-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DK3KDI9P0z8eYKpUPXlwI7GR17h6SQIa39DLMDNzey4jcKqIVqkmUG/lCYT4hiCF gS42L3qXuK6K8wMzkMVmNg== 0001047469-98-008729.txt : 19980306 0001047469-98-008729.hdr.sgml : 19980306 ACCESSION NUMBER: 0001047469-98-008729 CONFORMED SUBMISSION TYPE: SC 14D1/A PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19980305 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER SCIENCES CORP CENTRAL INDEX KEY: 0000023082 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 952043126 STATE OF INCORPORATION: NV FISCAL YEAR END: 0328 FILING VALUES: FORM TYPE: SC 14D1/A SEC ACT: SEC FILE NUMBER: 005-06907 FILM NUMBER: 98558250 BUSINESS ADDRESS: STREET 1: 2100 E GRAND AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 BUSINESS PHONE: 3106150311 MAIL ADDRESS: STREET 1: 2100 EAST GRAND AVE CITY: EL SEGUNDO STATE: CA ZIP: 90245 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER ASSOCIATES INTERNATIONAL INC CENTRAL INDEX KEY: 0000356028 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 132857434 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 14D1/A BUSINESS ADDRESS: STREET 1: ONE COMPUTER ASSOCIATES PLAZA CITY: ISLANDIA STATE: NY ZIP: 11788 BUSINESS PHONE: 5163425224 SC 14D1/A 1 AMEND NO. 6 TO SC 14D-1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 6 TO SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 COMPUTER SCIENCES CORPORATION (Name of Subject Company) ------------------------------ CAI COMPUTER SERVICES CORP. COMPUTER ASSOCIATES INTERNATIONAL, INC. (Bidder) COMMON STOCK, PAR VALUE $1.00 PER SHARE SERIES A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS (Title of Class of Securities) 20536310-4 (CUSIP Number of Class of Securities) SANJAY KUMAR PRESIDENT AND CHIEF OPERATING OFFICER C/O COMPUTER ASSOCIATES INTERNATIONAL, INC. ONE COMPUTER ASSOCIATES PLAZA ISLANDIA, NEW YORK 11788-7000 TELEPHONE: (516) 342-5224 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) ------------------------------ COPIES TO: SCOTT F. SMITH, ESQ. HOWARD, DARBY & LEVIN 1330 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 TELEPHONE: (212) 841-1000 ------------------------ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Statement amends and supplements the Tender Offer Statement on Schedule 14D-1 filed with the Securities and Exchange Commission on February 17, 1998, as previously amended (the "Schedule 14D-1"), relating to the offer by CAI Computer Services Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Computer Associates International, Inc., a Delaware corporation ("Computer Associates"), to purchase all outstanding shares of Common Stock, par value $1.00 per share (the "Shares"), of Computer Sciences Corporation, a Nevada corporation ("CSC"), together with (unless and until the Purchaser declares that the Rights Condition (as defined in the Offer to Purchase) has been satisfied) the Series A Junior Participating Preferred Stock Purchase Rights (the "Rights") associated therewith, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 17, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal, at a purchase price of $108 per Share (and associated Right) net to the tendering stockholder in cash, without interest thereon. Capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Offer to Purchase and the Schedule 14D-1. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. ITEM 10. ADDITIONAL INFORMATION. On February 23, 1998, CSC filed with the United States District Court for the District of Nevada (the "Nevada District Court") a Response to Computer Associates Ex Parte Motion for an Expedited Hearing On Claims For Declaratory Relief. A copy of the Response is filed as Exhibit (g)(5) to this Statement, and is incorporated herein by reference. On February 23, 1998, CSC filed with the Superior Court of the State of California for the County of Los Angeles, Central District, a complaint seeking injunctive relief and damages. A copy of the complaint is filed as Exhibit (g)(6) to this Statement, and is incorporated herein by reference. On February 26, 1998 the Nevada District Court issued an Order granting Computer Associates' motion for an expedited briefing schedule and hearing on claims for declaratory relief to be conducted on March 16, 1998. On February 27, 1998, Computer Associates issued a press release outlining the Order. Copies of the Order and the press release are attached hereto, respectively, as Exhibits (g)(7) and (a)(13) to this Statement and are incorporated herein by reference. On March 2, 1998, CSC filed with the Superior Court of the State of California for the County of Los Angeles, Central District, a Complaint for injunctive relief and damages. A copy of the Complaint is filed as Exhibit (g)(8) to this Statement, and is incorporated herein by reference. On March 2, 1998, Computer Associates issued a press release announcing that it is proceeding with the Offer to acquire CSC. A copy of the press release is attached as Exhibit (a)(14) to this Statement, and is incorporated herein by reference. On March 5, 1998, Computer Associates issued a press release announcing that it will let the Offer expire at midnight on March 16, 1998. In addition, on March 5, 1998, Charles B. Wang, Chairman and Chief Executive Officer of Computer Associates, sent a letter to Van B. Honeycutt, Chairman and Chief Executive Officer of CSC. The full text of the press release and Mr. Wang's letter (which is attached to the press release) is attached as Exhibit (a)(15) to this Statement and is incorporated herein by reference. 2 ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NUMBER EXHIBIT NAME - ----------- ----------------------------------------------------------------------------------------------------- (a)(13) Text of press release issued by Computer Associates dated February 27, 1998. (a)(14) Text of press release issued by Computer Associates dated March 2, 1998. (a)(15) Text of press release issued by Computer Associates dated March 5, 1998 (including Letter dated March 5, 1998 from Charles B. Wang to Van B. Honeycutt). (g)(5) Response of Computer Sciences Corporation to Computer Associates Ex Parte Motion for an Expedited Hearing on Claims For Declaratory Relief, filed with the United States District Court for the District of Nevada on February 23, 1998. (g)(6) Complaint of Computer Sciences Corporation filed with the Superior Court of the State of California for the County of Los Angeles, Central District on February 23, 1998. (g)(7) Order of the United States District Court for the District of Nevada granting Computer Associates' Motion for an Expedited Hearing on Claims for Declaratory Relief, filed February 26, 1998. (g)(8) Complaint of Computer Sciences Corporation filed with the Superior Court of the State of California for the County of Los Angeles, Central District for Injunctive Relief and Damages on March 2, 1998.
3 SIGNATURE After due inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: March 5, 1998 CAI COMPUTER SERVICES CORP. By /s/ PETER SCHWARTZ ----------------------------------------- Name: Peter Schwartz Title: Vice President and Treasurer COMPUTER ASSOCIATES INTERNATIONAL, INC. By /s/ PETER SCHWARTZ ----------------------------------------- Name: Peter Schwartz Title: Senior Vice President and Chief Financial Officer 4 EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT NAME - ----------- ----------------------------------------------------------------------------------------------------- (a)(13) Text of press release issued by Computer Associates dated February 27, 1998. (a)(14) Text of press release issued by Computer Associates dated March 2, 1998. (a)(15) Text of press release issued by Computer Associates dated March 5, 1998 (including Letter dated March 5, 1998 from Charles B. Wang to Van B. Honeycutt). (g)(5) Response of Computer Sciences Corporation to Computer Associates Ex Parte Motion for an Expedited Hearing on Claims For Declaratory Relief, filed with the United States District Court for the District of Nevada on February 23, 1998. (g)(6) Complaint of Computer Sciences Corporation filed with the Superior Court of the State of California for the County of Los Angeles, Central District on February 23, 1998. (g)(7) Order of the United States District Court for the District of Nevada granting Computer Associates' Motion for an Expedited Hearing on Claims for Declaratory Relief, filed February 26, 1998. (g)(8) Complaint of Computer Sciences Corporation filed with the Superior Court of the State of California for the County of Los Angeles, Central District for Injunctive Relief and Damages on March 2, 1998.
5 EX-99.(A)(13) 2 PRESS RELEASE DATED 2/27/98 Exhibit (a)(13) Contact: Bob Gordon, CA Doug Robinson, Investor Relations (516) 342-2391 (516) 342-2745 bobg@cai.com dougr@cai.com HEARING EXPEDITED ON COMPUTER ASSOCIATES' TAKEOVER OF CSC Nevada Court Sets March 16 Hearing To Rule On Legality Of Anti-Takeover Measures Adopted By CSC ISLANDIA, N.Y., February 27, 1998--The United States District Court for the District of late yesterday granted Computer Associates' motion, which was vigorously opposed by Computer Sciences Corporation, for an expedited hearing to declare illegal anti-takeover recently adopted by CSC. The ruling stated that, "because a material delay carries the of impeding the tender offer, the court concludes that an expedited disposition of the is warranted." Based upon that hearing, scheduled for March 16, the Court will decide CA's claims that to CSC's bylaws strip away the rights of CSC shareholders to remove the board directors and to consider its $9 billion all-cash offer. The Court will also decide CSC rights to remove and replace CSC directors who oppose CA's offer. Last night, CSC issued a misleading press release headlining one minor issue which has nothing do with whether the anti-takeover issues are illegal. The CSC press release ignored the main import of the Court's ruling, which was to grant an expedited hearing to address the legality of CSC's recently adopted anti-takeover measures. In fact, the Court referred all discovery on that ancillary point to a magistrate judge while an immediate hearing on the legality of the amendments. The Court rejected CSC's request that no hearing take place before mid-June and refused to delay consideration of the legality of CSC's response until CSC took discovery. Computer Associates is pleased with the Court's decision to hear its claims promptly and is confident that the rights of the CSC shareholders will be restored. Computer Associates International, Inc. (NYSE: CA), with headquarters in Islandia, N.Y., is the world leader in mission-critical business software. The company develops, licenses and supports more than 500 integrated products that include enterprise computing and information management, application development, manufacturing and financial applications. CA has over 11,000 people in 160 offices in 43 countries and had revenue of $4.5 billion in calendar year 1997. CA can be reached by visiting http://www.cai.com on the World Wide Web, emailing info@cai.com, or calling 1-516-342-5224. Computer Associates and the Computer Associates Nominees are participants in the of consents, proxies and agent designations from Computer Sciences Corporation shareholders. The Computer Associates nominees are Charles B. Wang, Sanjay Kumar, Artzt, Peter A. Schwartz, Steven M. Woghin, Charles P. McWade, Ira Zar, Michael A., David Kaplan, Robert Toth, Richard Chiarello, Lisa Savino, Gary Quinn, Abraham and Douglas Robinson. None of the Computer Associates Nominees will receive additional compensation for their participation in this solicitation. Computer Associates own, through a wholly owned subsidiary, 170,000 shares of common stock of Computer Sciences Corporation. None of the Computer Associates Nominees owns any shares of Computer Sciences common stock. Computer Associates has also retained Bear, Stearns & Co. Inc. and its affiliates ("Bear Stearns") to provide certain financial advisory services to Computer Associates. Bear Stearns is acting as Dealer Manager in connection with the Offer and as financial advisor to Computer Associates and CAI Computer Services Corp., a wholly owned subsidiary of Computer Associates, in connection with the proposed acquisition of the Company, but Bear Stearns has not been retained to specifically assist in this solicitation. Computer Associates is obligated to pay to Bear Stearns, if, as more fully described in the engagement letter relating to Bear Stearns' engagement, during the term of the engagement or within 12 months thereafter Computer Associates acquires the Company or more than 50% of its outstanding voting securities, a fee of $5 million and a fee of $1 million (which will be credited against such $5 million fee) if Computer Associates requests Bear Stearns to render a customary fairness opinion. Bear Stearns is also entitled to act as sole lead underwriter, placement agent and financial advisor in connection with certain debt and equity financings (and certain refinancings) and certain asset sales for a specified period following the acquisition and to receive fees in connection therewith. In addition, Computer Associates has agreed to reimburse Bear Stearns for its reasonable expenses, including reasonable fees and disbursements of its counsel, incurred in rendering its services under its engagement agreement with Computer Associates and has agreed to indemnify Bear Stearns against certain liabilities and expenses in connection with the Offer and the Proposed Merger, including certain liabilities under the federal securities laws. Bear Stearns from time to time renders various investment banking services to Computer Associates and its affiliates for which it is paid customary fees. In connection with Bear Stearns' engagement as financial advisor, Computer Associates anticipates that Michael J. Urfirer, Senior Managing Director of Bear Stearns, Lisa M. Price, Senior Managing Director of Bear Stearns and Barry J. Cohen, Senior Managing Director of Bear Stearns, none of whom will receive additional compensation for such solicitation, may communicate in person, by telephone or otherwise with a limited number of institutions, brokers or other persons who are shareholders for the purpose of assisting in this solicitation. Bear Stearns will not receive any fee for, or in connection with, such solicitation activities by its employees apart from the fees it is otherwise entitled to receive as described above. None of the above-named employees of Bear Stearns owns any shares of Computer Sciences Corporation common stock. EX-99.