SECTION IX.6. Trustee To Sign Amendments.
The Trustee shall sign any amendment authorized
pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee
may but need not sign it. In signing such amendment
the Trustee shall be entitled to receive indemnity
reasonably satisfactory to it and to receive, and
(subject to Section 7.1) shall be fully protected in
relying upon, in addition to the documents
required by Section 10.4, an Officers Certificate
and an Opinion of Counsel stating that such amendment
complies with the provisions of this Article 9 and
that such supplemental indenture constitutes the
legal valid and binding obligation of the Company
in accordance with its terms subject to customary
exceptions.
SECTION IX.7. Payment for Consent. Neither the
Company nor any affiliate of the Company shall,
directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or
otherwise, to any Holder of a Security of any
series for, or as an inducement to any consent,
waiver or amendment of any of the terms or provisions
of this Indenture or the Securities unless such
consideration is offered to be paid to all
Holders of a Securities of such series that so
consent, waive or agree to amend in the time frame
set forth in solicitation documents relating to such
consent, waiver or agreement.
ARTICLE X
Miscellaneous
SECTION X.1. Trust Indenture Act Controls. If
any provision of this Indenture limits, qualifies or
conflicts with another provision which is required to
be included in this Indenture by the TIA, the
provision required by the TIA shall control.
SECTION X.2. Notices. Any notice or communication
shall be in writing and delivered in person or mailed
by first-class mail addressed as follows:
if to the Company:
Computer Associates International, Inc.
One Computer Associates Plaza
Islandia, New York 11788
Facsimile Number: (516) 342-4854
Attention: Treasurer
<PAGE> 34
if to the Trustee:
The Chase Manhattan Bank
450 W. 33rd Street
15th Floor
New York, New York 10001
Facsimile Number: (212) 946-8159
Attention: Corporate Trustee
Any notices between the Company and the Trustee
may be by facsimile, with telephone confirmation of
receipt and the original to follow by guaranteed
overnight courier. The Company or the Trustee by
notice to the others may designate additional or
different addresses for subsequent notices or
communications.
Any notice or communication mailed to a
Securityholder shall be mailed to the Securityholder
at the Securityholders address as it appears on the
registration books of the Registrar and shall be
sufficiently given if so mailed within the
time prescribed.
Failure to mail a notice or communication
to a Securityholder or any defect in it shall not
affect its sufficiency with respect to other
Securityholders. If a notice or communication is
mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION X.3. Communication by Holders with other
Holders. Securityholders may communicate pursuant to
TIA 312(b) with other Securityholders with respect
to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar
and anyone else shall have the protection of TIA
312(c).
SECTION X.4. Certificate and Opinion as to
Conditions Precedent. Upon any request or
application by the Company to the Trustee to take or
refrain from taking any action under this Indenture,
the Company shall furnish to the Trustee:
(i) an Officers Certificate in form and
substance reasonably satisfactory to the Trustee
stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been
complied with; and
(ii) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee stating that,
in the opinion of such counsel, all such conditions
precedent have been complied with.
<PAGE> 35
SECTION X.5. Statements Required in Certificate
or Opinion. Each certificate or opinion with respect
to compliance with a covenant or condition provided
for in this Indenture shall include:
(i) a statement that the individual making such
certificate or opinion has read such covenant or
condition;
(ii) a brief statement as to the nature and scope
of the examination or investigation upon which the
statements or opinions contained in such certificate
or opinion are based;
(iii) a statement that, in the opinion of such
individual, he has made such examination or
investigation as is necessary to enable him to
express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(iv) a statement as to whether or not, in the
opinion of such individual, such covenant or
condition has been complied with.
SECTION X.6. When Securities Disregarded. In
determining whether the Holders of the required
principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the
Company or by any Person directly or indirectly
controlling or controlled by or under direct or
indirect common control with the Company (an
Affiliate)shall be disregarded and deemed not to be
outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent,
only Securities which a Trust Officer of the Trustee
knows are so owned shall be so disregarded. Also,
subject to the foregoing, only Securities outstanding
at the time shall be considered in any such
determination.
SECTION X.7. Rules by Trustee, Paying Agent
and Registrar. The Trustee may make reasonable rules
for action by or a meeting of Securityholders. The
Registrar and the Paying Agent may make reasonable
rules for their functions.
SECTION X.8. Governing Law. This Indenture and the
Securities shall be governed by, and construed in
accordance with, the laws of the State of New York
but without giving effect to applicable principles of
conflicts of law to the extent that the application
of the laws of another jurisdiction would be required
thereby.
SECTION X.9. No Recourse Against Others. A
director, officer, employee or stockholder, as such,
of the Company shall not have any liability for any
obligations of the Company under the Securities or
this Indenture or for any claim based on, in
respect of or by reason of such obligations or their
creation. By accepting a Security, each
securityholder shall waive and release all
such liability. The waiver and release shall be part
of the consideration for the issue of the Securities.
<PAGE> 36
SECTION X.10. Successors. All agreements of the
Company in this Indenture and the Securities shall
bind its successors. All agreements of the Trustee
in this Indenture shall bind its successors.
SECTION X.11. Multiple Originals. The parties
may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of
them together represent the same agreement. One
signed copy is enough to prove this Indenture.
SECTION X.12. Variable Provisions. The Company
initially appoints the Trustee as Paying Agent and
Registrar and custodian with respect to any Global
Securities (as defined in the Appendix hereto).
SECTION X.13. Qualification of Indenture. The
Company shall qualify this Indenture under the TIA in
accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all
reasonable costs and expenses (including attorneys
fees for the Company, the Trustee and the Holders)
incurred in connection therewith, including, but not
limited to, costs and expenses of qualification of
this Indenture and the Securities and printing this
Indenture and the Securities. The Trustee shall be
entitled to receive from the Company any such
Officers Certificates, Opinions of Counsel or other
documentation as it may reasonably request in
connection with any such qualification of this
Indenture under the TIA.
SECTION X.14. Table of Contents; Headings. The
table of contents, cross-reference sheet and headings
of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, are
not intended to be considered a part hereof
and shall not modify or restrict any of the terms or
provisions hereof.
<PAGE> 37
IN WITNESS WHEREOF, the parties have caused
this Indenture to be duly executed as of the date
first written above.
COMPUTER ASSOCIATES
INTERNATIONAL, INC.
By:
Name:
Title:
THE CHASE
MANHATTAN BANK as
Trustee
By:
Name:
Title:
<PAGE> 38
RULE 144A/REGULATION S APPENDIX
FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS
PURSUANT TO RULE 144A AND TO CERTAIN PERSONS IN
OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES,
PRIVATE EXCHANGE SECURITIES AND EXCHANGE SECURITIES
1. Definitions.
1.1 Definitions.
For the purposes of this Appendix the
following terms shall have the meanings indicated
below:
Depositary means The Depository Trust Company, its
nominees and their respective successors and assigns.
Exchange Securities means the Series B 61/4%
Senior Notes Due 2003, Series B 6 3/8% Senior Notes Due
2005 and Series B 61/2% Senior Notes Due 2008 to be
issued pursuant to this Indenture in connection with
a Registered Exchange Offer pursuant to the
Registration Rights Agreement.
Indenture means the Indenture dated as of April
24, 1998 between the Company and the Trustee, of
which this Appendix is incorporated therein and forms
a part thereof.
Initial Purchasers means Credit Suisse First
Boston Corporation, Bear, Stearns & Co. Inc.,
BancAmerica Robertson Stephens Inc., Chase Securities
Inc. and NationsBanc Montgomery Securities LLC.
Initial Securities means the 61/4% Senior Notes
Due 2003, 6 3/8% Senior Notes Due 2005 and 61/2% Senior
Notes Due 2008, issued under this Indenture on the
date hereof.
Private Exchange means the offer by the Company,
pursuant to the Registration Rights Agreement, to the
Initial Purchasers to issue and deliver to each
Initial Purchaser, in exchange for the Initial
Securities held by the Initial Purchaser as
part of its initial distribution, a like aggregate
principal amount of Private Exchange Securities.
Private Exchange Securities means the Series C
61/4% Senior Notes Due 2003, Series C 6 3/8% Senior
Notes Due 2005 and Series C 61/2% Senior Notes Due
2008, if any, to be issued pursuant to this Indenture
to the Initial Purchasers in a Private Exchange.
Purchase Agreement means the Purchase Agreement dated
April 21, 1998, among the Company and the Initial
Purchasers.
<PAGE> 39
QIB means a qualified institutional buyer as defined
in Rule 144A.
Registered Exchange Offer means the offer by the
Company, pursuant to the Registration Rights
Agreement, to certain Holders of Initial Securities,
to issue and deliver to such Holders, in exchange for
the Initial Securities, a like aggregate principal
amount of Exchange Securities registered under the
Securities Act.
Registration Rights Agreement means the Registration
Rights Agreement dated as of April 21, 1998 among
the Company and the Initial Purchasers.
SEC means the U.S. Securities and Exchange
Commission, or any successor agency.
Securities means the Initial Securities, the
Exchange Securities and the Private Exchange
Securities.
Securities Act means the Securities Act of 1933,
as amended.
Securities Custodian means the custodian with
respect to a Global Security (as appointed by the
Depositary), or any successor person thereto and
shall initially be the Trustee.
Shelf Registration Statement means the
registration statement issued by the Company, in
connection with the offer and sale of Initial
Securities or Private Exchange Securities, pursuant
to the Registration Rights Agreement.
Transfer Restricted Securities means Securities
that bear or are required to bear the legend set
forth in Section 2.3(b) hereto.
1.2 Other Definitions
Defined in
Term Section:
Agent Members 2.1(b)
Global Security 2.1(a)
Regulation S 2.1(a)
Rule 144A 2.1(a)
Other terms used and not defined in this Appendix are
used as defined in the Indenture.
<PAGE> 40
2. The Securities.
2.1 Form and Dating.
The Initial Securities are being offered and sold by
the Company pursuant to the Purchase Agreement.
(a) Global Securities. Initial Securities offered
and sold to a QIB in reliance on Rule 144A under the
Securities Act (Rule 144A) or in reliance on
Regulation S under the Securities Act (Regulation S),
in each case as provided in the Purchase Agreement,
shall be issued initially in the form of a unified
permanent global Security for both Rule 144A and
Regulation S purchases, in definitive, fully
registered form without interest coupons with the
global securities legend and restricted securities
legend set forth in Exhibit 1 hereto (each, a Global
Security), which shall be deposited on behalf of the
purchasers of the Initial Securities represented
thereby with the Trustee as custodian for the
Depositary (or with such other custodian as the
Depositary may direct), and registered in the name of
the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the
Trustee as hereinafter provided. Upon the issuance
of the Exchange Securities, the aggregate principal
amount of the Global Securities may from time to time
be increased or decreased by adjustments made on the
records of the Trustee and the Depositary or its
nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section 2.1(b)
shall apply only to a Global Security deposited with
or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in
accordance with this Section 2.1(b), authenticate and
deliver initially one or more Global Securities that
(a) shall be registered in the name of the Depositary
for such Global Securities or the nominee of such
Depositary and (b) shall be delivered by the
Trustee to such Depositary or pursuant to such
Depositarys instructions or held by the Trustee as
custodian for the Depositary.
Members of, or participants in, the Depositary (Agent
Members) shall have no rights under this Indenture
with respect to any Global Security held on their
behalf by the Depositary or by the Trustee as the
custodian of the Depositary or under such Global
Security, and the Depositary may be treated by the
Company, the Trustee and any agent of the
Company or the Trustee as the absolute owner of such
Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any
written certification, proxy or other authorization
furnished by the Depositary or shall impair, as
between the Depositary and its Agent Members, the
operation of customary practices of such Depositary
governing the exercise of the rights of a holder of a
beneficial interest in any Global Security.
(c) Certificated Securities. Except as
provided in this Section 2.1 or Section 2.3 or 2.4,
owners of beneficial interests in Global Securities
will not be entitled to receive physical delivery of
certificated Securities.
<PAGE> 41
2.2 Authentication. The Trustee shall authenticate
and deliver: (1) Initial Securities for original
issue in an aggregate principal amount of U.S. $575
million with respect to the 2003 Initial Securities,
U.S. $825 million with respect to the 2005 Initial
Securities and U.S. $350 million with respect to the
2008 Initial Securities and (2) Exchange Securities
or Private Exchange Securities for issue only in a
Registered Exchange Offer or a Private Exchange,
respectively, pursuant to the Registration
Rights Agreement, for a like principal amount of
Initial Securities, in each case upon a written order
of the Company signed by two Officers or by an
Officer and either an Assistant Treasurer or an
Assistant Secretary of the Company. Such order shall
specify the series of Securities to be authenticated,
amount of the Securities to be authenticated and the
date on which the original issue of Securities is to
be authenticated and whether the Securities are to
be Initial Securities, Exchange Securities or Private
Exchange Securities. In the case of the issuance of
Exchange Securities, the Company shall also provide
an Officers Certificate stating that all conditions
precedent to the Registered Exchange Offer have been
complied with and the related Registration Statement
has been declared effective by the SEC. The
aggregate principal amount of Securities outstanding
at any time under the Indenture may not exceed U.S.
$575 million with respect to the 2003 Securities,
U.S. $825 million with respect to the 2005 Securities
and U.S. $350 million with respect to the 2008
Securities except as provided in Section 2.7 of this
Indenture.