(A)(14) 3 PRESS RELEASE DATED 3/2/98 Exhibit (a)(14) Contact: Bob Gordon, CA Doug Robinson, Investor Relations (516) 342-2391 (516) 342-2745 bobg@cai.com dougr@cai.com COMPUTER ASSOCIATES PROCEEDS WITH OFFER FOR COMPUTER SCIENCES ISLANDIA, N.Y., March 2, 1998 - Computer Associates International, Inc. (CA:NYSE) today that it is proceeding with its $108 per share all cash offer to acquire Computer. "After reviewing CSC's 14D-9 filing today, we see no new information from CSC," stated Charles B. Wang, CA's Chairman and CEO. "CSC's principal justification for rejecting the appears to be our willingness to pay more in a promptly negotiated transaction. Under circumstances, we are bewildered by the intransigence of CSC's management in refusing meet with us and the lengths to which its Board of Directors has gone to frustrate the rights of shareholders. We are hopeful that the prompt hearing the Nevada Federal District Court for March 16, 1998 will eliminate the impediments the CSC Board has erected and confirm the shareholders rights to have a say in accepting CA's offer." Computer Associates International, Inc. (NYSE: CA), with headquarters in Islandia, N.Y., is the world leader in mission-critical business software. The company develops, licenses and supports more than 500 integrated products that include enterprise computing and information management, application development, manufacturing and financial applications. CA has over 11,000 people in 160 offices in 43 countries and had revenue of $4.5 billion in calendar year 1997. CA can be reached by visiting http://www.cai.com on the World Wide Web, emailing info@cai.com, or calling 1-516-342-5224. Computer Associates and the Computer Associates Nominees are participants in the of consents, proxies and agent designations from Computer Sciences Corporation shareholders. The Computer Associates nominees are Charles B. Wang, Sanjay Kumar, Artzt, Peter A. Schwartz, Steven M. Woghin, Charles P. McWade, Ira Zar, Michael A., David Kaplan, Robert Toth, Richard Chiarello, Lisa Savino, Gary Quinn, Abraham and Douglas Robinson. None of the Computer Associates Nominees will receive additional compensation for their participation in this solicitation. Computer Associates owns, through a wholly owned subsidiary, 170,000 shares of common stock of Computer Sciences Corporation. None of the Computer Associates Nominees owns any shares of Computer Sciences common stock. Computer Associates has also retained Bear, Stearns & Co. Inc. and its affiliates ("Bear Stearns") to provide certain financial advisory services to Computer Associates. Bear Stearns is acting as Dealer Manager in connection with the Offer and as financial advisor to Computer Associates and CAI Computer Services Corp., a wholly owned subsidiary of Computer Associates, in connection with the proposed acquisition of the Company, but Bear Stearns has not been retained to specifically assist in this solicitation. Computer Associates is obligated to pay to Bear Stearns, if, as more fully described in the engagement letter relating to Bear Stearns' engagement, during the term of the engagement or within 12 months thereafter Computer Associates acquires the Company or more than 50% of its outstanding voting securities, a fee of $5 million and a fee of $1 million (which will be credited against such $5 million fee) if Computer Associates requests Bear Stearns to render a customary fairness opinion. Bear Stearns is also entitled to act as sole lead underwriter, placement agreement and financial advisor in connection with certain debt and equity financings (and certain refinancings) and certain asset sales for a specified period following the acquisition and to receive fees in connection therewith. In addition, Computer Associates has agreed to reimburse Bear Stearns for its reasonable expenses, including reasonable fees and disbursements of its counsel, incurred in rendering its services under its engagement agreement with Computer Associates and has agreed to indemnify Bear Stearns against certain liabilities and expenses in connection with the Offer and the Proposed Merger, including certain liabilities under the federal securities laws. Bear Stearns from time to time renders various investment banking services to Computer Associates and its affiliates for which it is paid customary fees. In connection with Bear Stearns' engagement as financial advisor, Computer Associates anticipates that Michael J. Urfirer, Senior Managing Director of Bear Stearns, Lisa M. Price, Senior Managing Director of Bear Stearns and Barry J. Cohen, Senior Managing Director of Bear Stearns, none of whom will receive additional compensation for such solicitation, may communicate in person, by telephone or otherwise with a limited number of institutions, brokers or other persons who are shareholders for the purpose of assisting in this solicitation. Bear Stearns will not receive any fee for, or in connection with, such solicitation activities by its employees apart from the fees it is otherwise entitled to receive as described above. None of the above-named employees of Bear Stearns owns any shares of Computer Sciences Corporation common stock. EX-99.(A)(15) 4 PRESS RELEASE DATED 3/5/98 Exhibit (a)(15) Contact: Bob Gordon, CA Doug Robinson, Investor Relations (516) 342-2391 (516) 342-2745 bobg@cai.com dougr@cai.com CA TO LET CSC TENDER OFFER EXPIRE ON MARCH 16 ISLANDIA, N.Y., March 5, 1998--Computer Associates International, Inc. (CA) today announced it will let its $108 all cash tender offer for Computer Sciences Corporation expire at midnight on March 16. In a letter today to Van B. Honeycutt, chairman and CEO of CSC, CA Chairman and CEO Charles B. Wang said, "For whatever reason, it seems you would rather risk harming CSC's business and in the process diminish its value, than negotiate with Computer Associates despite our repeated offers to engage in a negotiated transaction. And, rather than allowing our tender offer to proceed to the shareholders, CSC has waged a campaign of unlawful roadblocks and baseless mudslinging lawsuits. At the same time, news articles appeared with racist overtones that questioned our loyalty as a trustworthy government contractor just because my family emigrated to this country from China 45 years ago. These actions, together with the likelihood of a protracted battle, are unhealthy for CSC, CA and the technology industry that has served us both so well." "We are simply unwilling to let this happen," Mr. Wang said. Mr. Wang said CA continues to have great respect for CSC managers and employees, and expects the companies to look for opportunities to expand their business relationship. "Throughout these discussions, we have maintained the utmost respect for CSC," Mr. Wang said. "We have been direct, even blunt, in letting you know where we stood every step along the way. This letter may be a blunt assessment of where we are, but unless you or your Board changes the landscape, we will not extend our $108 per share tender offer beyond its March 16 expiration." Mr. Wang's letter follows: March 5, 1998 Mr. Van B. Honeycutt Chairman and Chief Executive Officer Computer Sciences Corporation 2100 East Grand Avenue El Segundo, CA 90245 Dear Van, After consulting with our Board of Directors, we have concluded that Computer Associates will not extend its tender offer for CSC. We have proceeded from the outset in the utmost good faith and belief that combining Computer Associates and Computer Sciences would produce a world class information technology solutions provider without equal. The enthusiastic reception by clients and employees of our announced offer confirmed that belief. In fact, in our first meeting in Los Angeles on December 18, you immediately acknowledged the benefits for Computer Associates of such a combination, though admittedly you questioned the benefits to CSC's management and business. We also liked your view that no deal is unfriendly if price is agreed. We took from this meeting several key points: your concerns about compensation for key managers and our plan for operating the business, and the need to come to agreement on price. Although Sanjay and I addressed some of these issues in that meeting, we knew we had more convincing to do. We left that meeting with your agreement to give the idea of a merger serious consideration. In subsequent conversations, you reaffirmed that the idea of combining CA and CSC was worth serious consideration, and agreed that you and Sanjay should meet again in person to address the important people and operations issues, as well as price. We also encouraged you several times to let our respective advisors meet to work through details, but you were persistent in the desire to resolve the issues between principals. We continued to review our option to propose a cash or stock transaction. In the meantime, we lined up financing to be able to quickly complete an all cash offer if that was the ultimate decision. You then proposed that the next meeting be a make or break one - to decide whether we would move forward or not. Sanjay and I agreed, which led to scheduling the February 5th meeting in Scottsdale. In Scottsdale, we again discussed in detail the issues important to you - --price, organization, employee retention, stock options, severance plans, board composition and your role in the combined company. We thought we had agreed with you on all issues other than your role and price. With respect to price, you suggested that a fair value for CSC would be $130 per share, and in a telephone conference the next day you suggested that the range was $115 to $125 per share. While we still differed on price, we memorialized in Sanjay's February 6th letter the following agreements we did reach: We are in agreement on the need and manner of retaining key managers and employees. We would supply key managers and employees with employment agreements that will provide them with a strong incentive to remain with the combined company. We are in agreement on providing stock option grants to key managers and employees. This will allow them to participate in the success of the combined company, and will further ensure continuity with respect to the combined company's commitment to our mutual clients. We are in agreement that the CSC organization within the combined company will be on equal footing to CA's existing product organization. CA is committed to making sure that all of the members of the CSC organization are welcomed into the combined company with open arms. We do not expect the combined company to need to reduce any headcount to achieve the synergies that a transaction of this size demands. Consequently, as in our last major acquisition of Cheyenne Software, we anticipate that all of the valuable CSC employees will be offered positions with the combined company. Beyond the absolute level of staffing, we expect to maintain the current structure of CSC's organization with little change. As we discussed, it would make sense for the CA part of the combined company to take over CSC's product development efforts and for CSC, in turn, to take over CA's service commitments and efforts. The inherent synergies in this process will allow both the CA and CSC parts of the combined company to do what they do best. We expect to staff new projects with both outside hiring and some redeployment of existing CA staff. This will allow the combined company to aggressively seek new services opportunities. In Scottsdale and in subsequent conversations, we sought to bridge the gap between our respective values. When you gave us three options on February 10 - --(1) to meet your price, (2) to go away and move on, or (3) to make an offer to your shareholders -- we elected to go directly to your shareholders with an all cash offer of $108 per share. We later indicated that we would be willing to pay as much as $114 in a promptly negotiated transaction. It was always my impression that the real issue was price. It now appears that sometime after our Scottsdale meeting, you decided that no price we offer would be high enough. For whatever reason, it seems you would rather risk harming CSC's business and in the process diminish its value, than negotiate with Computer Associates despite our repeated offers to engage in a negotiated transaction. And, rather than allowing our tender offer to proceed to the shareholders, CSC has waged a campaign of unlawful roadblocks and baseless mudslinging lawsuits. At the same time, news articles appeared with racist overtones that questioned our loyalty as a trustworthy government contractor just because my family emigrated to this country from China 45 years ago. These actions, together with the likelihood of a protracted battle, are unhealthy for CSC, CA and the technology industry that has served us both so well. We are simply unwilling to let this happen. We continue to have great respect for CSC's managers, employees and clients. Computer Associates and CSC have a great history of working together in partnership for many of our mutual clients. Not only do we expect this to continue, but we will work hard to seek out opportunities to expand our business relationship. Throughout these discussions, we have maintained the utmost respect for CSC. We have been direct, even blunt, in letting you know where we stood every step along the way. This letter may be a blunt assessment of where we are, but unless you or your Board changes the landscape, we will not extend our $108 per share tender offer beyond its March 16 expiration. Very truly yours, Charles B. Wang ### Computer Associates International, Inc. (NYSE: CA), with headquarters in Islandia, N.Y., is the world leader in mission-critical business software. The company develops, licenses and supports more than 500 integrated products that include enterprise computing and information management, application development, manufacturing and financial applications. CA has over 11,000 people in 160 offices in 43 countries and had revenue of $4.5 billion in calendar year 1997. CA can be reached by visiting http://www.cai.com on the World Wide Web, emailing info@cai.com, or calling 1-516-342-5224. Computer Associates' wholly owned subsidiary CAI Computer Services Corp. is making a tender offer for all outstanding shares of Computer Sciences Corporation common stock at a price of $108 per share in cash. The tender offer is scheduled to expire at 12:00 midnight, New York City time, on Monday, March 16, 1998, unless extended in the manner described in the Offer to Purchase dated February 17, 1998. Computer Associates and the Computer Associates Nominees are participants in the solicitation of consents, proxies and agent designations from Computer Sciences Corporation shareholders. The Computer Associates nominees are Charles B. Wang, Sanjay Kumar, Russell Artzt, Peter A. Schwartz, Steven M. Woghin, Charles P. McWade, Ira Zar, Michael A. McElroy, David Kaplan, Robert Toth, Richard Chiarello, Lisa Savino, Gary Quinn, Abraham Poznanski and Douglas Robinson. None of the Computer Associates Nominees will receive any additional compensation for their participation in this solicitation. Computer Associates owns, through a wholly owned subsidiary, 170,000 shares of common stock of Computer Sciences Corporation. None of the Computer Associates Nominees owns any shares of Computer Sciences common stock. Computer Associates has also retained Bear, Stearns & Co. Inc. and its affiliates ("Bear Stearns") to provide certain financial advisory services to Computer Associates. Bear Stearns is acting as Dealer Manager in connection with the Offer and as financial advisor to Computer Associates and CAI Computer Services Corp., a wholly owned subsidiary of Computer Associates, in connection with the proposed acquisition of the Company, but Bear Stearns has not been retained to specifically assist in this solicitation. Computer Associates is obligated to pay to Bear Stearns, if, as more fully described in the engagement letter relating to Bear Stearns' engagement, during the term of the engagement or within 12 months thereafter Computer Associates acquires the Company or more than 50% of its outstanding voting securities, a fee of $5 million and a fee of $1 million (which will be credited against such $5 million fee) if Computer Associates requests Bear Stearns to render a customary fairness opinion. Bear Stearns is also entitled to act as sole lead underwriter, placement agent and financial advisor in connection with certain debt and equity financings (and certain refinancings) and certain asset sales for a specified period following the acquisition and to receive fees in connection therewith. In addition, Computer Associates has agreed to reimburse Bear Stearns for its reasonable expenses, including reasonable fees and disbursements of its counsel, incurred in rendering its services under its engagement agreement with Computer Associates and has agreed to indemnify Bear Stearns against certain liabilities and expenses in connection with the Offer and the Proposed Merger, including certain liabilities under the federal securities laws. Bear Stearns from time to time renders various investment banking services to Computer Associates and its affiliates for which it is paid customary fees. In connection with Bear Stearns' engagement as financial advisor, Computer Associates anticipates that Michael J. Urfirer, Senior Managing Director of Bear Stearns, Lisa M. Price, Senior Managing Director of Bear Stearns and Barry J. Cohen, Senior Managing Director of Bear Stearns, none of whom will receive additional compensation for such solicitation, may communicate in person, by telephone or otherwise with a limited number of institutions, brokers or other persons who are shareholders for the purpose of assisting in this solicitation. Bear Stearns will not receive any fee for, or in connection with, such solicitation activities by its employees apart from the fees it is otherwise entitled to receive as described above. None of the above-named employees of Bear Stearns owns any shares of Computer Sciences Corporation common stock. EX-99.(G)(5) 5 RESPONSE OF CSC DATED 2/23/98 Exhibit (g)(5) WAYNE W. SMITH (CA Bar 054593) JOSEPH P. BUSCH, III (CA Bar 070340) THOMAS S. JONES (CA Bar 165796) ELIZABETH A. WARKE (CA Bar 185320) GIBSON, DUNN & CRUTCHER LLP 4 Park Plaza, Suite 1400 Irvine, California 92614-8557 (714) 451-3800 (Telephone) (714) 451-4220 (Facsimile) DAVID A. BATTAGLIA (CA Bar No. 130474) MICHELLE H. TREMAIN (CA Bar No. 187342) GIBSON, DUNN & CRUTCHER LLP 333 South Grand Avenue Los Angeles, California 90071-3197 (213) 229-7000 (Telephone) (213) 229-7520 (Facsimile) C. STANLEY HUNTERTON (NV Bar No. 1891) TERRY JOHN CARE (NV Bar No. 4560) HUNTERTON & ASSOCIATES Bank of America Plaza 300 South Fourth Street, Suite 1110 Las Vegas, NV 89101 (702) 388-0098 (Telephone) (702) 388-0361 (Facsimile) Attorneys for Defendant COMPUTER SCIENCES CORPORATION UNITED STATES DISTRICT COURT DISTRICT OF NEVADA COMPUTER ASSOCIATES CASE NO. CV-S-98-00278-LDG (RLH) INTERNATIONAL, INC., RESPONSE OF DEFENDANT COMPUTER Plaintiff, SCIENCES CORPORATION TO PLAINTIFF COMPUTER ASSOCIATES v. INTERNATIONAL, INC.'S EX PARTE MOTION FOR EXPEDITED HEARING ON COMPUTER SCIENCES CORPORATION, CLAIMS FOR DECLARATORY RELIEF. Defendant. NO HEARING DATE SET [APPLICATION FOR ADMISSION PRO HAC VICE ON FILE] Pursuant to this Court's February 18, 1998 Order, Defendant Computer Sciences Corporation, a Nevada Corporation ("CSC"), hereby files its response to Plaintiff Computer Associates International, Inc.'s ("CAI") Ex Parte Motion for Expedited Hearing On Claims For Declaratory Relief. TABLE OF CONTENTS Page ---- I. INTRODUCTION......................................................... 1 II. CAI'S ACTIONS POSE A THREAT TO CSC'S BUSINESS, RENDERING EXPEDITED CONSIDERATION APPROPRIATE.................................. 1 III. EXPEDITIOUS TREATMENT IS APPROPRIATE FOR CSC'S CLAIMS THAT ARE NOT MOOT.................................................... 5 A. Prompt Consideration Of CAI's Section 14 Declaratory Relief Action Is Appropriate............................................ 5 B. CSC's Proposed Schedule For Expedited Consideration.............. 7 1. The Current State Of The Pleadings........................... 7 2. Discovery On The SEC Filings Claims.......................... 7 3. A Proposed Briefing Schedule for CAI's Motion On The SEC Filings Claim................................................ 8 IV. THE FEBRUARY 18,1998, CSC BOARD MEETING RENDERED MOOT ALL CLAIMS IN THE COMPLAINT OTHER THAN THE SEC FILING CLAIMS.................... 9 A. CSC's Board Acted Properly In Amending Its Bylaws................ 9 B. CSC Has Amended Its Bylaws Relating To Action By Written Consent.......................................................... 11 C. CSC Has Amended Its Bylaws Relating To Removal Of Directors...... 12 D. CSC's Bylaws Concerning The Selection Of Replacement Directors... 13 E. Calling Of Special Meeting Under N.R.S. Section 78.3789.......... 13 F. Annual Meeting Date.............................................. 14 V. CAI'S POSITIONS REGARDING CORPORATE GOVERNANCE HAVE NO MERIT EVEN UNDER THE PRIOR BYLAWS............................................... 14 A. Nevada Law And CSC's Bylaws Should Be Interpreted Consistent With The Nevada Legislature's Desire To Prohibit Hurried Strong-Arm Transactions That Only Benefit The Corporate Raider... 15 B. Nevada's Director Removal Statute Applies to CAI's Attempt to Unseat CSC Directors............................................. 16 C. Vacancies On The Board Of Directors May Not Be Filled By The Written Consent Of The Stockholders.............................. 17 D. CSC Has The Authority To Select The Record Date For CAI's Solicitations................................................... 18 i Page ---- E. CSC's Prior Bylaws Required Written Consent Of Three Fourths Of Issued And Outstanding Shares To Amend The Bylaws............. 18 F. The CSC Board Has The Right To Determine The Date Of The Annual Meeting 19 VI. CONCLUSION................................. 21 VI. CONCLUSION........................................................... 21 ii TABLE OF AUTHORITIES -------------------- Page(s) CASES ------- Abella v. Universal Leaf Tobacco Co., 546 F. Supp. 795 (E.D. Va. 1982)....................................... 6 Gilbert v. El Paso. Co., 575 A.2d 1131 (Del. 1990).............................................. 11 Hilton Hotels Corp. v. ITT Corp., 962 F. Supp. 1309 (D. Nev. 1997), aff'd, 116 F.3d 1485 (9th Cir. 1997).................................................................. 10,20 Hilton Hotels Corp. v. ITT Corp., 978 F. Supp. 1342 (D. Nev. 1997)....................................... 9 Paramount Communications, Inc. v. Time Inc., 571 A.2d 1140 (Del. 1989).............................................. 10 Piper v. Chris-Craft Indus. Inc., 430 U.S. 1 (I 977))................................................... 6 Polaroid Corp. v. Disney, 862 F.2d 987 (3d Cir. 1988);........................................... 6 Presbytery of New Jersey of Orthodox Presbyterian Church v. Florio, 40 F. 3d 1454 (3d Cir. 1994)........................................... 8 Ronson Corp. v. Liquifin Aktiengesellschaft, Liquigas, S.p.A. 497 F.2d 394 (3d Cir. 1974), cert. denied, 419 U.S. 870(1974).......... 6 Skydell v. AresSerono S.A., 892 F. Supp. 498 (S.D.N.Y. 1995)....................................... 6 Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985)............................................... 9 Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995).............................................. 10,11 STATUTES 15 U.S.C. Section 78n (West 1997)........................................ 5 Nev. Rev. Stat. Section 78.120........................................... 18 Nev. Rev. Stat.Section 78.138............................................ 9 Nev. Rev. Stat. Section 78.330(l)........................................ 19,20 Nev. Rev. Stat. Section 78.335(l)........................................ 16 Nev. Rev. Stat. Section 78.335(l)(a)..................................... 16 iii Page(s) ------- Nev. Rev. Stat. Sections 78.411-78.444................................... 15 MISCELLANEOUS Information Week U.K. 2.................................................. 4 Investor's Business Daily, 5............................................. 4 Keith P. Bishop, Nevada Corporation Law & Practice 119 (1994 Supp.)...... 17 Legislative History of 91-4 A.B. 655 of the 66th Session of the Nevada Legislature p. 75 (attaching Minutes of the Nevada State Legislature, Joint Senate and Assembly Committees on Judiciary p. 2 (testimony of Attorney General Frankie Sue Del Papa))................................ 14,15 Los Angles Times, 9...................................................... 4 New York Times, 2........................................................ 4 The Washington Post, 5................................................... 4 William Strunk Jr. & E.B. White, The Elements of Style 2 (3rd. ed. 1979).................................................................. 19,20 iv I. INTRODUCTION. Evidencing a quickly emerging pattern of premature confrontation, CAI has come to this Court claiming that it needs expedited treatment of its claims as stated in its Complaint For injunctive Relief ("Complaint") -- treatment to which CAI asserts CSC would not agree. 1 CAI is wrong regarding CSC's position. CSC agrees that expeditious treatment of this matter is both appropriate and necessary. Events subsequent to the filing of the Complaint, however, have changed the landscape and narrowed the issues before this Court. Nevertheless, CSC welcomes an expedited and complete airing of the remaining allegations of the Complaint and proposes a schedule herein that will achieve just that. In Section II of this Response, CSC explains the circumstances which make expedited treatment for the remaining allegations in the Complaint appropriate. Section III of this Response describes CSC's proposal for expedited treatment. Section IV explains how many of the allegations of the Complaint are now moot due to subsequent events. Finally, Section V briefly discusses the allegations of the Complaint as filed and the lack of merit to them. II. CAI'S ACTIONS POSE A THREAT TO CSC'S BUSINESS, RENDERING EXPEDITED CONSIDERATION APPROPRIATE. CSC is a service-based company. Its 44,000 employees and 600 offices world-wide offer a wide range of professional services including management consulting, information systems - ---------- 1 This Court's Local Rule 7-5 requires any party seeking ex parte relief to attempt to seek a stipulation from opposing parties with respect to the matter sought. See United States District Court for the District of Nevada Local Rule 7-5. This was not necessary, according to CAI, because "Computer Associates has no reason to believe that Computer Sciences Corporation would agree to an early hearing on claims which, if resolved in Computer Associates favor, would facilitate the acquisition Computer Sciences has rejected." Ex Parte Motion l.n.l. Even this statement misrepresents the status of affairs as it existed at the time of the filing of the Ex Parte Motion. CSC had not considered CAI's take over offer and, thus, had not "rejected" it at the time of the filing. Subsequent to the filing, CSC's Board of Directors did meet and consider the offer. As a result of that meeting, on February 19, 1998, CSC's Chief Executive Officer Van B. Honeycutt sent a letter to Charles Wang rejecting CAI's acquisition offer. 1 consulting, development, and integration, outsourcing, and operations support. Given the core nature of CSC's services to its clients, CSC has made client security and satisfaction its paramount concern. CAI has carried on a confrontational campaign designed to force CSC's Board into a rash and ill-advised decision regarding the sale of CSC and to lure investors on Wall Street into believing that CSC was "in play." This campaign began when CAI Chairman Charles Wang and CAI President and Chief Operating Officer Sanjay Kumar making an unsolicited contact with CSC Chief Executive Officer Van B. Honeycutt on December 18, 1997. At the meeting, Wang began by stating, "Wouldn't it be great to be partners." Honeycutt, who had no idea what he was talking about, indicated that his company already had a license relationship whereby CSC had the ability to use CAI's software with many of its clients. Wang then explained that he envisioned a different partnership through a combination in which CAI purchased CSC. He stated that such a transaction would be a good strategy for CAI. Honeycutt responded that he could see no advantage for CSC in such a relationship, an issue which Wang had neglected to address. Honeycutt stressed that CSC was not up for sale, and that he could not support any transaction based on the assertions Wang made. At no time before that meeting, at the meeting, or since has Mr. Honeycutt indicated that he considered CSC "for sale" or "in play." Nonetheless, Wang proceeded to make an offer to buy CSC at an unfair and disadvantageous price, in a transaction which would be detrimental to the interests of CSC and its customers, employees, and stockholders. Wang punctuated his offer with the suggestion that, absent a merger, CAI would directly compete with CSC by buying several small companies in CSC's business. Subsequently, Mr. Kumar made a number of other unsolicited phone calls to Mr. Honeycutt, urging that the parties convene a meeting of financial advisors. Each time Mr. Honeycutt refused. A second brief meeting was held on February 5, which Honeycutt attended based on the promise that Defendants were going to reveal their business plan for a combined entity, and therefore explain how the transaction benefited CSC. Defendants did not keep this promise. At that meeting, however, neither Mr. Wang nor Mr. Kumar said anything about a business plan. Instead, Defendants threatened to directly and wrongfully harm CSC if it refused to 2 agree to a transaction on CAI's terms. Mr. Honeycutt set forth a series of reasons why the transaction was unattractive to CSC, many of which