2.3 Transfer and Exchange. (a) Transfer and
Exchange of Global Securities. (i) The transfer and
exchange of Global Securities or beneficial interests
therein shall be effected through the Depositary, in
accordance with this Indenture (including applicable
restrictions on transfer set forth herein, if any)
and the procedures of the Depositary therefor. A
transferor of a beneficial interest in a Global
Security shall deliver to the Registrar a written
order given in accordance with the Depositarys
procedures containing information regarding the
participant account of the Depositary to be credited
with a beneficial interest in the Global Security.
The Registrar shall, in accordance with such
instructions instruct the Depositary to credit to the
account of the Person specified in such instructions
a beneficial interest in the Global Security and to
debit the account of the Person making the transfer
the beneficial interest in the Global Security being
transferred.
(ii) Notwithstanding any other provisions of this
Appendix (other than the provisions set forth in
Section 2.4), a Global Security may not be
transferred as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee
of such successor Depositary.
(iii) In the event that a Global Security is
exchanged for Securities in definitive registered
form pursuant to Section 2.4 of this Appendix or
Section 2.9 of this Indenture, prior to the
consummation of a Registered Exchange Offer or the
effectiveness of a Shelf Registration Statement with
respect to such Securities, such Securities may be
exchanged only in accordance with such procedures
as are substantially consistent with the provisions
of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial
Securities intended to ensure that such transfers
comply with Rule 144A or Regulation S, as the case
may be) and such other procedures as may from time to
time be adopted by the Company.
<PAGE> 42
(b) Legend.
(i) Except as permitted by the following paragraphs
(ii), (iii) and (iv), each Security certificate
evidencing the Global Securities (and all Securities
issued in exchange therefor or in substitution
thereof) shall bear a legend in substantially the
following form:
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE SECURITIES
ACT), AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT
THE SELLER OF THIS NOTE MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE
ISSUER THAT (A) THIS NOTE MAY BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (i) INSIDE THE
UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(ii) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
RULE 144 THEREUNDER (IF AVAILABLE) OR (iv) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (i) THROUGH (iv) IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS NOTE FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.
(ii) Upon any sale or transfer of a Transfer
Restricted Security (including any Transfer
Restricted Security represented by a Global Security)
pursuant to Rule 144 under the Securities Act, in the
case of any Transfer Restricted Security that is
represented by a Global Security, the Trustee shall
permit the Holder thereof to exchange such Transfer
Restricted Security for a certificated Security
that does not bear the legend set forth above and
rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder certifies
in writing to the Trustee that its request for such
exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the
reverse of the Security).
<PAGE> 43
(iii) After a transfer of any Initial Securities or
Private Exchange Securities during the period of the
effectiveness of a Shelf Registration Statement with
respect to such Initial Securities or Private
Exchange
Securities, as the case may be, which transfer
complies with the plan of distribution set forth in
such Shelf Registration Statement, all requirements
pertaining to legends on such Initial Securities or
such Private Exchange Securities will cease to
apply, but the requirements requiring such Initial
Securities or such Private Exchange Securities issued
to certain Holders be issued in global form will
continue to apply, and Initial Securities or Private
Exchange Securities in global form without legends
will be available to the transferee of the Holder of
such Initial Securities or Private Exchange
Securities upon exchange of such transferring Holders
Initial Securities or Private Exchange Securities or
directions to transfer such Holder's interest in the
Global Security, as applicable.
(iv) Upon the consummation of a Registered Exchange
Offer with respect to the Initial Securities
pursuant to which Holders of such Initial Securities
are offered Exchange Securities in exchange for their
Initial Securities, all requirements pertaining to
such Initial Securities that Initial Securities
issued to certain Holders be issued in global form
will continue to apply and Initial Securities in
global form with the restricted securities legend
set forth in Exhibit 1 hereto will be available to
Holders of such Initial Securities that do not
exchange their Initial Securities, and Exchange
Securities in global form will be available to
Holders that exchange such Initial Securities in such
Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange
with respect to the Initial Securities pursuant to
which Holders of such Initial Securities are offered
Private Exchange Securities in exchange for their
Initial Securities, all requirements pertaining to
such Initial Securities that Initial Securities
issued to certain Holders be issued in global form
will still apply, and Private Exchange Securities in
global form with the Restricted Securities Legend set
forth in Exhibit 1 hereto will be available to
Holders that
exchange such Initial Securities in such Private
Exchange.
(c) Cancellation or Adjustment of Global Security.
At such time as all beneficial interests in a Global
Security have either been exchanged for certificated
Securities, redeemed, repurchased or canceled, such
Global Security shall be returned to the Depositary
for cancellation or retained and canceled by the
Trustee. At any time prior to such cancellation, if
any beneficial interest in a Global Security is
exchanged for certificated Securities, redeemed,
repurchased or canceled, the principal amount of
Securities represented by such Global Security shall
be reduced and an adjustment shall be made on the
books and records of the Trustee (if it is then the
Securities Custodian for such Global Security) with
respect to such Global Security, by the Trustee or
the Securities Custodian, to reflect such reduction.
<PAGE> 44
(d) Obligations with Respect to Transfers and
Exchanges of Securities.
(i) To permit registrations of transfers and
exchanges, the Company shall execute and the Trustee
shall authenticate certificated Securities and Global
Securities at the Registrars request in accordance
with the terms of the Indenture (including this
Appendix).
(ii) No service charge shall be made for any
registration of transfer or exchange, but the Company
or the Registrar may require a Holder to furnish
appropriate endorsements and transfer documents and
payment of a sum sufficient to cover any transfer
tax, assessments, or similar governmental charge
payable in connection therewith (other than any such
transfer taxes, assessments or similar governmental
charge payable upon exchange or transfer pursuant to
Sections 3.6 and 9.5 of this Indenture).
(iii) The Registrar shall not be required to
register
the transfer of or exchange of any Securities
selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the
Security not to be redeemed) for a period beginning
15 days before a selection of Securities to be
redeemed and ending on the date of such selection.
(iv) Prior to the due presentation for registration
of transfer of any Certificated Security, the
Company,
the Trustee, the Paying Agent and the Registrar may
deem and treat the person in whose name a Security is
registered as the absolute owner of such Security for
the purpose of receiving payment of Principal of and
interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue
and notwithstanding any notation of ownership or
other writing on such Security made by anyone other
than the Company or the Registrar, and none of the
Company, the Trustee, the Paying Agent or the
Registrar shall be affected by notice to the
contrary.
(v) All Securities issued upon any transfer or
exchange pursuant to the terms of this Indenture
shall evidence the same debt and shall be entitled to
the same benefits under this Indenture as the
Securities surrendered upon such transfer or
exchange. No such transfer shall be effected until,
and such transferee shall succeed to the rights of a
Holder only upon, final acceptance and registration
of
the transfer by the Registrar.
(e) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or
obligation to any beneficial owner of a Global
Security, a member of, or a participant in the
Depositary or other Person with respect to the
accuracy of the records of the Depositary or its
nominee or of any participant or member thereof, with
respect to any ownership interest in the
Securities or with respect to the delivery to any
participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including
<PAGE> 45
any notice of redemption) or the payment of any
amount, under or with respect to such Securities.
All notices and communications to be given to the
Holders and all payments to be made to Holders under
the Securities shall be given or made only to or upon
the order of the registered Holders (which shall be
the Depositary or its nominee in the case of a Global
Security). The rights of beneficial owners in any
Global Security shall be exercised only through the
Depositary subject to the applicable rules and
procedures of the Depositary. The Trustee may rely
and shall be fully protected in relying upon
information furnished by the Depositary with respect
to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with
any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any
transfer of any interest in any Security (including
any transfers between or among Depositary
participants, members or beneficial owners in any
Global Security) other than with respect to
certificated Securities to require delivery of such
certificates and other documentation or evidence as
are expressly required by, and to do so if and when
expressly required by, the terms of this Indenture on
the form provided herein.
2.4 Certificated Securities.
(a) A Global Security deposited with the
Depositary or with the Trustee as custodian for the
Depositary pursuant to Section 2.1 shall be
transferred to the beneficial owners thereof in the
form of certificated Securities in an aggregate
principal amount equal to the principal amount of
such Global Security, in exchange for such Global
Security, only if such transfer complies with Section
2.3 and (i) the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary
for such Global Security or if at any time such
Depositary ceases to be a clearing agency registered
under the Exchange Act and a successor depositary is
not appointed by the Company within 90 days of such
notice, or (ii) an Event of Default has occurred and
is continuing or (iii) the Company, in its sole
discretion, notifies the Trustee in writing that it
elects to cause the issuance of certificated
Securities under this Indenture or (iv) pursuant to
Section 2.3(b)(ii).
(b) Any Global Security that is transferable to
the beneficial owners thereof pursuant to this
Section shall be surrendered by the Depositary to the
Trustee, to be so transferred, in whole or from time
to time in part, without charge, and the
Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Security, an
equal aggregate principal amount of certificated
Securities of authorized denominations. Any
portion of a Global Security transferred pursuant to
this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any
integral multiple thereof and registered in such
names as the Depositary shall direct. Any
certificated Security delivered in exchange for an
interest in the
Global Security shall, except as otherwise provided
by Section 2.3(b), bear the restricted securities
legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.1(b),
the registered Holder of a Global Security may grant
proxies and otherwise authorize any Person, including
Agent Members and Persons that may hold interests
through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or
the Securities.
<PAGE> 46
(d) In the event of the occurrence of any of the
events specified in Section 2.4(a), the Company will
promptly make available to the Trustee a reasonable
supply of certificated Securities in definitive,
fully registered form without interest coupons.
<PAGE? 47
EXHIBIT 1
TO RULE 144A/REGULATION S
APPENDIX
[FORM OF FACE OF INITIAL SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION (DTC), NEW YORK, NEW YORK, TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT
IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THIS INDENTURE REFERRED TO ON THE REVERSE
HEREOF.
[Restricted Securities Legend]
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE SECURITIES ACT), AND
THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS NOTE IS
HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE
MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT
OF THE ISSUER THAT (A) THIS NOTE MAY BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (i)
INSIDE THE UNITED STATES TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (ii)
OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE)
<PAGE> 48
OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS NOTE FROM IT OF THE RESALE
RESTRICTIONS REFERRED TO IN (A) ABOVE.
<PAGE> 49
COMPUTER ASSOCIATES INTERNATIONAL, INC.
No. __ Principal Amount$ __
CUSIP NO. _________
ISIN NO. _________
[6 1/4% Senior Notes Due 2003]
[6 3/8% Senior Notes Due 2005]
[6 1/2% Senior Notes Due 2008]
Computer Associates International, Inc., a Delaware
corporation, for value received, promises to pay to
_, or registered assigns, the principal sum of
________________________ Dollars on _________ __,
[2003] [2005] [2008].
Interest Payment Dates: April 15 and October 15,
commencing October 15, 1998.
Record Dates: April 1 and October 1.
<PAGE> 50
Additional provisions of this Security
are set forth on the other side of this Security.
Dated: April 24, 1998
COMPUTER ASSOCIATES INTERNATIONAL,INC.
by
by
TRUSTEES CERTIFICATE OF Dated: April 24, 1998
AUTHENTICATION
This is one of the Securities
of the series designated therein
referred to in the within-mentioned
Indenture.
THE CHASE MANHATTAN BANK,
as Trustee
by
Authorized Officer
<PAGE> 51
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
(Reverse of Security)
[6 1/4% Senior Notes Due 2003]
[6 3/8% Senior Notes Due 2005]
[6 1/2% Senior Notes Due 2008]
1. Interest
Computer Associates International, Inc., a Delaware
corporation (such corporation, and its successors and
assigns under the Indenture hereinafter referred to,
being herein called the Company), promises to pay
interest on the principal amount of this Security at
the rate per annum shown above; provided, however,
that if a Registration Default (as defined in the
Registration Rights Agreement) occurs, additional
cash interest will accrue on this Security at a rate
of 0.50% per annum from and including the date on
which any such Registration Default shall
occur to but excluding the date on which all
Registration Defaults have been cured, calculated on
the principal amount of this Security as of the date
on which such interest is payable. Such additional
cash interest of 0.50% per annum is payable in
addition to any other interest payable from time to
time with respect to this Security. The Trustee will
not be deemed to have notice of a Registration
Default until it shall have received actual notice of
such Registration Default.
The Company will pay interest semiannually on
April 15 and October 15 of each year (each such date,
an Interest Payment Date), commencing October 15,
1998. Interest on the Securities will accrue from
April 24, 1998, or from the most recent date to which
interest has been paid on the Securities. Interest
will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment
By no later than 1:00 p.m. (New York City time) on
the date on which any Principal of or interest on any
Security is due and payable, the Company shall
irrevocably deposit with the Trustee or the Paying
Agent money sufficient to pay such Principal
and/or interest. The Company will pay interest
(except defaulted interest) to the Persons who are
registered Holders of Securities at the close of
business on the April 1 or October 1 next preceding
the interest payment date even if Securities are
cancelled, repurchased or redeemed after the record
date and on or before the interest payment date.
Holders must surrender Securities to a Paying Agent
to collect principal payments. The Company will pay
Principal and interest in money of the United States
that at the time of payment is legal tender for
payment of public and private debts.