were later contained in his February 18th letter rejecting the offer. Mr. Wang continued to make statements that CAI would soon compete with CSC or that he would take his offer to the CSC shareholders with or without the CSC Board's endorsement and reiterated that CSC would be severely damaged if CSC did not accede to CAI's demands. Subsequent to the meeting, inexplicably, Mr. Kumar sent a letter announcing that a deal had been reached with respect to everything but price. Mr. Honeycutt was flabbergasted. He spoke with Mr. Kumar and asked him why he sent the letter. Mr. Honeycutt stressed again in no uncertain terms that no deal had been reached, that there were no agreements between the parties on anything, and that the letter did not attempt to summarize any meeting which Mr. Honeycutt attended. Mr. Honeycutt stated that he would respond to Mr. Kumar's letter with a letter. Shortly thereafter, on February 10, 1998, CSC received a widely publicized "bear hug" letter, restating many of the misrepresentations in Mr. Kumar's February 6, 1998 letter. In this letter (attached to the Declaration of Terry Care ("Care Dec.") at Ex. A), Mr. Wang offered a transaction at $108 a share. Mr. Honeycutt immediately notified the CSC Board of Directors and the Board scheduled a meeting for Wednesday, February 18, 1998 to consider the proposal. CAI was notified of this schedule. Before CSC could consider or respond to Mr. Wang's proposal and without any other contact between Mr. Honeycutt and CAI, CAI commenced a hostile tender offer, filed preliminary proxy materials and commenced this action seeking expedited adjudication of various issues of corporate and securities law. Throughout this hurried course of events, CAI has engaged in conduct that nowhere resembles the "reasonable" and "friendly" characterization in the Complaint. This campaign has included making offers to CSC management and not waiting for responses, assuming reactions from CSC before it has even had time to consider the proposals made, making material misrepresentations and omissions in filings with the United States Securities and Exchange Commission, making false statements in the press regarding contacts between CAI and CSC, contacting CSC employees and "welcoming" them to CAI as if the deal had been consummated, 3 communicating directly with CSC's customers regarding the future result of the transaction, and engaging in other potentially unlawful and unseemly activities. Most importantly, for purposes of expedition, this conduct has resulted in uncertainty in CSC's customer and employee base regarding CSC's future and the continued performance by CSC of its services. CA, a software supplier, has achieved a well-deserved reputation in industry as being tough on employees and customers alike.(2) This type of customer relationship is unacceptable in the highly service-based segment in which CSC operates. Thus, CSC's customer base has expressed significant concern over the take-over prospects with some customers going so far as to declare themselves to the press as being "CA free." With uncertainty growing with each day as to CSC's future and the misrepresentations and material omissions piling up in the media, CSC too wants to clear the air in order to assure its valued customers and employees that CSC is committed to continuing the tradition of unparalleled service in the systems administration market. In order to quell fears among its customers and employees and in accord with established corporate principles, at its February 18, 1998 board meeting, the CSC Board took certain measures to protect CSC, its shareholders, its customers and its employees and permit the time necessary to maximize value for the shareholders of CSC.(3) The Nevada Revised Statutes expressly provide, "The selection of a period for the achievement of corporate goals is the responsibility of the - ---------- 2 CAI's negative reputation for customer service is well known and well publicized in the national press. "I've never seen one vendor with so many dissatisfied customers as CA seems to have" (Investor's Business Daily, 5/26/95); "I think CA's lack of finesse has cost them in the customer relations arena" (Los Angeles Times, 9/13/93); "By the early 1990's, Computer Associates had become known for its ravenous appetite ..., for jacking up maintenance costs ... and for pushing its many licensing contracts at the expense of good customer relations. It was not uncommon for the company to sue a client over relatively minor infractions" (New York Times, 2/4/97); "Some customers ... maintain a strict 'no CA' policy.... Many also claim that after CA acquires a company and lays off scores of people, customer service falls off" (Fortune, 7/21/97); "In a ... survey of 50 major CA customers ... 75 percent rated its service as below average" (The Washington Post, 5/10/92). "Computer Associates should be feeling uncomfortable because it has been treating a lot of customers like dirt - particularly those it has gained through acquisition. (InformationWeek U.K. 2/20/98). CAI's terrible reputation is in sharp contrast to that of CSC: "In contrast, CSC is a customer advocate. As a services company, it has to treat customers with kid gloves to get repeat business" (Bloomberg, 2/12/98). 3 The CSC Board also met briefly on February 16, 1998 to opt out of the Nevada Control Shares provision. 4 directors." Nev. Rev. Statutes Section 78.120(3). The CSC Board also considered CAI's offer and rejected it as an "ill-considered and unwelcome attempt to force an acquisition threatening damages to the value" of CSC. Id. Exh B (attaching letter from CSC CEO Van B. Honeycutt to Charles Wang, CAI CEO, rejecting offer). As Mr. Honeycutt explained, the CAI offer did not represent fair value for CSC in light of CSC's potential for growth in revenues and earnings per share and the combination simply "does not make sense" considering, among other reasons, the demand of the customer base to retain platform neutrality -- a facet that would be lacking once a software vendor teamed with a systems administrator. Id. As shown below, the bylaws adopted and other acts taken retain the shareholders enfranchisement but give a breathing space to allow CSC's Board the opportunity to review its options and conduct CSC's operations in a manner that maximizes shareholder value and serves all other interests cognizable under Nevada law. One effect of these changes is to moot much of the Complaint. See infra Section IV. Thus, as shown below, the only issue remaining in the Complaint to be considered on an "expedited" basis is that relating to the prayer that CAI's SEC filings be deemed in conformance with law. CSC agrees that this is an important issue -- one that must be resolved in a timely and complete fashion. IV. EXPEDITIOUS TREATMENT IS APPROPRIATE FOR CS'S CLAIMS THAT ARE NOT MOOT A. PROMPT CONSIDERATION OF CAI'S SECTION 14 DECLARATORY RELIEF ACTION IS APPROPRIATE. In light of CAI's mootness problem discussed in Section IV, infra, all that remains is its request that this Court declare that CAI's "Schedule 14D-1 complies with applicable federal law and is not subject to attack by the CSC Board under section 14(e) of the Exchange Act. "Complaint 1 43. Nothing that the CSC Board at its February 18, 1998 meeting affected this request and CSC concurs that in order to resolve this action, prompt attention should be given to this claim. CAI has asked this Court to deem its disclosure full and truthful in all material respects and has sued CSC to require it to participate in the process. Evaluation of CAI's 14D-1 filing requires 5 that CSC be given the opportunity to conduct discovery. Section 14 prohibits "any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation." 15 U.S.C. Section 78n (West 1997). Courts routinely recognize that a Section 14 analysis of a proxy statement or tender offer requires a searching review of the documents, the statement and assertions made therein, its factual underpinnings, the assumptions made in the SEC filings and the conclusions drawn. See, e.g., Ronson Corp. v. Liquifin Aktiengesellschaft, Liquigas, S.p.A, 497 F.2d 394 (3d Cir. 1974), cert. denied, 419 U.S. 870 (1974). This requirement is not surprising given that the purpose of Section 14 is to compel disclosure of information pertaining to tender offers and proxy solicitations to public shareholders of target companies allowing them to make an informed decision. See, e.g., Piper v. Chris-Craft Indus. Inc., 430 U.S. 1 (1977) ("The purpose of the Williams Act is to insure that public shareholders who are confronted by a cash tender offer for their stock will not be required to respond without adequate information . . . " (quoting Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 58 (1975)); Skydell v. AresSerono S.A., 892 F. Supp. 498 (S.D.N.Y. 1995); see also Polaroid Corp. v. Disney, 862 F.2d 987 (3d Cir. 1988) ("The theory of the [Williams] Act is that shareholders are unable to protect their interests fully in making ... decisions if the tender offerer fails to provide all material information regarding the offer."); Abella v. Universal Leaf Tobacco Co., 546 F. Supp. 795 (E.D. Va. 1982) (purpose of Section 14 is to ensure full disclosure). CAI has asked this Court to deem its disclosures full and truthful in material respects. In an effort to assist this Court in making that determination, CSC proposes an expedited discovery schedule to assess just that issue. Only once this discovery has occurred can meaningful consideration begin as to whether CAI discharged its Section 14 responsibilities. 6 B. CSC's PROPOSED SCHEDULE FOR EXPEDITED CONSIDERATION. Expeditious handling of this case requires that a pleading schedule be established to correct the current state of the pleadings, that a discovery schedule be implemented, and that a briefing schedule on CAI's request for declaratory relief regarding its SEC filings be set. 1. THE CURRENT STATE OF THE PLEADINGS. Most of the claims asserted in the present complaint are moot based on the events of this past week. See infra. The only claim that has not been mooted is CAI's request that its submissions to the Securities and Exchange Commissions be declared lawful ("the SEC Filings Claim"). Accordingly, CAI should be required to file an amended complaint if it desires to assert any claims other than the SEC Filings Claim by not later than February 26, 1998. 2. DISCOVERY On THE SEC FILINGS CLAIMS. Today, CSC has served its first round of discovery on CAI and third parties relating to the SEC Filings Claim. A copy of that discovery is appended hereto for the Court's reference as Exhibit C to the Care Declaration. That discovery establishes the following broad schedule: o CAI will produce responsive documents by not later than March 6, 1998. Because the date is shorter than the 30 days contemplated by Rule 34 of the Federal Rules of Civil Procedure, CSC requests that the Court exercise discretion under Rule 34 and reduce the time required for CAI's response to permit the expedited handling of this matter. The production of documents prior to taking depositions will make the depositions more efficient, and will obviate the need to reconvene depositions after the documents have been produced. o Custodians of record for third parties will produce responsive documents on March 9 or during that week. o Depositions of four of CAI's officers and inside directors will take place during the weeks of March 16 and 23. Because Rule 30 of the Federal Rules of Civil Procedure imposes a 10 witness limit on the number of depositions that can be taken and CSC has noticed the depositions of 15 percipient witnesses and seven custodians of record, CSC requests leave of Court to take the indicated depositions. 7 o Depositions of CAI's four outside directors will commence on March 27 and be completed during the week of March 30. o Nothing is scheduled during the period from April 2 through April 10 due to the Holy Week, Easter and Passover observances. o The depositions of two of CAI's advisors and of its five financiers will take place during the weeks of April 13 and April 20. Under this schedule, CSC contemplates that it will be finished with its discovery on the SEC Filings Claim by April 23. More time may be needed to conduct additional discovery dependent upon any amended claims asserted by CAI 3. A PROPOSED BRIEFING SCHEDULE FOR CAI's MOTION On THE SEC FILINGS CLAIM. CAI's motion is devoid of any evidentiary support for its demand that this Court find its SEC filings to be adequate. CSC assumes that CAI plans to file support for its request for a declaration on the SEC Filings Claim. CSC proposes that the following schedule be adopted: o CAI will file and serve by either personal service or by fax its papers in support of its motion on or before May 4, 1998. o CSC will file and serve by either personal service or by fax its opposition to the motion on or before May 25, 1998. o CAI will file and serve by either personal service or by fax its reply in support of the amended motion on or before June 8, 1998. o A hearing will be conducted on CAI's motion on or after June 15, 1998, dependent on this Court's schedule. CSC will propose a briefing schedule on any motion for any other claim asserted by CAI in an amended complaint at such time as CSC has had an opportunity to review that amended complaint.(4) - ---------- (4) CSC has filed concurrently herewith a Proposed Order setting forth these dates. 8 IV. THE FEBRUARY 18,1998, CSC BOARD MEETING RENDERED MOOT ALL CLAIMS IN THE COMPLAINT OTHER THAN THE SEC FILING CLAIMS. Declaratory relief is inappropriate where subsequent events have materially changed the underlying basis. See, e.g., Presbytery of New Jersey of Orthodox Presbyterian Church v. Florio, 40 F.3d 1454, 1463 (3d Cir. 1994). This flows from the prohibition that federal courts should not render advisory opinions. Id. The Complaint seeks either declaratory or injunctive relief under a number of CSC bylaw provisions in effect at the time Mr. Wang first contacted Mr. Honeycutt. These provisions are no longer in force thus rendering the alleged factual predicate to much of the Complaint void. A. CSC'S BOARD ACTED PROPERLY IN AMENDING ITS BYLAWS. In Nevada, as elsewhere, it is a well-settled principle that the business and affairs of a corporation are managed by its board of directors. Each member of that board, in carrying out his or her managerial role, is "charged with an unyielding fiduciary duty to the corporation and its shareholders." Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985).(5) In acting in this fiduciary capacity, a director is legally obligated to proceed with a "critical eye" in assessing information presented to him or her, in order to exercise an "informed business judgment" relating to decisions affecting the future of a corporation or its shareholders. Id. In the specific context of a takeover proposal, paramount among a director's fiduciary duties is the careful and considered evaluation of the takeover proposal. Legislatures and courts have each created an affirmative duty on a director "to act in an informed and deliberate manner in determining whether to approve an agreement of merger before submitting the proposal to the stockholders." Id. at 873. Contrary to CAI's suggestion, the directors are not simply a conduit through which a shareholder meeting is called for each and every takeover proposal. Indeed, a - ---------- (5) This Court has stated that "[w]here, as here, there is no Nevada statutory or case law on point for an issue of corporate law, this Court finds persuasive authority in Delaware case law. " Hilton Hotels Corp. v. ITT Corp., 978 F. Supp. 1342, 1346 (D. Nev. 1997) 9 director violates this fiduciary duty by leaving to the shareholders alone the decision to approve or disapprove such a proposal. Id. Under Nevada law, the director's decision involves consideration of "[t]he interests of the corporation's employees, suppliers, creditors and customers," and "[t]he long-term as well as short-term interests of the corporation and its stockholders, including the possibility that these interests may be best served by the continued independence of the corporation." Nev. Rev. Stat. Section 78.138 (emphasis added). While clearly ignored by CAI, the CSC Board also has the ability to declare itself not for sale -- a refusal to entertain offers may comport with a valid exercise of business judgment. There is simply no duty imposed on a board of directors to negotiate with third parties, or sell a corporation whenever a premium price is offered, as long as the directors make a good faith, informed decision that it would be in the corporation's best interest to reject the offer. See Unitrin, Inc. v. American General Corp., 651 A.2d 1361 (Del. 1995) (noting recognition of the "prerogative of a board of directors to resist a third party's unsolicited acquisition proposal offer."); Paramount Communications, Inc. v. Time Inc., 571 A. 2d 1140, 1154 (Del. 1989) ("Directors are not obligated to abandon a deliberately conceived corporate plan for short-term shareholder profit unless there is clearly no basis to sustain the corporate strategy."). Meeting just eight days after receipt of the "bear hug" letter, and mere hours after CAI launched its full out assault on CSC and its shareholders, the CSC Board adopted measures designed to give it time to consider the offer, and make a proper, well-informed recommendation to its shareholders.(6) The CSC Board affected this result through revising some of its bylaws ("Revised Bylaws"). In doing so, the CSC Board embarked on a course that will maximize CSC shareholder value and, ultimately, permit the shareholders to reasonably consider all options before deciding on a resolution. In the takeover context, the question of who decides when and how an offer is taken to the shareholders is often crucial and disputed. The raider, fearful of other bidders or the ability of the target to gather itself and demonstrate its true and superior value as a stand- - ---------- (6) None of these measures "entrenched" the CSC Board as each board member will stand for election at the next CSC shareholder meeting. 10 alone entity, wishes to force the issue quickly on the target's shareholders, often proclaiming "sell now or lose your chance." The false sense of urgency is designed to force the shareholders into an ill-informed decision. As most raiders do, CAI advances the proposition that it may decide when and how the CSC shareholders will consider its offer and argues for a quick resolution with a low threshold necessary to remove impediments. Nevada law, as previously interpreted by this Court, however, clearly vests the decision as to timing and the manner of consideration in the CSC Board. See Hilton, 962 F. Supp. at 1311. This flows from the duty of the CSC Board both to consider the offer in a meaningful fashion as well as the duty to maximize shareholder value. These tasks cannot be performed without a thorough evaluative process, as CAI well knows, and the law does not permit the raider to force a hurried schedule which fits the raider's agenda. The amendment of bylaws in this type of context has long been recognized as a proper exercise of fiduciary duty by a board of directors, as long as such measures are neither preclusive nor coercive. See Unitrin, 651 A.2d at 1388 n.38 ("[D]epending upon the circumstances, the board may respond to a reasonably perceived threat by adopting individually or sometimes in combination: advance notice by-laws, supermajority voting provisions, shareholder rights plans, repurchase programs, etc."). Indeed, given the duties of care and loyalty, which clearly prevent the CSC board "from being a passive instrumentality in the face of a perceived threat to corporate control," see Gilbert v. El Paso. Co., 575 A.2d 1131 (Del. 1990), CSC's revision of some of its bylaws, in order to make a proper well-informed consideration of CAI's offer was a prudent reaction to CAI's threats. B. CSC HAS AMENDED ITS BYLAWS RELATING TO ACTION BY WRITTEN CONSENT. CAI's complaint seeks this Court's declaration that, pursuant to CSC's Bylaws, holders of a majority of CSC's shares can amend CSC's Bylaws by their written consent. Complaint paragraph 34. The Bylaws upon which CAI rely, Article VIII, Section 1 and Article II, Section 10, were amended by the CSC Board. Article VIII, Section 1 of the Bylaws now provides that: Bylaws may be adopted, amended or repealed by the affirmative vote of more than eighty percent (80%) of the outstanding voting shares of this corporation. 11 Revised Bylaws, Article VIII, Section 1 . The Revised Bylaw is clear that an eighty percent (80%) vote of stockholders is required to amend the Bylaws. Article II, Section 10 of the Bylaws was amended to read as follows: Any action, except election of directors, which may be taken by a vote of the stockholders at a meeting, may be taken without a meeting and without notice if authorized by the written consent of stockholders holding at least ninety percent (90%) of the voting power. Revised Bylaws, Article II, Section 10. Thus holders of eighty percent (80%) of the outstanding stock may amend the Bylaws by a vote at a stockholders' meeting and holders of ninety percent (90%) of the stock may amend the Bylaws by written consent. Although section 78.320(2) of the Nevada Revised Statutes is clear that the Bylaws may entirely eliminate the ability of stockholders to act by written consent, the Bylaw amendment tightened, but did not eliminate the possibility of action by written consent of the stockholders. Section 78.320(l) is equally plain that the Bylaws may require a higher proportion than a simple majority for stockholder action by vote. CSC's amendment of Article VIII, Section 1 and Article II, Section 10 of its Bylaws are consistent with these powers. Accordingly, CAI's request on this subject is now moot. C. CSC HAS AMENDED ITS BYLAWS RELATING TO REMOVAL OF DIRECTORS. CAI asks this Court to declare "that two-thirds of the stockholders may remove a sufficient number of existing directors to enable the stockholders to designate a majority of the board." To the extent CA's argument is based on the language of the statute, it is simply wrong. Section 78.335(l) of the Nevada Revised Statutes could not be clearer. See infra Section V(B). In order to clarify application of the statue, the CSC Board amended Article III, Section 2 of the Bylaws to eliminate the recitation of the statute's two-thirds requirement for removing directors, which is applicable only to corporations that do not provide for cumulative voting in the election of directors. The Revised Bylaw is consistent with the statutory requirement for the removal of directors in a company with cumulative voting. 12 Accordingly, the Revised Bylaws now simply reinforce and restate the statutory requirement that a director elected through cumulative voting may only be removed by votes sufficient to have prevented his or her election in the first place -- here ninety percent of the outstanding shares (90%) plus one. D. CSC's BYLAWS CONCERNING THE SELECTION OF REPLACEMENT DIRECTORS. CAI seeks to be able to fill any CSC Board vacancies it creates (either through removal or expanding the CSC Board from nine to fifteen) with its nominees by written consent, without having to undergo the "inconvenience" of the democratic process. As noted previously, Section 78.320(2) of the Nevada Revised Statutes provides that the bylaws of a corporation may modify, or even eliminate the ability of stockholders to take action by written consent without a meeting. Also as noted above, the CSC Board amended Article II, Section 10 to provide that a ninety percent (90%) standard shall apply to action by written consent, instead of the seventy-five percent (75%) standard in the pre-amendment Bylaws. Both before and after such amendment, however, Article II, Section 10 prohibited the election of directors by written consent. CAI argues that a lower standard is required to elect directors by written consent than applies to any other action of stockholders by written consent. This argument is discussed infra Section V(E). The Revised Bylaws clearly recognize that it is in the interest of CSC and its stockholders that the directors are to be selected in an open forum, and not by a corporate raider secretly collecting written consents of a bare majority of the stock. The language of the old and Revised Bylaw could not be clearer. E. CALLING OF SPECIAL MEETING UNDER N.R.S. SECTION 78.3789. CAI argues that under section 78.3789 of the Nevada Revised Statutes, it has the power to call a special meeting of the stockholders of CSC. CSC's Board, however, has amended the Bylaws to "opt out" of the provisions of the "Acquisition of Controlling Interest" provisions of the Nevada General Corporation Law (including section 78.3789) as is permitted under Nevada law. Accordingly, CAI is without power to seek a special meeting under a statutory provision that no longer applies to CSC. 13 F. ANNUAL MEETING DATE. CAI also asks this Court to declare that "under its Bylaws, the CSC annual meeting must occur on August 10, 1998." CSC's last annual meeting was held in August 1997, just 7 months ago. While the bylaws in effect at the commencement of CAI's efforts committed the date of the annual meeting to the sound discretion of the CSC Board, the bylaws also included a "default" date in August of 1998, absent exercise of that discretion. The CSC Board amended Article II, Section 2 of the Bylaws on February 18, 1998 to remove the default date and unambiguously state that "Annual meetings of the stockholders shall be held at such time and date as the Board of Directors shall determine." Revised Bylaw Art. II, Section 2. Accordingly, the Bylaws contain no language tying the date of the annual meeting to any particular date. The power to set the date of an annual meeting is committed to the sound discretion of the Board. Section 78.330(l) of the Nevada Revised Statutes explicitly states that "Unless otherwise provided in the bylaws, the Board of Directors have the authority to set the date, time and place for the annual meeting of stockholders. V. CAI'S POSITIONS REGARDING CORPORATE GOVERNANCE HAVE NO MERIT EVEN UNDER THE PRIOR BYLAWS. CSC expects that CAI may challenge the February 18, 1998 action taken by the CSC Board (if it has not done so already) through the filing of an amended complaint seeking to overturn the measures adopted.(7) Even if CAI were able to reverse the Revised Bylaws (there is no basis for that result), CAI's tortured construction of CSC's former bylaws and Nevada corporate law cannot stand. - ---------- (7) Procedures for dealing with such an amended complaint are considered infra, Section IV. While CSC would not object, in principle, to advancing discovery on any amended complaint, it is simply premature to consider whether a hypothetical future amended complaint is deserving of such treatment. If and when such an amended complaint is filed, CSC will consider stipulating to expedited treatment in accord with local rules or, if appropriate, oppose such a request if not warranted. 14 A. NEVADA LAW AND CSC'S BYLAWS SHOULD BE INTERPRETED CONSISTENT WITH THE NEVADA LEGISLATURE'S DESIRE TO PROHIBIT HURRIED STRONG-ARM TRANSACTIONS THAT ONLY BENEFIT THE CORPORATE RAIDER. A single purpose lies at the core of each CAI request: to force a quick and uninformed vote by the CSC shareholders on CAI's proposal. Before proceeding with an analysis of the mechanics by which CAI seeks to accomplish this goal, the aims of Nevada law should first be considered to inform any decision that the Court reaches regarding the effect of Nevada law or the bylaws that it governs. In late 1989, the Nevada Secretary of State decided to take a hard look at Nevada corporate law and to revise it "in order to remain in the forefront of corporation activity throughout the country." Legislative History of 91-4 A.B. 655 of the 66th Session of the Nevada Legislature p. 75 (attaching Minutes of the Nevada State Legislature, Joint Senate and Assembly Committees on Judiciary p.2 (testimony of Attorney General Frankie Sue Del Papa)). To that end, Nevada employed the law firm of Vargas and Bartlett, under the guidance of corporate lawyer John Fowler, to study the then existing Nevada corporate law, evaluate it in many respects and then propose changes along with explanations of those changes. Id. As a result of this review, Vargas and Bartlett proposed adoption of the Nevada Business Combinations statute, Nev. Rev. Stat. Sections 78.411-78.444. The purpose of this statute was "to encourage those wishing to acquire corporations to negotiate with the board of directors of the corporation before attempting to do so" and to allow the directors "to consider the interests of employees, suppliers and their communities as well as the long-range prospects of the company when making corporate decisions." Testimony of John P. Fowler May 7, 1991, p.4-5. Thus, "[g]iven time permitted by the more measured approach required by the 'business combination' statute, the board of directors can then make calm and deliberate long-range decisions which Nevada corporations, and our economy as a whole, 15 most emphatically need." Id. (emphasis added).(8) With these comments in mind, the Nevada legislature proceeded to adopt the Nevada Business Combinations statute. While a more exhaustive discussion of the reasons that underlie the Nevada Corporate law will await another day, it is worth noting that CAI's lawsuit seeks to accomplish exactly what the Nevada legislature sought to avoid: a quick and ill considered rush to the shareholders with a hostile tender offer. B. NEVADA'S DIRECTOR REMOVAL STATUTE APPLIES TO CAI'S ATTEMPT TO UNSEAT CSC DIRECTORS. CAI states that it intends to remove the entire Board of Directors of CSC. CAI Brief at 12. Under Nevada General Corporation Law section 78.335(l), "[a]ny director may be removed from office by the vote of the stockholders representing two-thirds of the outstanding voting power." Nev. Rev. Stat. Section 78.335(l). However, there is an exception to the foregoing rule that exists for corporations which have cumulative voting -- such as CSC.