However, the Company may pay Principal and interest
by check payable in such money. It may mail an
interest check to a Holders registered address.
<PAGE> 52
3. Paying Agent and Registrar
Initially, The Chase Manhattan Bank, a New York
banking corporation (the Trustee), will act as
Paying Agent and Registrar. The Company may appoint
and change any Paying Agent or Registrar without
notice to any Securityholder. The Company or any of
its domestically incorporated wholly owned
Subsidiaries may act as Paying Agent.
4. Indenture
The Company issued the Securities under an
Indenture dated as of April 24, 1998 (as it may be
amended or supplemented from time to time in
accordance with the terms thereof, the Indenture),
between the Company and the Trustee. The terms of
the Securities include those stated in the Indenture
and those made part of the Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-
77bbbb) as in effect on the date of the Indenture
(the Act). Capitalized terms used herein
and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject
to all such terms, and Securityholders are referred
to the Indenture and the Act for a statement of those
terms.
The Securities are senior obligations of the
Company limited to $[575,000,000] [825,000,000]
[350,000,000] aggregate principal amount (subject to
Section 2.7 of the Indenture). The Security is one
of the [2003][2005][2008] Initial Securities referred
to in the Indenture. The Securities include the
[2003][2005][2008] Initial Securities and any
[2003][2005][2008] Private Exchange Securities and
[2003][2005][2008] Exchange Securities issued in
exchange for the [2003][2005][2008] Initial
Securities pursuant to the Indenture and the
Registration Rights
Agreement. The [2003][2005][2008] Initial
Securities, [2003][2005][2008] the Private Exchange
Securities and the [2003][2005][2008] Exchange
Securities are treated as a single class of
securities under the Indenture. The Indenture
imposes
certain limitations on the ability of the Company to
create liens, enter into sale and leaseback
transactions and enter into mergers and
consolidations.
5. Optional Redemption
The Securities are redeemable, in whole or in part,
at any time and from time to time, at the option of
the Company, at a redemption price equal to the
greater of (i) 100% of the principal
amount of such Securities and (ii) the sum of the
present values of the Remaining Scheduled Payments,
discounted to the redemption date on a semiannual
basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate [plus
[12.5] [15] basis points,] plus accrued interest
thereon to the date of redemption.
Treasury Rate means, with respect to any redemption
date for the Securities, the rate per annum equal to
the semiannual equivalent yield to maturity (computed
as of the second business day immediately preceding
such redemption date) of the Comparable Treasury
Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury
Price for such redemption date.
<PAGE> 53
Comparable Treasury Issue means the United States
Treasury security selected by an Independent
Investment Banker that would be utilized, at the time
of selection and in accordance with customary
financial practice, in pricing new issues
of corporate debt securities of comparable maturity
to the remaining term of the Securities to be
redeemed. Independent Investment Banker means one of
the Reference Treasury Dealers appointed by the
Company.
Comparable Treasury Price means, with respect to
any redemption date for the Securities, (i) the
average of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as
a percentage of its principal amount) on the third
business day preceding such redemption date, as set
forth in the
daily statistical release (or any successor release)
published by the Federal Reserve Bank of New York and
designated Composite 3:30 p.m. Quotations for U.S.
Government Securities or (ii) if such release (or any
successor release) is not published or does not
contain such prices on such business day, (a) the
average of the Reference Treasury Dealer Quotations
for such redemption date, after excluding the highest
and lowest of such Reference Treasury
Dealer Quotations, or (b) if the Trustee obtains
fewer than four such Reference Treasury Dealer
Quotations, the average of all such Quotations.
Reference Treasury Dealer Quotations means, with
respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the
Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each
case as a percentage of its principal amount) quoted
in writing to the Trustee by such Reference Treasury
Dealer as of 3:30 p.m., New York time, on the third
business day preceding such redemption date.
Reference Treasury Dealer means each of Credit
Suisse First Boston Corporation (and its successors)
and three other nationally recognized investment
banking firms that are Primary Treasury Dealers
specified from time to time by the Company; provided,
however, that if any of the foregoing shall
cease to be a primary U.S. Government securities
dealer in New York City (a Primary Treasury Dealer),
the Company shall substitute therefor another
nationally recognized investment banking firm that is
a Primary Treasury Dealer.
Remaining Scheduled Payments means, with
respect to each Security to be redeemed, the
remaining scheduled payments of the Principal thereof
and interest thereon that would be due after the
related redemption date but for such redemption;
provided, however, that, if such redemption date is
not an Interest Payment Date with respect to such
Security, the amount of the next succeeding scheduled
interest payment thereon will be reduced by
the amount of interest accrued thereon to such
redemption date.
Except as set forth above, the Securities
will not be redeemable by the Company prior to
maturity and will not be entitled to the benefit of
any sinking fund.
<PAGE> 54
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days
but not more than 60 days before the redemption date
by first class mail to each Holder of Securities to
be redeemed at his registered address. Securities in
denominations of principal amount larger than $1,000
may be redeemed in part but only in whole multiples
of
$1,000. If money sufficient to pay the redemption
price of and accrued and unpaid interest on all
Securities (or portions thereof) to be redeemed on
the redemption date is deposited with the Paying
Agent on or before the redemption date and certain
other conditions are satisfied, on and after such
date
interest ceases to accrue on such Securities (or such
portions thereof) called for redemption.
7. Registration Rights
The Company is party to a Registration Rights
Agreement, dated as of April 21, 1998, among the
Company, Credit Suisse First Boston Corporation,
Bear, Stearns & Co. Inc., BancAmerica Robertson
Stephens Inc., Chase Securities Inc. and NationsBanc
Montgomery Securities LLC pursuant to which it is
obligated to pay Additional Interest (as defined
therein) upon the
occurrence of certain Registration Defaults (as
defined therein).
8. Denominations; Transfer; Exchange
The Securities are in registered form without
coupons in denominations of principal amount of
$1,000 and whole multiples of $1,000. A Holder may
register, transfer or exchange Securities in
accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to
pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not register
the transfer of or exchange any Securities selected
for
redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to
be redeemed)for a period beginning 15 days before a
selection of Securities to be redeemed
and ending on the date of such selection.
9. Persons Deemed Owners
The registered holder of this Security may be treated
as the owner of it for all purposes.
10. Unclaimed Money
If money for the payment of Principal or interest
remains unclaimed for two years after the date of
payment of Principal and interest, the Trustee or
Paying Agent shall pay the money back to the Company
at its request unless an abandoned property law
designates another Person. After any such payment,
Holders entitled to the money must look only to the
Company and not to the Trustee for payment.
<PAGE> 55
11. Defeasance
Subject to certain conditions set forth in the
Indenture, the Company at any time may terminate some
or all of its obligations under the Securities of
this series and the Indenture if the Company deposits
with the Trustee money or U.S. Government Obligations
for the payment of Principal of and interest on the
Securities of this series to redemption or maturity,
as the case may be.
12. Amendment, Waiver
Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Securities of
this series may be amended with the written consent
of the Holders of at least a majority in principal
amount of the outstanding Securities of this series
and (ii) with respect to this series, any default or
noncompliance with any provision of the Indenture or
the Securities of this series may be waived with the
written consent of the Holders of a majority in
principal amount of the outstanding Securities of
this series. Subject to certain exceptions set forth
in the Indenture, without the consent of any
Securityholder, the Company and the Trustee may amend
the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to
comply with
Article 5 of the Indenture, or to provide for
uncertificated Securities of this series in addition
to or in place of certificated Securities of this
series, or to add guarantees with respect to the
Securities of this series or to add security for the
Securities of this series, or to add additional
covenants of or surrender rights and powers conferred
on the Company, or to comply with any request
of the SEC in connection with qualifying the
Indenture under the Act, or to make any change that
does not adversely affect the rights of any
Securityholder of this series.
13. Defaults and Remedies
Under the Indenture, Events of Default with respect
to this series include (i) default for 30 days in
payment of interest on the Securities of this series;
(ii) default in payment of Principal on the
Securities of this series at maturity, upon
redemption
pursuant to paragraph 5 of the Securities of this
series, upon declaration or otherwise; (iii) failure
by the Company to comply with other agreements in the
Indenture or the Securities of this series, subject
to notice and lapse of time; (iv) a failure to pay
within any grace period after final maturity other
indebtedness of the Company in an amount in excess of
$25 million; (v) certain accelerations of other
indebtedness of the Company if the amount
accelerated exceeds $25 million; and (vi) certain
events of bankruptcy or insolvency involving the
Company.
If an Event of Default with respect to this series
occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the
Securities of this series may declare all the
<PAGE> 56
Securities of this series to be due and payable
immediately. Certain events of bankruptcy or
insolvency are Events of Default which will result in
the Securities of this series being due and payable
immediately upon the occurrence of such Events of
Default.
Securityholders may not enforce the Indenture or
the Securities of this series except as provided in
the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities of this series unless it
receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority
in principal amount of the Securities of this series
may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from
Securityholders of this series notice of any
continuing Default or
Event of Default (except a Default or Event of
Default in payment of Principal or interest) if it
determines that withholding notice is not opposed to
their interest.
14. Trustee Dealings with the Company
Subject to certain limitations set forth in this
Indenture, the Trustee under the Indenture, in its
individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal
with and collect obligations owed to it by the
Company and may otherwise deal with the Company with
the same rights it would have if it were not Trustee.
15. No Recourse Against Others
A director, officer, employee or stockholder, as
such, of the Company shall not have any liability for
any obligations of the Company under the Securities
or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their
creation. By accepting a Security, each
Securityholder waives
and releases all such liability. The waiver and
release are part of the consideration for the issue
of the Securities.
16. Authentication
This Security shall not be valid until an
authorized officer of the Trustee (or an
authenticating agent acting on its behalf) manually
signs the certificate of authentication on the other
side of this Security.
17. Abbreviations
Customary abbreviations may be used in
the name of a Securityholder or an assignee, such as
TEN COM (=tenants in common), TEN ENT (=tenants by
the entirety), JT TEN (=joint tenants with rights of
survivorship and not as tenants in common),
CUST (=custodian) and U/G/M/A (=Uniform Gift to
Minors Act).
<PAGE> 57
18. CUSIP Numbers
Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification
Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the
Trustee to use CUSIP numbers in notices of redemption
as a convenience to Securityholders. No
representation is made as to the accuracy of such
numbers either as
printed on the Securities or as contained in any
notice of redemption and reliance may be placed only
on the other identification numbers placed thereon.
19. Governing Law
This Security shall be governed by, and
construed in accordance with, the laws of the State
of New York but without giving effect to applicable
principles of conflicts of law to the extent
that the application of the laws of another
jurisdiction would be required thereby.
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip
code) (Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company.
The agent may substitute another to act for him.
Date: Your Signature:
Signature Guarantee:
(Signature must be guaranteed by a participant in a
recognized Signature Guarantee Medallion Program or
other signature guarantor program reasonably
acceptable to the Trustee)
Sign exactly as your name appears on the other side
of this Security.
In connection with any transfer or exchange of any of
the certificated Securities evidenced by this
certificate occurring prior to the date that is two
years after the later of the date of original
issuance of such Securities and the last date, if
any, on which such Securities were owned by the
Company or any Affiliate of the Company, the
undersigned confirms that such Securities are being
transferred:
CHECK ONE BOX BELOW:
(1) to the Company; or
(2) pursuant to an effective registration
statement under the Securities Act of
1933; or
(3) inside the United States to a qualified
institutional buyer (as defined in Rule
144A under the Securities Act of 1933)
that purchases for its own account or
for the account of a qualified
institutional buyer to whom notice is
given that such transfer is being
made in reliance on Rule 144A, in each
case pursuant to and in compliance with
Rule 144A under the Securities Act of
1933; or
(4) outside the United States in an offshore
transaction within the meaning of
Regulation S under the Securities Act in
compliance with Rule 904 under the
Securities Act of 1933; or
<PAGE> 58
(5) pursuant to the exemption from
registration provided by Rule 144 under
the Securities act of 1933.
Unless one of the boxes is checked, the Trustee will
refuse to register any of the certificated Securities
evidenced by this certificate in the name of any
Person other than the registered holder thereof;
provided, however, that if box (4) or (5) is checked,
the Trustee may require, prior to registering any
such transfer of the Securities, such legal opinions,
certifications and other information as the Company
has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from,
or in a transaction not subject to, the registration
requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act.
Signature
Signature Guarantee:
Signature
(Signature must be guaranteed by a
participant in a recognized Signature
Guarantee Medallion Program or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 59
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS
CHECKED.
The undersigned represents and warrants
that it is purchasing this certificated Security for
its own account or an account with respect to which
it exercises sole investment discretion and that it
and any such account is a qualified institutional
buyer within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to
it is being made in reliance on Rule 144A and
acknowledges that it has received such information
regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that
the transferor is relying upon the undersigneds
foregoing representations in order to claim
the exemption from registration provided by Rule
144A.