(9) In such cases, no director may be removed "except upon the vote of stockholders owning sufficient shares to have prevented his election to office in the first instance." 10 Nev. Rev. Stat. Section 78.335(l)(a). The effect of this provision is to require ninety percent (90%) of the shareholders votes plus one to remove a director.(11) - ---------- (8) Indeed, the intent of Nevada law was put into focus by opponents of the statute ultimately adopted. In opposition to the Vargas and Bartlett authored revisions, Mark Goldstein wrote to the Nevada Legislature arguing that statutes that slow down the merger process "cause investors to shun stock. A stock purchaser may buy shares expecting to profit from the sale of the company. The company will not be sold and the stock purchaser will lose money. The purchaser will not buy shares in state with laws that discourage these types of profits. Legislative History of 91-4 A.B. 655 of the 66th Session of the Nevada Legislature p. 102. Notwithstanding Mr. Goldstein's admonition that the new law would "slow down" the merger process and deter buyers looking for a quick profit in Nevada companies, the Nevada legislature adopted the statute. (9) CSC's Articles of Incorporation provide for cumulative voting. CSC Articles, Article Fourth, "Cumulative Voting." (10) This provision is included almost verbatim in CSC's Bylaws. CSC Bylaws Art. III, Section 2. (11) The process of cumulative voting allows a shareholder to "accumulate" the number of votes he or she would be permitted to cast in favor of or against all directors, and instead vote them for or against a single director or in any manner he or she wishes. For example, [Footnote continued on next page] 16 CAI's proposal to remove directors from CSC's board must satisfy the cumulative-voting removal provision set forth in section 78.335(l)(a). The two-thirds voting standard for companies without cumulative voting set forth in section 78.335(l) does not apply. Undaunted by the plain language of the statute, CAI suggests that this provision should not be applied and asks this Court to judicially amend the director removal statute. This Court should decline CAI's invitation to substitute CAI's version of corporate wisdom for that of the Nevada Legislature. C VACANCIES ON THE BOARD OF DIRECTORS MAY NOT BE FILLED BY THE WRITTEN CONSENT OF THE STOCKHOLDERS. CAI requests a declaration that a majority of CSC's stockholders may fill vacancies on the CSC Board and that they may do so pursuant to an action by written consent. While it is true that CSC's stockholders have the authority, which they share with the remaining Board members, to fill Board vacancies resulting from removals, CAI's argument that the stockholders may fill such vacancies by written consent is clearly contradicted by the plain language of CSC's Bylaws. CAI's argument that stockholders may fill Board vacancies by written consent is based on its interpretation of Article II, Section 10 of CSC's Bylaws. Prior to its amendment, Article II, Section 10 provided that "[a]ny action, EXCEPT ELECTION of DIRECTORS, which may be taken by a vote of the stockholders at a meeting, may be taken without a meeting and without notice if authorized by the written consent of stockholders holding at least three-fourths of the voting power" (emphasis added). CAI strains to interpret this provision to mean that CSC's stockholders may take any action by written consent if at least 75% of the voting shares are obtained, except that to elect directors the written consent of only 50% of the voting shares is required. This interpretation of Article II, Section 10 ignores the plain meaning of the provision, which clearly carves out the election of directors from stockholder actions that can be taken by written consent. - ---------- [Footnote continued from previous page] under cumulative voting, a holder of one share of CSC stock in an election of nine directors could either (i) cast all nine votes for or against any one director; (ii) cast one vote for or against each of the nine directors; or (iii) split the nine votes among various directors in any way he or she chooses. 17 D. CSC HAS THE AUTHORITY TO SELECT THE RECORD DATE FOR CAI'S SOLICITATIONS. Prior to 1991, section 78.350(3) of the Nevada Revised Statutes granted statutory authority to a board to set the record date for solicitation of written consents. CAI claims that the Nevada legislature's repeal of subsection 3 of Section 78.350 "specifically removed [CSC's] power to set record dates for solicitations of written consents and agent designations." CAI Brief at 25. The absence of a specific statutory grant of authority, however, does not limit CSC's power to set record dates for solicitations. A respected treatise on Nevada corporation law specifically refers to section 78.350(3) and concludes that "In the absence of these statutory rules, the bylaws should make provision for the fixing of record dates. There appears no reason why the bylaws could not include substantially similar rules to the former statutory provisions." Keith P. Bishop, Nevada Corporation Law & Practice 119 (1994 Supp.). Thus, consistent with previous section 78.350(3), Article 5, Section 5(b)-(c) of CSC's bylaws validly empowers the board to set the record date for written consents and agent designations. See also Nev. Rev. Stat. Section 78.120 (stating that statutory provision act as limitation, not affirmative grants, on board of directors' power to administer the affairs of the corporation). E. CSC'S PRIOR BYLAWS REQUIRED WRITTEN CONSENT OF THREE FOURTHS OF ISSUED AND OUTSTANDING SHARES TO AMEND THE BYLAWS. Prior to amendment on February 18, 1998, amendment of the CSC Bylaws by written consent required written consent from the holders of at least three-fourths of the issued and outstanding shares of common stock. Article II Section 10 of the Old Bylaws provided that any action that stockholders could take at a meeting of the stockholders, except for the election of directors, "may be taken without a meeting and without notice if authorized by the written consent of stockholders holding at least three-fourths of the voting power." CAI incorrectly interprets this section as merely providing a "general authorization" for shareholder action by written consent of three-fourths of the voting shares "if there is no more specific provision for shareholder action by written consent." CAI Brief at 15. In fact, this section provided no exceptions to the three-fourths requirement for any action by written consent (except for the election of directors, which can not 18 be done by written consent at all); therefore, this section governed all actions to be done by written consent. Article VIII Section 1 of the CSC Bylaws previously provided that the bylaws may be amended by the stockholders "by the affirmative vote or written consent of a majority of the outstanding voting shares of this corporation, except as otherwise provided . . . elsewhere in these Bylaws." This section, when read alone, might appear to allow amendments to the bylaws by written consent of the holders of only a majority of the outstanding shares; however, this section specifically limited the general power to amend by stating that other sections of the bylaws might provide different requirements that must instead be followed. Thus, this section is subordinate to, and must be read in conjunction with, any section of the bylaws that imposed different and controlling requirements, and, in this instance, Article II Section 10 of the bylaws is a sdction that imposed different and controlling requirements by requiring, without exception, that actions by written consent must be authorized by holders of three-fourths of the outstanding shares. F. THE CSC BOARD HAS THE RIGHT TO DETERMINE THE DATE OF THE ANNUAL MEETING. Nevada corporate law grants a board of directors the "authority to set the date, time and place for the annual meeting of stockholders." Nev. Rev. Stat. Section 78.330(l). Similarly, Art. II, Section 2, as amended, of CSC's bylaws states that "[a]nnual meetings of the stockholders shall be held at such time and dates as the Board of Directors shall determine. CAI asks this Court to ignore this plain language and to force the CSC Board to schedule an annual meeting in August. CAI arrives at its conclusion that an annual meeting must be held in August through yet another tortured interpretation of the superseded version of Art. II, Section 2 which provided in relevant part:(12) - ---------- (12) The current version of Art. II, Section 2 is clear that the Board has the authority to set the time and date for the annual meeting. It is not tied to any specific date. But even under the previous version of Art. II, Section 2, CSC's Board was the ultimate authority on when to hold an annual meeting. 19 [a]n annual meeting of the stockholders shall be held on the second Monday in August, if not a legal holiday, and if a legal holiday, then on the next secular day following at 2:00 p.m., OR at such other time and date as the Board of Directors shall determine. (emphasis added). According to CAI, this bylaw purportedly means that CSC's Board only has the authority to schedule the date of the annual meeting in the limited instance when the second Monday in August is a legal holiday. (Complaint at paragraph 38). This argument is fanciful at best. CAI disregards basic rules of grammar. The language in Art. II, Section 2, "if not a legal holiday, and if a legal holiday, then on the next secular day following at 2:00 p.m.," is a series of dependent clauses occurring within a sentence. As such, it must always be set-off by commas when it interrupts the flow of the sentence. William Strunk Jr. & E.B. White, The Elements of Style 2 (3rd. ed. 1979). The comma after "2:00 p.m." indicates the end of the dependent clauses and the resumption of the main thought of the sentence. Id. The result is that an annual meeting can be held either in August or at such other time and date as the Board determines. The conclusion that the Board has the authority to set the date of the annual meeting is reinforced by the case law. See, e.g., Hilton Hotels Corp. v. ITT Corp., 962 F. Supp. 1309, 1310-11 (D. Nev. 1997), aff'd 116 F.3d 1485 (9th Cir. 1997). In Hilton, Hilton made a hostile tender offer and sought a preliminary injunction requiring the target, ITT Corp., to hold its annual meeting in May. ITT responded that it retained the discretion to set a later date, even if the decision to set the later date was in response to Hilton's tender offer. In denying Hilton's motion, the court noted that Nevada law did not require that ITT's annual meeting be conducted on a specific date. Id. at 1309. According to the court, section 78.345 requires only that an annual meeting occur not later than 18 months after the last annual meeting. Id. at 1310. Thus, Nevada's corporation law sets the outer limit of time that may pass between annual meetings, but it does not set the specific date the annual meeting must occur within this 18 month period.(13) That decision is - ---------- (13) CSC's Board has not yet scheduled a date and time for the annual meeting nor has 18 months passed since the last annual meeting. 20 left to the Bylaws and the Board of Directors of a corporation. Nev. Rev. Stat. Section 78.330(l). Here, even under the old version of Art. II, Section 2, it is clear that CSC's Board determines the date of the annual meeting and only if the Board does not exercise that discretion does August become the date for the meeting. VI. CONCLUSION For the foregoing reasons, CSC respectfully requests that this Court grant expedited treatment to the portions of the Complaint now on file that are not moot and enter an order: (1) granting expedited treatment of the SEC Filings Claims; (2) setting February 26, 1998 as the date for the filing of any amended complaint by CAI; (3) shortening the time periods applicable under Federal Rule of Civil Procedure 34; (4) setting March 6, 1998 as the date by which CAI will serve documents responsive to CAI's request; (5) granting CSC leave to notice in excess of ten depositions; and (6) setting a briefing schedule for CAI's motion. DATED: February ,1998. -- WAYNE W. SMITH JOSEPH P. BUSCH, III DAVID A. BATTAGLIA THOMAS S. JONES ELIZABETH A. WARKE GIBSON, DUNN & CRUTCHER LLP C. STANLEY HUNTERTON TERRY JOHN CARE HUNTERTON & ASSOCIATES By: --------------------------------- Terry John Care Attorneys for Defendant COMPUTER SCIENCES CORPORATION 21 EX-99.(G)(6) 6 COMPLAINT OF CSC FILED 2/23/98 Exhibit (g)(6) GIBSON, DUNN & CRUTCHER LLP WAYNE W. SMITH (Bar No. 054593) DAVID A. BATTAGLIA (Bar No. 130474) ORIGINAL FILED MICHELLE H. TREMAIN (Bar No. 187342) ROBYN C. CROWTHER (Bar No. 193840) 333 South Grand Avenue FEB 23 1998 Los Angeles, California 90071-3197 (213) 229-7000 SUPERIOR COURT Attorneys for Plaintiff COMPUTER SCIENCES CORPORATION SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES CENTRAL DISTRICT COMPUTER SCIENCES CASE NO. BC186394 CORPORATION, a Nevada corporation headquartered in Los Angeles County, COMPLAINT FOR: Plaintiff, (1) UNFAIR, UNLAWFUL, AND FRAUDULENT BUSINESS ACTS AND PRACTICES IN VIOLATION OF CALIFORNIA BUSINESS AND V. PROFESSIONS CODE SECTIONS 17200 ET SEQ., INCLUDING: (a) IMPROPER ATTEMPT TO BUY LOYALTY; COMPUTER ASSOCIATES (b) ATTEMPTED ECONOMIC DURESS; INTERNATIONAL, INC., a Delaware (c) FRAUD AND DECEIT; corporation; CHARLES B. WANG, (d) IMPROPER. INTENTIONAL an individual; SANJAY KUMAR, INTERFERENCE; an individual; CORPORATE DOES (e) UNFAIR BUSINESS ACTS. 1-50 and INDIVIDUAL DOES 51-100, inclusive, (2) ECONOMIC DURESS; Defendants. (3) INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE AND CONTRACTUAL RELATIONS; (4) CONSPIRACY. 1 Plaintiff COMPUTER SCIENCES CORPORATION ("CSC"), for its Complaint in this matter, avers and alleges, upon knowledge as to itself and upon information and belief as to all other matters, as follows: NATURE OF ACTION 1. Defendants Computer Associates International, Inc. ("Computer Associates"), Charles B. Wang ("Wang"), and Sanjay Kumar ("Kumar") (collectively "Defendants") have engaged, and continue to engage, in an unfair, unlawful and fraudulent scheme to attempt to acquire CSC at less than its value by employing wrongful and illegal means. They first attempted to buy the loyalty of CSC's senior executive in the hopes of acquiring CSC for $100 a share. They then threatened to damage CSC and its relationships with its employees and customers if CSC did not sell at a disadvantageous and unfair price and in a transaction which would be detrimental to the interests of CSC and its customers, employees, and stockholders. Then they commenced a continuing campaign of fraud and interference in order to continue to attempt to pressure CSC to sell the company on Defendants' terms. 2. Defendants are aware that if they are successful, they are able to acquire CSC at a price far less than its value. They also recognize that even if they fail, they will have damaged CSC just before launching a major competitive initiative against it. Either way, Defendants' misconduct is rewarded -- unless it is immediately halted by this Court. THE PARTIES COMPUTER SCIENCES CORPORATION 3. Complainant CSC is a Nevada corporation with its principal place of business located in Los Angeles County at 2100 E. Grand Avenue, El Segundo, California 90245. Its common stock is listed on the New York Stock Exchange under the symbol "CSC." CSC is in the business of providing clients with a wide range of professional services, including management consulting, information systems consulting, development and integration, outsourcing, and operations support. It has approximately 44,000 employees in nearly 600 offices worldwide. The Chairman of the Board, President, and Chief Executive Officer of CSC is Van B. Honeycutt ("Honeycutt") 2 4. CSC's robust financial condition includes a compound annual growth rate of 20.4 percent in revenue over the past five years, and a 26.3 percent compound annual increase in income before special items for the same period. CSC has had larger gains in market share and revenue than its primary competitor in fifteen of the last sixteen quarters. It has won or implemented $6.7 billion in large outsourcing contracts over the last twelve months. COMPUTER ASSOCIATES INTERNATIONAL, INC. 5. Defendant CAI is a Delaware corporation with its principal executive offices located at One Computer Associates Plaza, Islandia, New York 11780. Its common stock is listed on the New York Stock Exchange under the symbol "CA." CAI is in the business of developing, licensing and supporting computer software products, and has approximately 11,000 employees in 160 offices worldwide. Its corporate headquarters for California and Hawaii is located in Los Angeles County at 300 Corporate Pointe, 2nd Floor, Culver City, California 90230-7614. It has nine other regional offices in the State of California, including another office in Los Angeles County. 6. CAI has grown rapidly in recent years by acquiring software companies with a substantial installed product base and ongoing license revenues, ruthlessly reducing costs and employee headcount, writing off acquired research and development costs and good will, and drastically cutting back further product development. CAI's business strategy has made it a very controversial company in the software industry. CAI's tactics in dealing with clients have been similarly aggressive and questionable, and CAI is consistently involved in litigation with its clients. 7. CAI's reputation in connection with acquisitions is well known. In May 1995, in connection with the acquisition of Legent Corporation, Wang, Kumar and others promised that "CA's trying to do the right things" with regard to employees, that the acquisition represents an "acceleration of hiring," and prospects of firings were called "ridiculous rumors." CAI's actions differed from its representations. By one estimate, between 80 to 90 percent of Legent's 2,000 or so employees had left or been let go within a year of the transaction. In fact, in connection with the Legent acquisition, CAI represented in SEC filings that there were "no current 3 plans or proposals that would relate to, or result in, any other material change in the [target's] business, corporate structure, Board of Directors or management." In 1994, in connection with the ASK acquisition, Wang emphasized, "We're excited to have the opportunity to include the ASK people, products and clients in the CA family." Within days of the acquisition, 150 ASK employees were terminated and an additional 100 employees left because of CAI's demand that they enter into a stringent non-compete agreement extending long after employment ended, an agreement which is contrary to long-standing law and policy in California. Discussing potential layoffs in connection with the Cullinet acquisition, Wang stated that "some redundant jobs will be eliminated and those affected will be reassigned, if possible within CA. " Then the deal closed. "CA got rid of more than half of the company's 2,000 employees (many quit before they were fired)," according to Upside magazine. 8. The descriptions of Defendants' treatment of employees at companies it acquires are well publicized. "Within several days of a deal's closing, out come the long knives" (Fortune, 7/21/97); "hordes of personnel to the sword" (Computergram Intl. 1997); "it has acquired a reputation for extensive bloodletting after its purchases and a certain arrogance and aggression" (Software Futures, 1996). As succinctly stated in The Washington Post, "It's been tarred with such names as 'Darth Vader' or 'the Neutron Bomb' -- a weapon that leaves buildings standing, but with no one in them." As one ex-employee recalled, "It was the most humiliating experience of my life. Then they refused to pay off my expense account." (Fortune 7/21/97). Another emphasized, "I've been in the business for 15 years, and I've never seen anything like it." (Id.) As another example, CAI was found guilty of violating the Racketeer Influenced and Corrupt Organizations Act ("RICO") two years ago by a New York arbitration panel and was ordered to pay $12 million to former employees as a result of misconduct in connection with acquisition and valuation of Online Software. CAI subsequently lost the appeal. In fact, CAI has become so proficient at laying people off that it has actually developed its own software program for this purpose: "the merger acquisition program system" or "MAPS. " Manager rankings, personality profiles and other information are input into a CAI proprietary program and the computer tells CAI who should be fired. Wang refers to his management approach as "zero-based thinking." 4 9. CAI's negative reputation for service is well known and well publicized. "I've never seen one vendor with so many dissatisfied customers as CA seems to have" (Investor's Business Daily, 5/26/95); "I think CA's lack of finesse has cost them in the customer relations arena" (Los Angles Times, 9/13/93); "By the early 1990's, Computer Associates had become known for its ravenous appetite . . ., for jacking up maintenance costs ... and for pushing its many licensing contracts at the expense of good customer relations. It was not uncommon for the company to sue a client over relatively minor infractions" (New York Times, 2/4/97); "Some customers maintain a strict 'no CA' policy.... Many also claim that after CA acquires a company and lays off scores of people, customer service falls off' (Fortune, 7/21/97); "In a . survey of 50 major CA customers ... 75 percent rated its service as below average" (The Washington Post, 5/10/92). "[CAI], which is a huge provider of operating systems and other software to financial institutions, has a reputation for inflexible licensing policies that can complicate a bank's move to new providers of technology issues." (American Banker, 2/23/98). Computer Associates should be feeling uncomfortable because it has been treating a lot of customers like dirt -- particularly those it has gained through acquisition." (Information Week U.K. 2/20/98). CAI's terrible reputation is in sharp contrast to that of CSC: "In contrast, CSC is a customer advocate. As a services company, it has to treat customers with kid gloves to get repeat business" (Bloomberg, 2/12/98). THE INDIVIDUAL DEFENDANTS 10. Billionaire Defendant Charles B. Wang is the Chief Executive Officer, Chairman of the Board and a director of CAI. He has been a director since June 1976 and Chairman since April 1980. He also is one of three members of the Executive Committee of CAI. He owns approximately 5% of the stock of the company, although he expects to own substantially more in the near future. In 1995, Wang, Kumar and Russell M. Arntz (Executive Vice President of Research and Development), granted themselves 20.25 million shares of stock of CAI; 60%, 30% and 10% respectively. These shares are worth nearly a billion dollars, with an as yet untaken consequent charge to CAI's earnings. A portion of these shares currently are vested, and the 5 remainder appears likely to become vested if there is a combination, pursuant to the change in control provisions of CAI's 1995 Key Employee Ownership Plan ("Plan"). Regardless, they are expected to become vested by March 31, 2000, since CAI's stock price needs only exceed $38.82 for sixty days during the preceding twelve months for such vesting to occur. A number of Plan conditions which concern vesting have not been described, or have been described inconsistently, in CAI's public financial statements. Wang participated in a meeting and communications concerning the matters set forth in this Complaint in this judicial district. 11. Defendant Sanjay Kumar is the President, Chief Operating Officer and a director of CAI. He also is one of three members of the Executive Committee of CAI's Board. He joined CAI in 1987, and he served as Executive Vice President-Operations and Senior Vice President-Planning before being elected to his current positions effective January 1994. He also owns a significant amount of stock in CAI. Kumar participated in a meeting and communications concerning the matters set forth in this Complaint in this judicial district. GENERAL ALLEGATIONS 12. In effecting the wrongful actions herein alleged, each defendant was the agent or co-conspirator of each other defendant, and was acting in the course and scope of said agency or conspiracy. Defendants also ratified, approved and accepted all or part of the wrongful acts of their agents, employees and/or co-conspirators alleged herein. Moreover, at the time of the wrongful conduct alleged herein, Plaintiff was led to believe, either intentionally or with a lack of ordinary care, that each defendant was the agent, employer or co-conspirator of each other defendant, and that they were acting within the course and scope of said agency, employment or conspiracy in perpetrating the wrongful conduct alleged herein. In addition, Wang and Kumar were permitted by CAI to be in positions to commit the wrongful conduct alleged herein while appearing to act within the powers permitted to them by their corporate principal. 13. The true names and capacities of various other defendants, whether corporate, individual or otherwise, are at this time unknown to Plaintiff, but may include various subsidiaries and affiliates of CAI, as well as officers, directors, employees and agents of the 6 corporate defendant. Plaintiff will amend this Complaint if necessary when the true names, capacities and actions of Corporate Does 1-50 and Individual Does 51-100 become ascertained. On information and belief, each of said defendants is responsible in some manner for the events and injuries described herein and have caused damage to Plaintiff as described herein. 14. Representatives of Defendant CAI have been present frequently in this judicial district and have maintained substantial contacts in Los Angeles County and the State of California. CAI has two offices in this district and nine offices throughout California. The obligations and liabilities which are the subject of this action arose in this judicial district, and various of the wrongful acts of the Defendants alleged herein took place in the County of Los Angeles, State of California. Jurisdiction and venue are proper. FIRST CAUSE OF ACTION (UNFAIR, UNLAWFUL, AND FRAUDULENT BUSINESS PRACTICES) (BY PLAINTIFF CSC AGAINST ALL DEFENDANTS) 15. Plaintiff CSC incorporates by reference and realleges Paragraphs 1 through 14 as if set forth in full herein. 16. Defendants, and each of them, have engaged, are engaging, continue to engage in, and propose to continue to engage in, unlawful, unfair and fraudulent business acts and practices in violation of the California Unfair Business Practices Act, set forth at California Business and Professions Code section 17200 et seq. Specifically, Defendants, and each of them, were engaging, are engaging, and will continue to engage in a systematic and conspiratorial campaign of unfair, unlawful, and fraudulent acts and practices to attempt to coerce CSC and its directors to sell the company to CAI at a disadvantageous and unfair price and in a transaction which would be detrimental to the interests of CSC and its customers, employees, and stockholders. 17. In furtherance of Defendants' campaign, Defendants first attempted to buy the loyalty of Honeycutt, CSC's chief executive officer, to secure his support to sell CSC below its value, and thereby defraud CSC shareholders. When this failed, Defendants sought to coerce CSC to negotiate an acquisition on their terms by threatening to cause severe harm to CSC's business. 7 Defendants subsequently have followed through on their threats and are continuing their illegal coercive scheme. In Defendants' minds, there is no downside to this unlawful and unfair strategy. The worst CAI perceives may happen is that it does substantial harm to CSC's relationships with its customers and employees so that CAI will be in a better position to compete against CSC if it is unable to acquire CSC below its value -- competition which Wang promised if the deal is unsuccessful. In the process, Defendants are hoping to gain access to CSC's confidential financial information and trade secrets, which also would put it in a better position to compete against CSC. 18. Defendants' actions threaten severe damage to the business of CSC and the value of the shareholders' interests. Defendants' gross and persistent misconduct is precisely the type of behavior the California Unfair Business Practices Act was designed to address. 