Dated:
______________________________
NOTICE: To be executed by
an executive
officer
Signature Guarantee:
Signature
(Signature must be guaranteed by a
participant in a recognized Signature
Guarantee Medallion Program or other
signature guarantor program reasonably
acceptable to the Trustee)
<PAGE> 60
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY
The following increases or decreases in this Global
Security have been made:
Date of
Exchange
Amount of decrease
in Principal Amount
of this Global Security
Amount of increase in Principal
Amount of this Global Security
Principal Amount of this Global
Security following such decrease
or increase
Signature of authorized officer of
Trustee or Securities Custodian
<PAGE> 61
EXHIBIT A
[FORM OF FACE OF EXCHANGE SECURITY [OR PRIVATE
EXCHANGE SECURITY]]
COMPUTER ASSOCIATES INTERNATIONAL, INC.
No. Principal Amount $
CUSIP NO.
ISIN NO.
[Series [B][C] 61/4% Senior Notes Due 2003]
[Series [B][C] 63/8% Senior Notes Due 2005]
[Series [B][C] 61/2% Senior Notes Due 2008]
Computer Associates International, Inc., a Delaware
corporation, for value received, promises to pay to
__________, or registered assigns, the principal sum
of ___________________________ Dollars on ________
__,[2003] [2005] [2008].
Interest Payment Dates: April 15 and October 15.
Record Dates: April 1 and October 1.
Additional provisions of this Security
are set forth on the other side of this Security.
Dated: __________ COMPUTER ASSOCIATES
INTERNATIONAL,INC.
by
by
TRUSTEES CERTIFICATE OF Dated:
AUTHENTICATION
This is one of the Securities
of the series designated therein
referred to in the within-mentioned
Indenture.
THE CHASE MANHATTAN BANK
by
Authorized Officer
<PAGE> 62
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY [OR
PRIVATE EXCHANGE SECURITY]]
[Series [B][C] 61/4% Senior Notes Due 2003]
[Series [B][C] 63/8% Senior Notes Due 2005]
[Series [B][C] 61/2% Senior Notes Due 2008]
1. Interest
Computer Associates International, Inc., a Delaware
corporation (such corporation, and its successors and
assigns under this Indenture hereinafter referred to,
being herein called the Company), promises to pay
interest on the principal amount of this Security at
the rate per annum shown above.
The Company will pay interest semiannually on
April 15 and October 15 of each year (each such date,
an Interest Payment Date), commencing October 15,
1998 Interest on the Securities will accrue from
April 24, 1998, or from the most recent date to which
interest has been paid on the Securities. Interest
will be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment
By no later than 1:00 p.m. (New York City time) on
the date on which any Principal of or interest on any
Security is due and payable, the Company shall
irrevocably deposit with the Trustee or the Paying
Agent money sufficient to pay such Principal
and/or interest. The Company will pay interest
(except defaulted interest) to the Persons who are
registered Holders of Securities at the close of
business on the April 1 or October 1 next preceding
the Interest Payment Date even if Securities are
cancelled, repurchased or redeemed after the record
date and on or before the Interest Payment Date.
Holders must surrender Securities to a Paying
Agent to collect principal payments. The Company
will pay Principal and interest in money of the
United States that at the time of payment is legal
tender for payment of public and private debts.
However, the Company may pay Principal and interest
by check payable in such money. It may mail an
interest check to a Holders registered address.
3. Paying Agent and Registrar
Initially, The Chase Manhattan Bank, a New York
banking corporation (the Trustee), will act as
Paying Agent and Registrar. The Company may appoint
and change any Paying Agent or Registrar without
notice to any Securityholder. The Company or any of
its domestically incorporated wholly owned
Subsidiaries may act as Paying Agent.
<PAGE> 63
4. Indenture
The Company issued the Securities under
an Indenture dated as of April 24, 1998 (as it may be
amended or supplemented from time to time in
accordance with the terms thereof, the Indenture),
between the Company and the Trustee. The terms of
the Securities include those stated in this Indenture
and those made part of this Indenture by reference to
the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-
77bbbb) as in effect on the date of this Indenture
(the Act). Capitalized terms used herein and not
defined herein have the meanings ascribed thereto in
this Indenture. The Securities are subject to all
such terms, and Securityholders are referred to this
Indenture and the Act for a statement of those terms.
The Securities are senior obligations of the
Company limited to $[575,000,000] [825,000,000]
[350,000,000] aggregate principal amount (subject to
Section 2.7 of the Indenture). The Security is one
of the [2003][2005][2008] [Private] Exchange
Securities referred to in the Indenture. The
Securities include the [2003][2005][2008] Initial
Securities and any [2003][2005][2008] Private
Exchange Securities and [2003][2005][2008] Exchange
Securities issued in exchange for the
[2003][2005][2008] Initial Securities pursuant to the
Indenture and the Registration Rights Agreement. The
[2003][2005][2008] Initial Securities, the
[2003][2005][2008] Private Exchange Securities and
the [2003][2005][2008] Exchange Securities are
treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations
on the ability of the Company to create liens,
enter into sale and leaseback transactions and enter
into mergers and consolidations.
5. Optional Redemption
The Securities are redeemable, in whole
or in part, at any time and from time to time, at the
option of the Company, at a redemption price equal to
the greater of (i) 100% of the principal
amount of such Securities and (ii) the sum of the
present values of the Remaining Scheduled Payments of
Principal, discounted to the redemption date on a
semiannual basis (assuming a 360-day year consisting
of twelve 30-day months) at the Treasury Rate [plus
[12.5] [15] basis points,] plus accrued interest
thereon to the date of redemption.
Treasury Rate means, with respect to any redemption
date for the Securities, the rate per annum equal to
the semiannual equivalent yield to maturity (computed
as of the second business day immediately preceding
such redemption date) of the Comparable Treasury
Issue, assuming a price for the Comparable
Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury
Price for such redemption date.
Comparable Treasury Issue means the United States
Treasury security selected by an Independent
Investment Banker that would be utilized, at the time
of selection and in accordance with customary
financial practice, in pricing new issues
of corporate debt securities of comparable maturity
to the remaining term of the Securities to be
redeemed. Independent Investment Banker means one of
the Reference Treasury Dealers appointed by the
Company.
<PAGE> 64
Comparable Treasury Price means, with respect to
any redemption date for the Securities, (i) the
average of the bid and asked prices for the
Comparable Treasury Issue (expressed in
each case as a percentage of its principal amount) on
the third business day preceding such redemption
date, as set forth in the daily statistical release
(or any successor release)published by the
Federal Reserve Bank of New York and designated
Composite 3:30 p.m. Quotations for U.S. Government
Securities or (ii) if such release (or any successor
release) is not published or does not contain such
prices on such business day, (a) the average of the
Reference Treasury Dealer Quotations for such
redemption date, after excluding the highest and
lowest of such Reference Treasury Dealer Quotations,
or (b) if the Trustee obtains fewer than four
such Reference Treasury Dealer Quotations, the
average of all such Quotations. Reference Treasury
Dealer Quotations means, with respect to each
Reference Treasury Dealer and any redemption
date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by
such Reference Treasury Dealer as of 3:30 p.m.,
New York time, on the third business day preceding
such redemption date.
Reference Treasury Dealer means each of Credit
Suisse First Boston Corporation (and its successors)
and three other nationally recognized investment
banking firms that are Primary Treasury Dealers
specified from time to time by the Company; provided,
however, that if any of the foregoing shall
cease to be a primary U.S. Government securities
dealer in New York City (a Primary Treasury Dealer),
the Company shall substitute therefor another
nationally recognized investment banking firm that is
a Primary Treasury Dealer.
Remaining Scheduled Payments means, with
respect to each Security to be redeemed, the
remaining scheduled payments of the Principal thereof
and interest thereon that would be
due after the related redemption date but for such
redemption; provided, however, that, if such
redemption date is not an Interest
Payment Date with respect to such Security, the
amount of the next succeeding scheduled interest
payment thereon will be reduced by the amount of
interest accrued thereon to such redemption date.
Except as set forth above, the Securities will not be
redeemable by the Company prior to maturity and will
not be entitled to the benefit of any sinking fund.
6. Notice of Redemption
Notice of redemption will be mailed at least 30 days
but not more than 60 days before the redemption date
by first-class mail to each Holder of Securities to
be redeemed at his registered address. Securities in
denominations of principal amount larger than $1,000
may be redeemed in part but only in whole multiples
of $1,000. If money sufficient to pay the redemption
price of and accrued and unpaid interest on all
Securities (or portions thereof)
<PAGE> 65
to be redeemed on the redemption date is deposited
with the Paying Agent on or before the redemption
date and certain other conditions are satisfied, on
and after such date interest ceases to accrue on such
Securities (or such portions thereof) called for
redemption.
7. Denominations; Transfer; Exchange
The Securities are in registered form without
coupons in denominations of principal amount of
$1,000 and whole multiples of $1,000. A Holder may
register transfer or exchange Securities in
accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish
appropriate endorsements or transfer documents and to
pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not register
the transfer of or exchange any Securities selected
for redemption (except, in the case of a Security to
be redeemed in part, the portion of the Security not
to be redeemed)for a period beginning 15 days before
a selection of Securities to be redeemed
and ending on the date of such selection.
8. Persons Deemed Owners
The registered holder of this Security may be treated
as the owner of it for all purposes.
9. Unclaimed Money
If money for the payment of Principal or interest
remains unclaimed for two years after the date of
payment of Principal and interest, the Trustee or
Paying Agent shall pay the money back to the Company
at its request unless an abandoned property law
designates another Person. After any such payment,
Holders entitled to the money must look only to the
Company and not to the Trustee for payment.
10. Defeasance
Subject to certain conditions set forth in the
Indenture, the Company at any time may terminate some
or all of its obligations under the Securities of
this series and the Indenture if the Company deposits
with the Trustee money or U.S. Government Obligations
for the payment of Principal of and interest on the
Securities of this series to redemption or maturity,
as the case may be.
11. Amendment, Waiver
Subject to certain exceptions set forth in the
Indenture, (i) the Indenture or the Securities of
this series may be amended with the written consent
of the Holders of at least a majority in principal
<PAGE> 66
amount of the outstanding Securities of this
series and (ii) with respect to this series, any
default or noncompliance with any provision of the
Indenture or the Securities of this series may be
waived with the written consent of the Holders
of a majority in principal amount of the outstanding
Securities of this series. Subject to certain
exceptions set forth in the Indenture, without the
consent of any Securityholder, the Company and the
Trustee may amend the Indenture or the Securities to
cure any ambiguity, omission, defect or nconsistency,
or to comply with Article 5 of the Indenture, or to
provide for uncertificated Securities of this series
in addition to or in place of certificated
Securities of this series, or to add guarantees with
respect to the Securities of this series or to add
security for the Securities of this series, or to add
additional covenants of or surrender rights and
powers conferred on the Company, or to comply with
any request of the SEC in connection with qualifying
the Indenture under the Act, or to make any change
that does not adversely affect the rights
of any Securityholder of this series.
12. Defaults and Remedies
Under the Indenture, Events of Default with respect
to this series include (i) default for 30 days in
payment of interest on the Securities of this series;
(ii) default in payment of principal on the
Securities of this series at maturity, upon
redemption pursuant to paragraph 5 of the Securities
of this series, upon declaration or otherwise; (iii)
failure by the Company to comply with other
agreements in the Indenture or the Securities of this
series, subject to notice and lapse of time; (iv)
failure to pay within any grace period after final
maturity other indebtedness of the Company in an
amount in excess of $25 million; (v) certain
accelerations of other indebtedness of the Company if
the amount accelerated exceeds $25 million; or (vi)
certain events of bankruptcy or insolvency with
respect to the Company.
If an Event of Default with respect to this series
occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the
Securities of this series may declare all the
Securities to be due and payable immediately.
Certain events of bankruptcy or insolvency are Events
of Default which will result in the Securities of
this series being due and payable immediately upon
the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or
the Securities of this series except as provided in
the Indenture. The Trustee may refuse to enforce the
Indenture or the Securities of this series unless it
receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority
in principal amount of the Securities of this series
may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from
Securityholders notice of any continuing Default or
Event of Default (except a Default or Event of
Default in payment of Principal or interest) if it
determines that withholding notice is not opposed to
their interest.
<PAGE> 67
13. Trustee Dealings with the Company
Subject to certain limitations set forth in this
Indenture, the Trustee under the Indenture, in its
individual or any other capacity, may become the
owner or pledgee of Securities and may otherwise deal
with and collect obligations owed to it by the
Company and may otherwise deal with the Company with
the same rights it would have if it were not Trustee.
14. No Recourse Against Others
A director, officer, employee or stockholder, as
such, of the Company shall not have any liability for
any obligations of the Company under the Securities
or this Indenture or for any claim based on, in
respect of or by reason of such obligations or
their creation. By accepting a Security, each
Securityholder waives and releases all such
liability. The waiver and release are part of the
consideration for the issue of the Securities.
15. Authentication
This Security shall not be valid until an authorized
officer of the Trustee (or an authenticating agent
acting on its behalf) manually signs the certificate
of authentication on the other side of this Security.
16. Abbreviations
Customary abbreviations may be used in the name of
a Securityholder or an assignee, such as TEN COM
(=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of
survivorship and not as tenants in common),
CUST (=custodian) and U/G/M/A (=Uniform Gift to
Minors Act).
17. CUSIP Numbers
Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification
Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the
Trustee to use CUSIP numbers in notices of redemption
as a convenience to Securityholders. No
representation is made as to the accuracy of such
numbers either as printed on the Securities or as
contained in any notice of redemption and reliance
may be placed only on the other identification
numbers placed thereon.
<PAGE? 68
18. Governing Law
This Security shall be governed by, and construed in
accordance with, the laws of the State of New York
but without giving effect to applicable principles of
conflicts of law to the extent that the application
of the laws of another jurisdiction would be required
thereby.
<PAGE> 69
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignees name, address and zip
code)
(Insert assignees soc. sec. or tax I.D. No.)
and irrevocably appoint agent to
transfer this Security on the books of the Company.
The agent may substitute another to act for him.
Date: ____________________ Your Signature:
___________________
Signature Guarantee: ______________________________
(Signature must be guaranteed by a participant in a
recognized Signature Guarantee Medallion Program or
other signature guarantor program reasonably
acceptable to the Trustee)
Sign exactly as your name appears on the other side
of this Security.
COMPUTER ASSOCIATES INTERNATIONAL, INC.
Issuer
6 1/4% Senior Notes Due 2003
6 3/8% Senior Notes Due 2005
6 1/2% Senior Notes Due 2008
INDENTURE
Dated as of April 24, 1998
THE CHASE MANHATTAN BANK,
Trustee
<PAGE> 70
CROSS-REFERENCE TABLE
Certain Sections of this Indenture relating to
Sections 310 through 318, inclusive, of the Trust
Indenture Act of 1939:
TIA Indenture
Section Section
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(b) 7.8; 7.10
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.5
(b) 10.3
(c) 10.3
313(a) 7.6
(b)(1) N.A.
(b)(2) 7.6
(c) 7.6
(d) 7.6
314(a) 4.8
4.4; 10.2
(b) N.A.
(c)(1) 10.4
(c)(2) 10.4
(c)(3) N.A.
(d) N.A.
(e) 10.5
(f) 4.8
315(a) 7.1
(b) 7.5
(c) 7.1
(d) 7.1
(e) 6.11
316(a)(last sentence) 10.6
(a)(1)(A) 6.5
(a)(1)(B) 6.4
(a)(2) N.A.
(b) 6.7
317(a)(1) 6.8
(a)(2) 6.9
(b) 2.4
318(a) 10.1
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any
purpose, be deemed to be part of this Indenture.
<PAGE> 71
TABLE OF CONTENTS
ARTICLE I
Definitions and Incorporation by Reference 1
SECTION 1.1. Definitions 1
SECTION 1.2. Other Definitions 5
SECTION 1.3. Incorporation by Reference of
Trust Indenture Act 5
SECTION 1.4. Rules of Construction 5
SECTION 1.5. One Class of Securities 6
ARTICLE II
The Securities 6
SECTION 2.1. Form and Dating 6
SECTION 2.2. Execution and Authentication 7
SECTION 2.3. Registrar and Paying Agent 7
SECTION 2.4. Paying Agent To Hold Money in
Trust 8
SECTION 2.5. Securityholder Lists 8
SECTION 2.6. Business Days 8
SECTION 2.7. Replacement Securities 8
SECTION 2.8. Outstanding Securities 9
SECTION 2.9. Temporary Securities 9
SECTION 2.10. Cancellation 9
SECTION 2.11. Defaulted Interest 9
SECTION 2.12. CUSIP Numbers 10
ARTICLE III
Redemption 10
SECTION 3.1. Notices to Trustee 10
SECTION 3.2. Selection of Securities To Be
Redeemed 10
SECTION 3.3. Notice of Redemption 11
SECTION 3.4. Effect of Notice of Redemption 11
SECTION 3.5. Deposit of Redemption Price 12
SECTION 3.6. Securities Redeemed in Part 12
ARTICLE IV
Covenants 12
SECTION 4.1. Payment of Securities 12
SECTION 4.2. Limitations on Liens. 13
SECTION 4.3. Limitation on Sale and Lease-Back
Transactions. 14
SECTION 4.4. Compliance Certificate 15
SECTION 4.5. Further Instruments and Acts 16
<PAGE> 72
SECTION 4.6. Maintenance of Office or Agency 16
SECTION 4.7. Corporate Existence 16
SECTION 4.8. SEC Reports 16
ARTICLE V
Successor Company 16
SECTION 5.1. When the Company May Merge or
Transfer Assets 16
ARTICLE VI
Defaults and Remedies 17
SECTION 6.1. Events of Default 17
SECTION 6.2. Acceleration 19
SECTION 6.3. Other Remedies 19
SECTION 6.4. Waiver of Past Defaults 20
SECTION 6.5. Control by Majority 20
SECTION 6.6. Limitation on Suits 20
SECTION 6.7. Rights of Holders To Receive
Payment 21
SECTION 6.8. Collection Suit by Trustee 21
SECTION 6.9. Trustee May File Proofs
of Claim 21
SECTION 6.10. Priorities 21
SECTION 6.11. Undertaking for Costs 22
SECTION 6.12. Waiver of Stay or
Extension Laws 22
ARTICLE VII
Trustee 22
SECTION 7.1. Duties of Trustee 22
SECTION 7.2. Rights of Trustee 23
SECTION 7.3. Individual Rights of Trustee 24
SECTION 7.4. Trustee's Disclaimer 24
SECTION 7.5. Notice of Defaults 24
SECTION 7.6. Reports by Trustee to Holders 24
SECTION 7.7. Compensation and Indemnity 25
SECTION 7.8. Replacement of Trustee 25
SECTION 7.9. Successor Trustee by Merger 26
SECTION 7.10. Eligibility; Disqualification 27
SECTION 7.11. Preferential Collection of
Claims Against Company 27
ARTICLE VIII
Discharge of Indenture; Defeasance 27
SECTION 8.1. Discharge of Liability on
Securities; Defeasance 27
SECTION 8.2. Conditions to Defeasance 28
<PAGE? 73
SECTION 8.3. Application of Trust Money 29
SECTION 8.4. Repayment to Company 29
SECTION 8.5. Indemnity for Government
Obligations 30
SECTION 8.6. Reinstatement 30
ARTICLE IX
Amendments 30
SECTION 9.1. Without Consent of Holders 30
SECTION 9.2. With Consent of Holders 31
SECTION 9.3. Compliance with Trust Indenture
Act 32
SECTION 9.4. Revocation and Effect of
Consents and Waivers 32
SECTION 9.5. Notation on or Exchange of
Securities 32
SECTION 9.6. Trustee To Sign Amendments 33
SECTION 9.7. Payment for Consent 33
ARTICLE X
Miscellaneous 33
SECTION 10.1. Trust Indenture Act Controls 33
SECTION 10.2. Notices 33
SECTION 10.3. Communication by Holders with
other Holders 34
SECTION 10.4. Certificate and Opinion as to
Conditions Precedent 34
SECTION 10.5. Statements Required in
Certificate or Opinion 35
SECTION 10.6. When Securities Disregarded 35
SECTION 10.7. Rules by Trustee, Paying Agent
and Registrar 35
SECTION 10.8. Governing Law 35
SECTION 10.9. No Recourse Against Others 35
SECTION 10.10. Successors 36
SECTION 10.11. Multiple Originals 36
SECTION 10.12. Variable Provisions 36
SECTION 10.13. Qualification of Indenture 36
SECTION 10.14. Table of Contents; Headings 36
Rule 144A/Regulation S Appendix
Exhibit 1 to Appendix - Form of Initial Security
Exhibit A - Form of Exchange Security and Private
Exchange Security
*/ [If the Security is to be issued in global form
add the Global Securities
Legend from Exhibit 1 to Appendix A and the
attachment from such
Exhibit 1 captioned "[TO BE ATTACHED TO GLOBAL
SECURITIES] - SCHEDULE OF INCREASES OR DECREASES IN
GLOBAL SECURITY".]
**/ [If the Security is a Private Exchange Security
issued in a Private
Exchange to an Initial Purchaser holding an unsold
portion of its
initial allotment, add the Restricted Securities
Legend from Exhibit 1
to Appendix A and replace the Assignment Form with
the Assignment
Form included in such Exhibit 1.]
(..continued)
1
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Page
- iii -
- i -
$1,750,000,000
COMPUTER ASSOCIATES INTERNATIONAL, INC.
$575,000,000 6.250% Senior Notes due 2003
$825,000,000 6.375% Senior Notes due 2005
$350,000,000 6.500% Senior Notes due 2008
REGISTRATION RIGHTS AGREEMENT
as of April 21, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO. INC.
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
Computer Associates International, Inc., a Delaware
corporation (the Company), proposes to
issue and sell to Credit Suisse First Boston
Corporation, Bear, Stearns & Co. Inc., BancAmerica
Robertson Stephens, Chase Securities Inc. and
NationsBanc Montgomery Securities LLC (collectively,
the Initial Purchasers), upon the terms set forth in
a purchase agreement of even date herewith (the
Purchase Agreement), U.S.$575,000,000 principal
amount of its 6.25% Senior Notes due 2003 (the
2003 Notes), U.S.$825,000,000 principal amount of its
6.375% Senior Notes due 2005 (the 2005
Notes) and U.S.$350,000,000 principal amount of its
6.5% Senior Notes due 2008 (the 2008 Notes
and, together with the 2003 Notes and the 2005 Notes,
the Initial Securities). The Initial Securities will
be issued pursuant to an Indenture, to be dated as of
April 24, 1998 (the Indenture) among the Company
and The Chase Manhattan Bank (the Trustee). As an
inducement to the Initial Purchasers, the
Company agrees with the Initial Purchasers, for the
benefit of the holders of the Initial Securities
(including, without limitation, the Initial
Purchasers), the Exchange Securities (as defined
below) and the Private Exchange Securities (as
defined below) (collectively the Holders), as
follows:
1. Registered Exchange Offer. The Company
shall, at its own cost, prepare and, not later than
90 days after (or if the 90th day is not a business
day, the first business day thereafter) the date of
original issue of the Initial Securities (the Issue
Date), file with the Securities and Exchange
Commission (the Commission) a registration statement
(the Exchange Offer Registration Statement) on an
appropriate form under the Securities Act of 1933, as
amended (the Securities Act), with respect to a
proposed offer (the Registered Exchange Offer) to the
Holders of Transfer Restricted Securities (as defined
in Section 6 hereof), who are not prohibited by any
law or policy of the Commission from participating in
the Registered Exchange Offer, to issue and deliver
to such Holders, in exchange for the Initial
Securities, a like aggregate principal amount of debt
securities (the Exchange Securities) of the Company
issued under the Indenture and identical in all
material respects to the Initial Securities (except
for the transfer restrictions relating to the Initial
Securities and the provisions relating to the matters
described in Section 6 hereof) that would be
registered under the Securities Act. The Company
shall use its best efforts to cause such Exchange
Offer Registration Statement to become effective
under the Securities Act within 150 days (or if the
150th day is not a business day, the first business
day thereafter) after the Issue Date of the Initial
Securities and shall keep the Exchange Offer
Registration Statement effective for not less than
20 business days (or longer, if required by
applicable law) after the date notice of the
Registered Exchange Offer is mailed to the Holders
(such period being called the Exchange Offer
Registration Period).
If the Company effects the Registered Exchange Offer,
the Company will be entitled to close the
Registered Exchange Offer 20 business days after the
commencement thereof provided that the Company
has accepted all the Initial Securities theretofore
validly tendered in accordance with the terms of the
Registered Exchange Offer.
Following the declaration of the effectiveness of the
Exchange Offer Registration Statement, the
Company shall promptly commence the Registered
Exchange Offer, it being the objective of such
Registered Exchange Offer to enable each Holder of
Transfer Restricted Securities (as defined in
Section 6 hereof) electing to exchange the Initial
Securities for Exchange Securities (assuming that
such Holder is not an affiliate of the Company within
the meaning of the Securities Act, acquires the
Exchange Securities in the ordinary course of such
Holder's business and has no arrangements with any
person to participate in the distribution of the
Exchange Securities and is not prohibited by any law
or policy of the Commission from participating in the
Registered Exchange Offer) to trade such Exchange
Securities from and after their receipt without any
limitations or restrictions under the Securities Act
and without material restrictions under the
securities laws of the several states of the United
States.
The Company acknowledges that, pursuant to current
interpretations by the Commission's staff of
Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder
which is a broker-dealer electing to exchange
Securities, acquired for its own account as a result
of market making activities or other trading
activities, for Exchange Securities (an Exchanging
Dealer), is required to deliver a prospectus
containing the information set forth in (a) Annex A
hereto on the cover, (b) Annex B hereto in the
Exchange Offer Procedures section and the Purpose of
the Exchange Offer section, and (c) Annex C hereto in
the Plan of Distribution section of such prospectus
in connection with a sale of any such Exchange
Securities received by such Exchanging Dealer
pursuant to the Registered Exchange Offer and (ii) an
Initial Purchaser that elects to sell Exchange
Securities acquired in exchange for Securities
constituting any portion of an unsold allotment is
required to deliver a prospectus containing the
information required by Items 507 or 508 of
Regulation S-K under the Securities Act, as
applicable, in connection with such sale.
The Company shall use its best efforts to keep the
Exchange Offer Registration Statement
effective and to amend and supplement the prospectus
contained therein, in order to permit such
prospectus to be lawfully delivered by all persons
subject to the prospectus delivery requirements of
the Securities Act for such period of time as such
persons must comply with such requirements in order
to resell the Exchange Securities; provided, however,
that (i) in the case where such prospectus and any
amendment or supplement thereto must be delivered by
an Exchanging Dealer or an Initial Purchaser,
such period shall be the lesser of 180 days and the
date on which all Exchanging Dealers and the Initial
Purchasers have sold all Exchange Securities held by
them (unless such period is extended pursuant to
Section 3(j) below) and (ii) the Company shall make
such prospectus and any amendment or supplement
thereto, available to any broker-dealer for use in
connection with any resale of any Exchange Securities
for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange
Offer, any Initial Purchaser holds Initial
Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the
delivery of the Exchange Securities pursuant to the
Registered Exchange Offer, shall issue and deliver to
such Initial Purchaser upon the written request of
such Initial Purchaser, in exchange (the Private
Exchange)for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt
securities of the Company issued under the Indenture
and identical in all material respects (including the
existence of restrictions on transfer under the
Securities Act and the securities laws of the several
states of the United States, but excluding provisions
relating to the matters described in Section 6
hereof) to the Initial Securities (the Private
Exchange Securities). The Initial Securities, the
Exchange Securities and the Private Exchange
Securities are herein collectively called the
Securities.
In connection with the Registered Exchange Offer, the
Company shall:
(a) mail to each Holder a copy of the prospectus
forming part of the Exchange Offer
Registration Statement, together with an appropriate
letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not
less than 20 business days (or longer, if required by
applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the
Registered Exchange Offer with an address in the
Borough of Manhattan, The City of New York, which may
be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities
at any time prior to the close of business, New York
time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the
Registered Exchange Offer or the Private Exchange,
as the case may be, the Company shall:
(x) accept for exchange all the Securities validly
tendered and not withdrawn pursuant to the Registered
Exchange Offer and the Private Exchange;
(y) deliver to the Trustee for cancellation all the
Initial Securities so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver
promptly to each Holder of the Initial
Securities, Exchange Securities or Private Exchange
Securities, as the case may be, equal in
principal amount to the Initial Securities of such
Holder so accepted for exchange.
The Indenture will provide that the Exchange
Securities will not be subject to the transfer
restrictions set forth in the Indenture and that all
the Securities of each series will vote and consent
together on all matters as one class and that none of
the Securities of a particular series will have the
right to vote or consent as a class separate from one
another on any matter.
Interest on each Exchange Security and Private
Exchange Security issued pursuant to the
Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on
which interest was paid on the Initial Securities
surrendered in exchange therefor or, if no interest
has been paid on the Initial Securities, from the
date of original issue of the Initial Securities.
Each Holder participating in the Registered Exchange
Offer shall be required to represent to the
Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange
Securities received by such Holder will be acquired
in the ordinary course of business, (ii) such Holder
will have no arrangements or understanding with any
person to participate in the distribution of the
Securities or the Exchange Securities within the
meaning of the Securities Act, (iii) such Holder is
not an affiliate, as defined in Rule 405 of the
Securities Act, of the Company or if it is an
affiliate, such Holder will comply with the
registration and prospectus delivery requirements of
the Securities Act to the extent applicable, (iv) if
such Holder is not a broker-dealer, that it is not
engaged in, and does not intend to engage in, the
distribution of the Exchange Securities and (v) if
such Holder is a broker-dealer, that it will
receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as
a result of market-making activities or other trading
activities and that it will be required to
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange
Securities.
Notwithstanding any other provisions hereof, the
Company will ensure that (i) any Exchange
Offer Registration Statement and any amendment
thereto and any prospectus forming part thereof and
any supplement thereto complies in all material
respects with the Securities Act and the rules and
regulations thereunder, (ii) any Exchange Offer
Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading and (iii) any prospectus forming part of
any Exchange Offer Registration Statement, and any
supplement to such prospectus, does not include an
untrue statement of a material fact or omit to state
a material fact required to be stated therein or
necessary in order to make the statements therein, in
the light of the circumstances under which
they were made, not misleading.
2. Shelf Registration. If, (i) because of any
change in law or in applicable interpretations
thereof by the staff of the Commission, the Company
is not permitted to effect a Registered Exchange
Offer, as contemplated by Section 1 hereof, (ii) the
Registered Exchange Offer is not consummated within
180 days of the Issue Date, (or, if not a business
day, the first business day thereafter) (iii) any
Initial Purchaser so requests with respect to the
Initial Securities (or the Private Exchange
Securities) not eligible to be exchanged for Exchange
Securities in the Registered Exchange Offer and held
by it following consummation of the Registered
Exchange Offer or (iv) any Holder (other than an
Exchanging Dealer) is not eligible to participate in
the Registered Exchange Offer or, in the case of any
Holder (other than an Exchanging Dealer) that
participates in the Registered Exchange Offer, such
Holder does not receive freely tradeable Exchange
Securities on the date of the exchange, the Company
shall take the following actions:
(a) The Company shall, at its cost, as promptly as
practicable (but in no event more than 60 days after
so required or requested pursuant to this Section 2)
file with the Commission and thereafter shall use its
best efforts to cause to be declared effective a
registration statement (the Shelf Registration
Statement and, together with the Exchange Offer
Registration Statement, a Registration Statement) on
an appropriate form under the Securities Act relating
to the offer and sale of the Transfer Restricted
Securities by the Holders thereof from time to time
in accordance with the methods of distribution set
forth in the Shelf Registration Statement and
Rule 415 under the Securities Act (hereinafter, the
Shelf Registration); provided, however, that
no Holder (other than an Initial Purchaser) shall be
entitled to have the Securities held by it
covered by such Shelf Registration Statement unless
such Holder agrees in writing to be bound by
all the provisions of this Agreement applicable to
such Holder.
(b) The Company shall use its best efforts to keep
the Shelf Registration Statement continuously
effective in order to permit the prospectus included
therein to be lawfully delivered by the Holders of
the relevant Securities, for a period of two years
(or for such longer period if extended pursuant to
Section 3(j) below) from the Issue Date or such
shorter period that will terminate when all the
Securities covered by the Shelf Registration
Statement (i) have been sold pursuant thereto or (ii)
are no longer restricted securities (as defined in
Rule 144 under the Securities Act, or any successor
rule thereof). The Company shall be deemed not to
have used its best efforts to keep the Shelf
Registration Statement effective during the requisite
period if it voluntarily takes any action that would
result in Holders of Securities covered thereby not
being able to offer and sell such Securities during
that period, unless such action is required by
applicable law.
(c) Notwithstanding any other provisions of this
Agreement to the contrary, the Company shall cause
the Shelf Registration Statement and the related
prospectus and any amendment or supplement thereto,
as of the effective date of the Shelf Registration
Statement, amendment or supplement, (i) to comply in
all material respects with the applicable
requirements of the Securities Act and the rules and
regulations of the Commission and (ii) not to contain
any untrue statement of a material fact or omit to
state a material fact required to be stated therein
or necessary in order to make the statements therein,
in light of the circumstances under which they
were made, not misleading.
(d) Notwithstanding anything to the contrary set
forth in this Agreement, if the Company is required
to file a Shelf Registration Statement pursuant to
this Section 2, the Company may postpone or suspend
the filing or effectiveness of such Shelf
Registration Statement (or any amendment or
supplements thereto) (i) if such action is required
by applicable law or (ii) for up to an aggregate of
60 days (but for not more than 30 consecutive days)
during any consecutive 365 day period, if such action
is taken by the Company in good faith and for valid
business reasons (not including the avoidance of the
Companys obligations hereunder), including the
premature disclosure of material nonpublic
information which, if disclosed at such time, would
be materially harmful to the interests of the Company
and its shareholders, so long as the Company promptly
thereafter complies with the requirements of this
Section 2. This 2(d) shall not affect the Companys
obligations, if any, to pay Additional Interest
pursuant to Section 6 of this Agreement.
3. Registration Procedures. In connection with any
Shelf Registration contemplated by Section
2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1
hereof, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial
Purchaser, prior to the filing thereof
with the Commission, a copy of the Registration
Statement and each amendment thereof and
each supplement, if any, to the prospectus included
therein and, in the event that an Initial
Purchaser (with respect to any portion of an unsold
allotment from the original offering) is
participating in the Registered Exchange Offer or the
Shelf Registration Statement, the Company
shall use its reasonable efforts to reflect in each
such document, when so filed with the
Commission, such comments as such Initial Purchaser
reasonably may propose; (ii) include the
information set forth in Annex A hereto on the cover,
in Annex B hereto in the Exchange Offer
Procedures section and the Purpose of the Exchange
Offer section and in Annex C hereto in
the Plan of Distribution section of the prospectus
forming a part of the Exchange Offer
Registration Statement and include the information
set forth in Annex D hereto in the Letter of
Transmittal delivered pursuant to the Registered
Exchange Offer; (iii) if requested by an Initial
Purchaser, include the information required by Items
507 or 508 of Regulation S-K under the
Securities Act, as applicable, in the prospectus
forming a part of the Exchange Offer Registration
Statement; (iv) include within the prospectus
contained in the Exchange Offer Registration
Statement a section entitled Plan of Distribution,
reasonably acceptable to the Initial
Purchasers, which shall contain a summary statement
of the positions taken or policies made by
the staff of the Commission with respect to the
potential underwriter status of any broker-dealer
that is the beneficial owner (as defined in Rule 13d-
3 under the Securities Exchange Act of 1934,
as amended (the Exchange Act)) of Exchange Securities
received by such broker-dealer in the
Registered Exchange Offer (a Participating Broker-
Dealer), whether such positions or policies
have been publicly disseminated by the staff of the
Commission or such positions or policies, in
the reasonable judgment of the Initial Purchasers
based upon advice of counsel (which may be in-
house counsel), represent the prevailing views of the
staff of the Commission; and (v) in the case
of a Shelf Registration Statement, include the names
of the Holders, who propose to sell
Securities pursuant to the Shelf Registration
Statement, as selling securityholders.
(b) The Company shall give written notice to the
Initial Purchasers, the Holders of the
Securities and any Participating Broker-Dealer from
whom the Company has received prior
written notice that it will be a Participating
Broker-Dealer in the Registered Exchange Offer
(which notice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite
changes have been made):
(i) when the Registration Statement or any amendment
thereto has been filed with the Commission and when
the Registration Statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the Commission for amendments
or supplements to the Registration Statement or the
prospectus included therein or for additional
information;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of the
Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company or its legal
counsel of any notification with
respect to the suspension of the qualification of the
Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding
for such purpose; and
(v) of the happening of any event that requires the
Company to make changes in the Registration Statement
or the prospectus in order that the Registration
Statement or the prospectus does not contain an
untrue statement of a material fact nor omit to
state a material fact required to be stated therein
or necessary to make the statements
therein (in the case of the prospectus, in light of
the circumstances under which they
were made) not misleading.
(c) The Company shall make every reasonable effort
to obtain the withdrawal at the
earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of
Securities included within the coverage of the Shelf
Registration, without charge, at least one copy of
the Shelf Registration Statement and any post-
effective amendment thereto, including financial
statements and schedules, and, if the Holder so
requests in writing, all exhibits thereto (including
those, if any, incorporated by reference).
(e) The Company shall deliver to each Exchanging
Dealer and each Initial Purchaser,
and to any other Holder who so requests, without
charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective
amendment thereto, including financial statements
and schedules, and, if any Initial Purchaser or any
such Holder requests, all exhibits thereto
(including those incorporated by reference).
(f) The Company shall, during the Shelf Registration
Period, deliver to each Holder of
Securities included within the coverage of the Shelf
Registration, without charge, as many copies
of the prospectus (including each preliminary
prospectus) included in the Shelf Registration
Statement and any amendment or supplement thereto as
such person may reasonably request.
The Company consents, subject to the provisions of
this Agreement, to the use of the prospectus
or any amendment or supplement thereto by each of the
selling Holders of the Securities in
connection with the offering and sale of the
Securities covered by the prospectus, or any
amendment or supplement thereto, included in the
Shelf Registration Statement.
(g) The Company shall deliver to each Initial
Purchaser, any Exchanging Dealer, any
Participating Broker-Dealer and such other persons
required to deliver a prospectus following the
Registered Exchange Offer, without charge, as many
copies of the final prospectus included in
the Exchange Offer Registration Statement and any
amendment or supplement thereto as such
persons may reasonably request. The Company
consents, subject to the provisions of this
Agreement, to the use of the prospectus or any
amendment or supplement thereto by any Initial
Purchaser, if necessary, any Participating Broker-
Dealer and such other persons required to
deliver a prospectus following the Registered
Exchange Offer in connection with the offering and
sale of the Exchange Securities covered by the
prospectus, or any amendment or supplement
thereto, included in such Exchange Offer Registration
Statement.
(h) Prior to any public offering of the Securities,
pursuant to any Registration Statement, the Company
shall register or qualify or cooperate with the
Holders of the Securities included therein and their
respective counsel in connection with the
registration or qualification of the Securities for
offer and sale under the securities or "blue sky"
laws of such states of the United States as any
Holder of the Securities reasonably requests in
writing and do any and all other acts or things
necessary or advisable to enable the offer and sale
in such jurisdictions of the Securities covered by
such Registration Statement; provided, however, that
the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it
is not then so qualified or (ii) take any action
which would subject it to general service of process
or to taxation in any jurisdiction where it is not
then so subject.
(i) The Company shall cooperate with the Holders of
the Securities to facilitate the timely preparation
and delivery of certificates representing the
Securities to be sold pursuant to any Registration
Statement free of any restrictive legends and in such
denominations and registered in such names as the
Holders may request a reasonable period of time prior
to sales of the Securities pursuant to such
Registration Statement.
(j) Upon the occurrence of any event contemplated by
paragraphs (ii) through (v) of Section 3(b) above
during the period for which the Company is required
to maintain an effective Registration Statement, the
Company shall promptly prepare and file a post-
effective amendment to the Registration Statement or
a supplement to the related prospectus and any other
required document so that, as thereafter delivered to
Holders of the Securities or purchasers of
Securities, the prospectus will not contain an 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, in light of
the circumstances under which they were made, not
misleading. If the Company notifies the Initial
Purchasers, the Holders of the Securities and any
known Participating Broker-Dealer in
accordance with paragraphs (ii) through (v) of
Section 3(b) above to suspend the use of the
prospectus until the requisite changes to the
prospectus have been made, then the Initial
Purchasers, the Holders of the Securities and any
such Participating Broker-Dealers shall suspend
use of such prospectus, and the period of
effectiveness of the Shelf Registration Statement
provided for in Section 2(b) above and the Exchange
Offer Registration Statement provided for in
Section 1 above shall each be extended by the number
of days from and including the date of the
giving of such notice to and including the date when
the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer
shall have received such amended or
supplemented prospectus pursuant to this Section
3(j).
(k) Not later than the effective date of the
applicable Registration Statement, the
Company will obtain a CUSIP number for the Initial
Securities, the Exchange Securities or the
Private Exchange Securities, as the case may be, and
provide the applicable trustee with printed
certificates for the Initial Securities, the Exchange
Securities or the Private Exchange Securities,
as the case may be, in a form eligible for deposit
with The Depository Trust Company.
(l) The Company will comply with all rules and
regulations of the Commission to the
extent and so long as they are applicable to the
Registered Exchange Offer or the Shelf
Registration and will make generally available to its
security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act)
an earnings statement satisfying the
provisions of Section 11(a) of the Securities Act, no
later than 45 days after the end of a 12-
month period (or 90 days, if such period is a fiscal
year) beginning with the first month of the
Company's first fiscal quarter commencing after the
effective date of the Registration Statement,
which statement shall cover such 12-month period.
(m) The Company shall cause the Indenture to be
qualified under the Trust Indenture
Act of 1939, as amended, in a timely manner and
containing such changes, if any, as shall be
necessary for such qualification. In the event that
such qualification would require the
appointment of a new trustee under the Indenture, the
Company shall appoint a new trustee thereunder
pursuant to the applicable provisions of the
Indenture.
(n) The Company may require each Holder of
Securities to be sold pursuant to the Shelf
Registration Statement to furnish to the Company such
information regarding the Holder and the distribution
of the Securities as the Company may from time to
time reasonably require for inclusion in the Shelf
Registration Statement, and the Company may exclude
from such registration the Securities of any Holder
that fails to furnish such information within a
reasonable time after receiving such request.
(o) The Company shall enter into such customary
agreements (including, if requested, an underwriting
agreement in customary form) and take all such other
action, if any, as any Holder of the Securities shall
reasonably request in order to facilitate the
disposition of the Securities pursuant to any Shelf
Registration.
(p) In the case of any Shelf Registration, the
Company shall (subject to entering into
customary confidentiality arrangements) (i) make
reasonably available for inspection by the
Holders of the Securities, any underwriter
participating in any disposition pursuant to the
Shelf Registration Statement and any attorney,
accountant or other agent retained by the Holders of
the Securities or any such underwriter all relevant
financial and other records, pertinent corporate
documents and properties of the Company and (ii)
cause the Companys officers, directors,
employees, accountants and auditors to supply all
relevant information reasonably requested by
the Holders of the Securities or any such
underwriter, attorney, accountant or agent in
connection with the Shelf Registration Statement, in
each case, as shall be reasonably necessary to enable
such persons, to conduct a reasonable investigation
within the meaning of Section 11 of the
Securities Act; provided, however, that the foregoing
inspection and information gathering shall
be coordinated on behalf of the Initial Purchasers by
you and on behalf of the other parties, by
one counsel designated by and on behalf of such other
parties as described in Section 4 hereof.
(q) In the case of any Shelf Registration, the
Company, if requested by any Holder of
Securities covered thereby, shall cause (i) its
counsel (which may be its in-house counsel) to
deliver an opinion and updates thereof relating to
the Securities in customary form addressed to
such Holders and the managing underwriters, if any,
thereof and dated, in the case of the initial
opinion, the effective date of such Shelf
Registration Statement (it being agreed that such
opinion may contain customary qualifications and
assumptions and that the matters to be covered by
such opinion shall include, without limitation, the
due incorporation and good standing of the
Company and its significant subsidiaries; the
qualification of the Company and its significant
subsidiaries to transact business as foreign
corporations; the due authorization, execution and
delivery of the relevant agreement of the type
referred to in Section 3(o) hereof; the due
authorization, execution, authentication and
issuance, and the validity and enforceability, of the
applicable Securities; the absence of material legal
or governmental proceedings involving the
Company and its subsidiaries; the absence of
governmental approvals required to be obtained in
connection with the Shelf Registration Statement, the
offering and sale of the applicable Securities, or
any agreement of the type referred to in Section 3(o)
hereof; the compliance as to form of such Shelf
Registration Statement and any documents incorporated
by reference therein and of the Indenture with the
requirements of the Securities Act and the Trust
Indenture Act, respectively; and, as of the date of
the opinion and as of the effective date of the Shelf
Registration Statement or most recent post-effective
amendment thereto, as the case may be, the
absence from such Shelf Registration Statement and
the prospectus included therein, as then amended or
supplemented, and from any documents incorporated by
reference therein of an untrue statement of a
material fact or the omission to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading (in the case of any such documents, in the
light of the circumstances existing at the time that
such documents were filed with the Commission under
the Exchange Act); (ii) its officers to execute and
deliver all customary documents and certificates and
updates thereof requested by any underwriters of the
applicable Securities and (iii) its independent
public accountants to provide to the selling Holders
of the applicable Securities and any underwriter
therefor a comfort letter in customary form and
covering matters of the type customarily covered in
comfort letters in connection with primary
underwritten offerings, subject to receipt of
appropriate documentation as contemplated, and only
if permitted, by Statement of Auditing Standards No.
72.
(r) In the case of the Registered Exchange Offer, if
requested by any Initial Purchaser or any known
Participating Broker-Dealer, the Company shall cause
(i) its counsel (which may be its in-house counsel)
to deliver to such Initial Purchaser or such
Participating Broker-Dealer a signed opinion in the
form set forth in Section 6(c) of the Purchase
Agreement with such changes as are customary in
connection with the preparation of a Registration
Statement and (ii) only if permitted by Statement of
Auditing Standards No. 72, its independent public
accountants to deliver to such Initial Purchaser or
such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the
substance thereof as set forth in Section 6(a)
of the Purchase Agreement, with appropriate date
changes.
(s) If a Registered Exchange Offer or a Private
Exchange is to be consummated, upon delivery of the
Initial Securities by Holders to the Company (or to
such other Person as directed by the Company) in
exchange for the Exchange Securities or the Private
Exchange Securities, as the case may be, the Company
shall mark, or caused to be marked, on the Initial
Securities so exchanged that such Initial Securities
are being canceled in exchange for the Exchange
Securities or the Private Exchange Securities, as the
case may be; in no event shall the Initial Securities
be marked as paid or otherwise satisfied.
(t) The Company will use its reasonable efforts to
(i) if the Initial Securities have been rated prior
to the initial sale of such Initial Securities,
confirm such ratings will apply to the Securities
covered by a Registration Statement, or (ii) if the
Initial Securities were not previously rated, cause
the Securities covered by a Registration Statement to
be rated with the appropriate rating agencies, if so
requested by Holders of a majority in aggregate
principal amount of Securities covered by such
Registration Statement, or by the managing
Underwriters, if any.
(u) In the event that any broker-dealer registered
under the Exchange Act shall underwrite any
Securities or participate as a member of an
underwriting syndicate or selling group or assist in
the distribution (within the meaning of the Conduct
Rules (the Rules) of the National Association of
Securities Dealers, Inc. (NASD)) thereof, whether as
a Holder of such Securities or as an underwriter, a
placement or sales agent or a broker or dealer in
respect thereof, or otherwise, the Company will
assist such broker-dealer in complying with the
requirements of such Rules, including, without
limitation, by (i) if such Rules, including Rule
2720, shall so require, engaging a "qualified
independent underwriter" (as defined in Rule 2720)
to participate in the preparation of the Registration
Statement relating to such Securities, to
exercise usual standards of due diligence in respect
thereto and, if any portion of the offering
contemplated by such Registration Statement is an
underwritten offering or is made through a
placement or sales agent, to recommend the yield of
such Securities, (ii) indemnifying any such
qualified independent underwriter to the extent of
the indemnification of underwriters provided
in Section 5 hereof and (iii) providing such
information to such broker-dealer as may be required
in order for such broker-dealer to comply with the
requirements of the Rules.
(v) The Company shall use its best efforts to take
all other steps necessary to effect the
registration of the Securities covered by a
Registration Statement contemplated hereby.
4. Registration Expenses. The Company shall bear
all fees and expenses incurred in connection
with the performance of its obligations under
Sections 1 through 3 hereof (including the reasonable
fees and expenses, if any, of Simpson Thacher &
Bartlett, counsel for the Initial Purchasers,
incurred in connection with the Registered Exchange
Offer), whether or not the Registered Exchange Offer
or a Shelf Registration is filed or becomes
effective, and, in the event of a Shelf Registration,
shall bear or reimburse the Holders of the Securities
covered thereby for the reasonable fees and
disbursements of one firm of counsel designated by
the Holders of a majority in principal amount of the
Initial Securities covered thereby to act as counsel
for the Holders of the Initial Securities in
connection therewith.
5. Indemnification. (a) The Company agrees to
indemnify and hold harmless each Holder of the
Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such
Participating Broker-Dealer within the meaning of the
Securities Act or the Exchange Act (each Holder,
any Participating Broker-Dealer and such controlling
persons are referred to collectively as the
Indemnified Parties) from and against any losses,
claims, damages or liabilities, joint or several, or
any actions in respect thereof (including, but not
limited to, any losses, claims, damages, liabilities
or actions relating to purchases and sales of the
Securities) to which each Indemnified Party may
become subject under the Securities Act, the Exchange
Act or otherwise, insofar as such losses, claims,
damages, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue
statement of a material fact contained in a
Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration, or arise
out of, or are based upon, the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, and shall reimburse, as
incurred, the Indemnified Parties for any legal or
other expenses reasonably incurred by them
(including, without limitation, the fees and
expenses of a single counsel (in addition to any
local counsel) to all Indemnified Parties
collectively in connection with any proceeding or
related proceedings in the same jurisdiction) in
connection with investigating or defending any such
loss, claim, damage, liability or action in respect
thereof; provided, however, that (i) the Company
shall not be liable in any such case to the extent
that such loss, claim, damage or liability arises out
of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made
in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration in
reliance upon and in conformity with written
information pertaining to such Holder and furnished
to the Company by or on behalf of such Holder
specifically for inclusion therein and (ii) with
respect to any untrue statement or omission or
alleged untrue statement or omission made in any
preliminary prospectus relating to a Shelf
Registration Statement, the indemnity agreement
contained in this subsection (a) shall not inure to
the benefit of any Holder or Participating Broker-
Dealer from whom the person asserting any such
losses, claims, damages or liabilities purchased the
Securities concerned, to the extent that a prospectus
relating to such Securities was required to be
delivered by such Holder or Participating Broker-
Dealer under the Securities Act in connection with
such purchase and any such loss, claim, damage or
liability of such Holder or Participating Broker-
Dealer results from the fact that there was not sent
or given to such person, at or prior to the written
confirmation of the sale of such Securities to such
person, a copy of the final prospectus if the Company
had previously furnished copies thereof to such
Holder or Participating Broker-Dealer; provided
further, however, that this indemnity agreement will
be in addition to any liability which the Company may
otherwise have to such Indemnified Party. The
Company shall also indemnify underwriters, their
officers and directors and each person who controls
such underwriters within the meaning of the
Securities Act or the Exchange Act to the same extent
as provided above with respect to the indemnification
of the Holders of the Securities if requested by such
Holders.
(b) Each Holder of the Securities, severally and not
jointly, will indemnify and hold harmless the
Company and each person, if any, who controls the
Company within the meaning of the Securities Act or
the Exchange Act from and against any losses, claims,
damages or liabilities or any actions in respect
thereof, to which the Company or any such controlling
person may become subject under the Securities
Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages, liabilities or actions arise
out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained
in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary
prospectus relating to a Shelf Registration, or arise
out of or are based upon the omission or alleged
omission to state therein a material fact necessary
to make the statements therein not misleading, but in
each case only to the extent that the untrue
statement or omission or alleged untrue statement or
omission was made in reliance upon and in conformity
with written information pertaining to such Holder
and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein; and,
subject to the limitation set forth immediately
preceding this clause, shall reimburse, as incurred,
the Company for any legal or other expenses
reasonably incurred by the Company or any such
controlling person in connection with investigating
or defending any loss, claim, damage, liability or
action in respect thereof.
This indemnity agreement will be in addition to any
liability which such Holder may otherwise have to the
Company or any of its controlling persons.
(c) Promptly after receipt by an indemnified party
under this Section 5 of notice of the commencement of
any action or proceeding (including a governmental
investigation), such indemnified party will, if a
claim in respect thereof is to be made against the
indemnifying party under this Section 5,
notify the indemnifying party of the commencement
thereof; but the omission so to notify the
indemnifying party will not, in any event, relieve
the indemnifying party from any obligations to any
indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above,
except to the extent the Indemnified Party is
prejudiced thereby. The Indemnifying Party shall not
be liable for any settlement of any proceeding
without its written consent. In case any such action
is brought against any indemnified party, and it
notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may
wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such
indemnified party (it being understood that, except
with the consent of the indemnified party, the
indemnifying party and the indemnified party shall
have separate counsel), and after notice from the
indemnifying party to such indemnified party of its
election so to assume the defense thereof the
indemnifying party will not be liable to such
indemnified party under this Section 5 for any legal
or other expenses, other than reasonable costs of
investigation, subsequently incurred by such
indemnified party in connection with the defense
thereof. No indemnifying party shall, without the
prior written consent of the indemnified party, which
consent shall not be unreasonable withheld, effect
any settlement of any pending or threatened action in
respect of which any indemnified party is or could
have been a party and indemnity could have been
sought hereunder by such indemnified party unless
such settlement includes an unconditional release of
such indemnified party from all liability on any
claims that are the subject matter of such action.
(d) If the indemnification provided for in this
Section 5 is unavailable or insufficient to hold
harmless an indemnified party under subsections (a)
or (b) above, then each indemnifying party shall
contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect
thereof) referred to in subsection (a) or (b) above
(i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified
party on the other from the exchange of the
Securities, pursuant to the Registered Exchange
Offer, or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable
law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in
clause (i) above but also the relative fault of the
indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the
statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect
thereof) as well as any other relevant equitable
considerations. The relative fault of the parties
shall be determined by reference to, among other
things, whether the untrue or alleged untrue
statement of a material fact or the omission or
alleged omission to state a material fact relates to
information supplied by the Company on the one hand
or such Holder or such other indemnified party, as
the case may be, on the other, and the parties'
relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or
omission. The amount paid by an indemnified party as
a result of the losses, claims, damages or
liabilities referred to in the first sentence of this
subsection (d) shall be deemed to include any legal
(including, without limitation, the fees
and expenses of a single counsel (in addition to any
local counsel) to all indemnified parties
collectively in connection with any proceeding or
related proceedings in the same jurisdiction) or
other expenses reasonably incurred by such
indemnified party in connection with investigating or
defending any action or claim which is the subject of
this subsection (d). Notwithstanding any other
provision of this Section 5(d), the Holders of the
Securities shall not be required to contribute any
amount in excess of the amount by which the net
proceeds received by such Holders from the sale of
the Securities pursuant to a Registration
Statement exceeds the amount of damages which such
Holders have otherwise been required to pay by
reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For
purposes of this paragraph (d), each person, if any,
who controls such indemnified party within the
meaning of the Securities Act or the Exchange Act
shall have the same rights to contribution as such
indemnified party and each person, if any, who
controls the Company within the meaning of the
Securities Act or the Exchange Act shall have the
same rights to contribution as the Company.
(e) The agreements contained in this Section 5 shall
survive the sale of the Securities pursuant to
a Registration Statement and shall remain in full
force and effect, regardless of any termination or
cancellation of this Agreement or any investigation
made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances.
(a) Additional interest (the Additional
Interest) with respect to the Initial Securities
shall be assessed as follows if any of the following
events occur (each such event in clauses (i) through
(iii) below a Registration Default):
(i) If by July 23, 1998, neither the Exchange Offer
Registration Statement nor a Shelf Registration
Statement has been filed with the Commission;
(ii) If by September 21, 1998, neither the
Registered Exchange Offer is consummated
nor, if required in lieu thereof, the Shelf
Registration Statement is declared effective by the
Commission; or
(iii) If after either the Exchange Offer
Registration Statement or the Shelf Registration
Statement is declared effective (A) such Registration
Statement thereafter ceases to be effective
during the period specified herein; or (B) such
Registration Statement or the related prospectus
ceases to be usable (except as permitted in paragraph
(b) below) in connection with resales of
Transfer Restricted Securities during the periods
specified herein because either (1) any event
occurs as a result of which the related prospectus
forming part of such Registration Statement
would include any untrue statement of a material fact
or omit to state any material fact necessary
to make the statements therein in the light of the
circumstances under which they were made not
misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the
related prospectus, to comply with the Securities Act
or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Initial
Securities over and above the interest set forth in
the title of the Securities from and including the
date on which any one or more such Registration
Defaults shall occur to but excluding the date on
which all such Registration Defaults have been cured,
at a rate of 0.50% per annum.
(b) A Registration Default referred to in Section
6(a)(iii)(B) hereof shall be deemed not to have
occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if
(i) such Registration Default has occurred solely as
a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to
incorporate annual audited financial information with
respect to the Company where such post-effective
amendment is not yet effective and needs to be
declared effective to permit Holders to use the
related prospectus or (y) other material events, with
respect to the Company that would need to be
described in such Shelf Registration Statement or the
related prospectus and (ii) in the case of clause
(y), the Company is proceeding promptly and in good
faith to amend or supplement such Shelf Registration
Statement and related prospectus to describe such
events; provided, however, that in any case if such
Registration Default occurs for a continuous period
in excess of 30 days, Additional Interest shall be
payable in accordance with the above paragraph from
the day such Registration Default occurs until such
Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant
to clause (i), (ii) or (iii) of Section 6(a)
above will be payable in cash on the regular interest
payment dates with respect to the Initial Securities.
The amount of Additional Interest will be determined
by multiplying the applicable Additional Interest
rate by the principal amount of the Initial
Securities, multiplied by a fraction, the numerator
of which is the number of days such Additional
Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised
of twelve 30-day months), and the denominator of
which is 360.
(d) Transfer Restricted Securities means each
Security until (i) the date on which such
Transfer Restricted Security has been exchanged by a
person other than a broker-dealer for a freely
transferable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a
broker-dealer in the Registered Exchange Offer of a
Initial Security for an Exchange Note, the date on
which such Exchange Note is sold to a purchaser who
receives from such broker-dealer on or prior to the
date of such sale a copy of the prospectus contained
in the Exchange Offer Registration Statement, (iii)
the date on which such Initial Security has been
effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Initial
Securities is distributed to the public pursuant to
Rule 144 under the Securities Act or is saleable
pursuant to Rule 144(k) under the Securities Act.
7. Rules 144 and 144A. The Company shall use its
reasonable efforts to file the reports required
to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time
the Company is not required to file such reports, it
will, upon the request of any Holder of Initial
Securities, make publicly available other information
so long as necessary to permit sales of their
securities pursuant to Rules 144 and 144A. The
Company covenants that it will take such further
action as any Holder of Initial Securities may
reasonably request, all to the extent required from
time to time to enable such Holder to sell Initial
Securities without registration under the Securities
Act within the limitation of the exemptions provided
by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)). The Company will provide a copy of
this Agreement to prospective purchasers of Initial
Securities identified to the Company by the Initial
Purchasers upon request. Upon the request of any
Holder of Initial Securities, the Company shall
deliver to such Holder a written statement as to
whether it has complied with such requirements.
Notwithstanding the foregoing, nothing in this
Section 7 shall be deemed to require the Company to
register any of its securities pursuant to the
Exchange Act.
8. Underwritten Registrations. If any of the
Transfer Restricted Securities covered by any Shelf
Registration are to be sold in an underwritten
offering, the investment banker or investment bankers
and manager or managers that will administer the
offering (Managing Underwriters) will be selected by
the Holders of a majority in aggregate principal
amount of such Transfer Restricted Securities to be
included in such offering, subject to the Companys
approval, which shall not be unreasonably withheld.
No person may participate in any underwritten
registration hereunder unless such person (i)
agrees to sell such persons Transfer Restricted
Securities on the basis reasonably provided in any
underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting
agreements and other documents reasonably required
under the terms of such underwriting arrangements.
9. Miscellaneous.
(a) Amendments and Waivers. The provisions of this
Agreement may not be amended, modified
or supplemented, and waivers or consents to
departures from the provisions hereof may not be
given, except by the Company and the written consent
of the Holders of a majority in principal amount of
the Securities affected by such amendment,
modification, supplement, waiver or consents.
(b) Notices. All notices and other communications
provided for or permitted hereunder shall be
made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which
guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most
current address given by such Holder to the Company.
(2) if to the Initial Purchasers;
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Fax No.: (212) 455-2502
Attention: Charles Garner
(3) if to the Company, at its address as follows:
One Computer Associates Plaza
Islandia, New York 11788
Fax No.: (516) 342-4854
Attention: Treasurer
with a copy to:
Howard, Darby & Levin
1330 Avenue of the Americas
New York, NY 10019
Fax No.: (212) 841-1010
Attention: Stephen A. Infante
All such notices and communications shall be deemed
to have been duly given: at the time delivered by
hand, if personally delivered; three business days
after being deposited in the mail, postage
prepaid, if mailed; when receipt is acknowledged by
recipient's facsimile machine operator, if sent by
facsimile transmission; and on the day delivered, if
sent by overnight air courier guaranteeing next day
delivery.
(c) No Inconsistent Agreements. The Company has
not, as of the date hereof, entered into, nor
shall it, on or after the date hereof, enter into,
any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders
herein or otherwise conflicts with the provisions
hereof.
(d) Successors and Assigns. This Agreement shall be
binding upon the Company and its successors and
assigns.
(e) Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto
in separate counterparts, each of which when so
executed shall be deemed to be an original
and all of which taken together shall constitute one
and the same agreement.
(f) Headings. The headings in this Agreement are
for convenience of reference only and shall
not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS.
(h) Severability. If any one or more of the
provisions contained herein, or the application
thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and
enforceability of any such provision in every other
respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) Securities Held by the Company. Whenever the
consent or approval of Holders of a specified
percentage of principal amount of Securities is
required hereunder, Securities held by the Company or
its affiliates (other than subsequent Holders of
Securities if such subsequent Holders are deemed to
be affiliates solely by reason of their holdings of
such Securities) shall not be counted in determining
whether such consent or approval was given by the
Holders of such required percentage.
If the foregoing is in accordance with your
understanding of our agreement, please sign and
return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will
become a binding agreement among the several Initial
Purchasers and the Company in accordance with
its terms.
Very truly yours,
Computer Associates International, Inc.
by:____________________________
Name:
Title:
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BEAR, STEARNS & CO. INC.
BANCAMERICA ROBERTSON STEPHENS
CHASE SECURITIES INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
by: CREDIT SUISSE FIRST BOSTON CORPORATION
By:_____________________________
Name:
Title:
ANNEX A
Each broker-dealer that receives Exchange Securities
for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange
Securities. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is
an underwriter within the meaning of the Securities
Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange
Securities received in exchange for Initial
Securities where such Initial Securities were
acquired by such broker-dealer as a result of market-
making activities or other trading activities. The
Company has agreed that, for a period of 180 days
after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-
dealer for use in connection with any such resale.
See Plan of Distribution.
ANNEX B
Each broker-dealer that receives Exchange Securities
for its own account in exchange for Securities,
where such Initial Securities were acquired by such
broker-dealer as a result of market-making activities
or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any
resale of such Exchange Securities. See Plan of
Distribution.
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities
for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange
Securities. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange
Securities received in exchange for Initial
Securities where such Initial Securities were
acquired as a result of market-making activities or
other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration
Date, it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use
in connection with any such resale. In addition,
until , 199 , all dealers effecting transactions
in the Exchange Securities may be required to deliver
a prospectus.( )
The Company will not receive any proceeds from any
sale of Exchange Securities by broker-dealers.
Exchange Securities received by broker-dealers for
their own account pursuant to the Exchange Offer may
be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated
transactions, through the writing of options on the
Exchange Securities or a combination of such methods
of resale, at market prices prevailing at the time of
resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers
or dealers who may receive compensation in the form
of commissions or concessions from any such broker-
dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange
Securities that were received by it for its own
account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such
Exchange Securities may be deemed to be an
"underwriter" within the meaning of the Securities
Act and any profit on any such resale of
Exchange Securities and any commission or concessions
received by any such persons may be deemed to
be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning
of the Securities Act.
For a period of 180 days after the Expiration Date
the Company will promptly send additional
copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer
that requests such documents in the Letter of
Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including
the expenses of one counsel for the Holders of the
Securities)other than commissions or concessions of
any brokers or dealers and will indemnify the Holders
of the Securities (including any broker-dealers)
against certain liabilities, including liabilities
under the Securities Act.
ANNEX D
1
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO
RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10
COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and
does not intend to engage in, a distribution of
Exchange Securities. If the undersigned is a broker-
dealer that will receive Exchange Securities for its
own account in exchange for Initial Securities that
were acquired as a result of market-making activities
or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any
resale of such Exchange Securities; however, by so
acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act.
( ) In addition, the legend required by Item 502(e)
of Regulation S-K will appear on the back
cover page of the Exchange Offer prospectus.
(..continued)
13