19. Therefore, as set forth more fully in the Prayer below, Plaintiff seeks to enjoin Defendants from engaging in, and continuing to engage in, unlawful, unfair and fraudulent business acts and practices, and all violations of California law; to enjoin Defendants from proceeding with their proposed acquisition of CSC and from any further acquisition of shares or any attempt to solicit the shareholders of CSC; to enjoin Defendants from attempting illegally to buy the loyalty of any of CSC's officers, directors, employees or representatives or from attempting to induce them to breach their fiduciary duties; to enjoin Defendants from attempting to coerce improperly CSC or its officers, directors, employees or representatives to sell CSC to CAI at a disadvantageous and unfair price and in a transaction which would be detrimental to the interests of CSC, its customers, employees, stockholders and the public interest; to enjoin Defendants from making false and fraudulent representations; to enjoin Defendants from communicating in any way, directly or indirectly, with CSC's customers and employees about any proposed transaction; and, to pay restitution to CSC in an amount to be determined at trial. (A) CAI'S FIRST STEP: IMPROPER ATTEMPT TO BUY LOYALTY 20. On December 18, 1997, Wang and Kumar came to CSC's corporate headquarters in El Segundo to meet with Honeycutt. The purpose of their meeting was unknown to Honeycutt. Kumar had called Honeycutt's assistant the day before and indicated that Wang and Kumar were interested in visiting CSC's offices, which is not surprising since is a vendor of 8 software to CSC. At the meeting, Wang began by stating, "Wouldn't it be great to be partners." Honeycutt, who had no idea what he was talking about, indicated that his company already had a license relationship whereby CSC had the ability to use CAI's software with many of its clients. Wang then explained that he envisioned a different partnership through a combination in which CAI purchased CSC. He stated that such a transaction would be a good strategy for CAI. 21. Honeycutt responded that he could see no advantage for CSC in such a relationship, an issue which Wang had neglected to address. Honeycutt stressed that CSC was not up for sale, and that he could not support any transaction based on the assertions Wang made. After some additional discussion, Wang asked Honeycutt if Wang and Kumar could meet privately for five minutes. Honeycutt stepped out of the meeting. 22. When Honeycutt returned, Wang did not seek to explain how a merger benefited CSC, nor did he present any business plan for the combined companies. Instead, Wang offered to pay Honeycutt personally more than $50 million. Wang promised that Honeycutt would receive guaranteed stock options worth at least $35 million (with any shortfall in market value being paid by CAI), as well as a guaranteed seven-year contract with an annual base income of no less than $2.5 million. Honeycutt objected to this attempt to buy his loyalty, and was interrupted by Wang. 23. Wang stated he wanted to consummate a merger transaction for $100 a share, which he and Kumar knew was far below the value of CSC. Indeed, on February 11, 1998, CAI made public an offer of $108 a share (which it knows is still less than the value of CSC). This price difference alone represents value to CSC shareholders of about $650 million. Further, on or about February 15, CAI's bankers stated on the telephone to a representative of CSC that CAI was prepared to pay $114 a share (which it also knows is less than the value of CSC) in a friendly transaction, pointedly emphasizing the potential harm to CSC's business that CAI would cause if CSC was not sold on CAI's terms. The $14 dollar price difference between $100 a share and $114 per share represents approximately $1.1 billion to CSC shareholders. 24. The conduct of Defendants was an intentional, unlawful and corrupt attempt to buy Honeycutt's support of a transaction that only benefited CAI at the expense of CSC and its 9 stockholders. Defendants' conduct is an express violation of numerous provisions of the California Penal Code governing commercial bribery (including the criminal statutes governing solicitation of others to Join in a bribery scheme). It is an unlawful, unfair, and fraudulent business act or practice within the meaning of the California Unfair Business Practices Act. (B) CAI STEP NO. 2: ATTEMPTED ECONOMIC DURESS 25. A second brief meeting was held on February 5, which Honeycutt attended based on the promise that Defendants were going to reveal their business plan for a combined entity, and therefore explain how the transaction benefited CSC. Defendants did not keep this promise. Instead, Defendants threatened to directly and wrongfully harm CSC if it refused to agree to a transaction on CAI's terms. They mentioned $98 a share. Given CAI's negative reputation and the nature and tone of Defendants' threats, CSC had a reasonable belief that CAI would attempt to do exactly as it threatened. CAI has in fact done so. 26. CAI's threats were echoed in a letter dated February 15, 1998, in which CAI stated that if a friendly transaction was not consummated promptly on CAI's terms, the consequence would be "an adverse impact to CSC's business and people." Kumar continued that "a reduced value of CSC" would result from CAI's actions. Statements to this effect also were made to the same CSC representative on or about that day, in which CAI noted that it independently had been in discussions with competitors of CSC which were excited about the prospect of CSC being damaged. 27. Defendants' attempts at improper economic duress were rebuffed by CSC. The interests of CSC and its shareholders, employees, and customers were paramount and would not be sacrificed because of CAI's threats of improper economic injury. That CAI has chosen to follow through on its statements has exacerbated its wrongful conduct. 28. Defendants' conduct is an express violation of numerous provisions of the California Penal Code governing economic extortion (including the criminal statutes governing solicitation of others to join in an extortion scheme). It is an unlawful, unfair and fraudulent business act or practice within the meaning of the California Unfair Business Practices Act. 10 (C) CAI STEP NO. 3: FRAUDULENT MISREPRESENTATIONS ABOUT NEGOTIATIONS AND THE PROSPECT FOR AN "AGREEMENT." 29. CAI was aware that an offer by it to acquire CSC would lack credibility in view of fundamental obstacles to a combination of its business methods and reputation with those of CSC. In an effort to overcome the skepticism with which a takeover offer by it was sure to be received, it embarked on a deliberate attempt to mischaracterize its two meetings with CSC's chief executive officer. CAI therefore deliberately and falsely published statements calculated to lead CSC's employees, customers, shareholders and the general public into believing that Honeycutt was in agreement with all aspects of the proposed acquisition, save only price. Defendants made these statements fully knowing that they were false when made. 30. On February 11, 1998, Defendants published a letter sent to CSC's chief executive officer dated the previous day. The letter from Kumar to Honeycutt contained numerous, deliberate material misrepresentations of fact. 31. First, the letter states that Honeycutt invested "significant time" in discussions "regarding the combination of" CAI and CSC, emphasizing that these "discussions" commenced in mid-December. In fact, the only communications between the parties on the subject were two brief meetings (and a few telephone calls to schedule the meetings) in which CAI expressed its strong desire to purchase CSC at a disadvantageous and unfair price, attempted to buy the loyalty of the chief executive officer of CSC, and threatened to damage CSC if Honeycutt refused to accede to CAI's proposals. 32. The mischaracterization of CAI's communications with Honeycutt continue in the February 10 letter: "As we agreed, the combination of CA and CSC would create a worldclass information technology solutions provider with unparalleled depth in both software and services. The combination of CA's strength in software and CSC's services capabilities, together with our collective personnel, would create the perfect model for the next generation of information technology solutions providers that will lead our industry into the millennium. (Emphasis added). In fact, as Defendants well knew, there was never any such agreement. 11 Neither Honeycutt nor anybody else at CSC had "agreed" with any of these propositions and, in fact, Honeycutt strongly disagreed with them. As Defendants well knew, Mr. Honeycutt had made it clear again in no uncertain terms that he was not interested in the combination as proposed by Defendants, because the proposed price was not fair and the strategy was flawed. 33. Defendants' misrepresentations in the February 10 letter continue with the statement that the parties have reached "agreement" on the material terms of a combination of the two companies, with the sole exception of price. Indeed, these purported agreements are said to be "confirmed by my letter," suggesting that terms already have been incorporated into writing. No such agreements were ever reached, and Defendants acknowledged this at the February 5 meeting. - Defendants falsely stated in the February 10 letter, "We are in agreement on the need and manner of retaining key managers and employees." (Emphasis added). - Defendants falsely represented, "We are in agreement on providing stock option grants to key managers and employees." (Emphasis added). - Defendants falsely wrote, "We are in agreement that the CSC organization within the combined company will be on equal footing to CAI's existing product organization." - Further, Defendants falsely suggested that there was an agreement that the parties "do not expect the combined company to need to reduce any head count to achieve the synergies that a transaction of this size demands." - Defendants falsely suggested that discussions had occurred and agreement was reached on the structure and organization of a combined entity. "As we discussed, it would make sense for the CA part of the combined company to take over CSC's product development efforts and for CSC, in turn, to take over CA's service commitments and efforts." (Emphasis added.) 34. Defendants have continued to misrepresent and mischaracterize their communications with Mr. Honeycutt in numerous media and investor interviews and statements. For example, they stated on a conference call on February 11 to members of the press that CAI 12 and CSC had "significant agreement on most of the points" and that "we're simply disagreeing over value at this point." 35. Defendants' conduct was calculated to, did, and continues to cause substantial damage to CSC's relationships with customers, prospective customers, employees, prospective employees and shareholders. Material misstatements intentionally made by Defendants created and continue to create false expectations and fears on the part of such persons about the prospect of a business combination. By creating these false expectations and fears, Defendants intended to mislead customers, prospective customers, employees and the investment community into believing that the proposed transaction was commercially attractive, that agreement was close at hand, and that opposition to such a transaction would be pointless and futile. This conduct also was intended to coerce CSC to accept the offer, even though it is much less than the value of the company, rather than be subject to shareholder lawsuits if the price of the stock dropped. Defendants' fraudulent misrepresentations, in conjunction with their other misconduct, constitute an unlawful, unfair and fraudulent attempt to coerce CSC to sell the company at less than its value. 36. At the same time CAI claims that negotiations were proceeding and agreements were being reached, Wang, Charles P. McWade (Senior Vice President of Finance of CAI), and Russell M. Arntz (Executive Vice President of Research and Development), sold over $27 million of stock of CAI. These sales took place in late January and early February. Defendants well knew that the public announcement of a proposed transaction with CSC would cause a steep and sudden decline in the value of CAI stock as a result of the high cost of the transaction to CAI, the formidable obstacles to combining the two incompatible businesses, and the substantial long-term dilution of CAI's earnings per share that would result. Wang sold 150,000 shares of CAI stock at $49.13 per share, for $7.4 million on January 22, according to documents filed with the Securities and Exchange Commission ("SEC"). He sold another 150,000 shares at $48.06 per share for a total of $7.2 million on January 27. McWade sold 72,006 shares at $53.65 per share for a total of $3.9 million on January 30, 1998. Arntz stated in a Form 144 filing that he was going to sell 175,000 shares of CAI "ASAP" on February 2 for in excess of $9.4 million in total proceeds at the market price, and expressly represented to the SEC that he "does not have any 13 material adverse information in regard to the current and prospective operations of the issuer of the securities to be sold which has not been publicly disclosed" immediately above his signature. 37. Defendants' conduct was calculated to, did, and continues to cause substantial damage to CSC's relationships with employees, prospective employees, customers, prospective customers, and shareholders, and was calculated to interfere with CSC's ongoing business. By damaging these relationships, the value of CSC's business is reduced accordingly. Thus, by damaging CSC, CAI is attempting to bring that value down to its desired disadvantageous and unfair price range. And even if the transaction does not go forward, CAI will have damaged CSC through its improper conduct, just as CAI is entering into competition with CSC . Wang himself promised at the very first meeting with Honeycutt that if the proposed transaction did not go forward, CAI would become one of the primary competitors of CSC within five years. Defendants' "squeeze" tactics violate the California Unfair Business Practices Act. (D) CAI STEP NO. 4: FRAUDULENT MISREPRESENTATIONS ABOUT THE FEASIBILITY AND EFFECTS OF THE PROPOSED TRANSACTION 38. Defendants intentionally, fraudulently, and with reckless disregard made misstatements concerning the effects a combination would have on CSC and on the combined entity, and omitted substantial material information. They stated that Honeycutt was in agreement that "the combination of CA and CSC would create a world-class information technology solutions provider with unparalleled depth in both software and services." They represented that there would be "inherent synergies" in a combination of the two companies, and that these purported mutual synergies would result in an improved operating entity. They have emphasized the "incredible potential that this merger holds for the clients, employees, and shareholders" of CSC. They emphasized that "we believe we're offering a very fair value" to CSC shareholders, and that CSC people agree that a combination "is a tremendous opportunity for both companies." They stressed that customers "would also have many, many more opportunities in working with the combined company" and that the deal somehow "benefits clients." They have emphasized that nothing would "change dramatically in any reorganization." 14 39. Defendants made these statements fully knowing that they were false when made, or with reckless disregard for their accuracy, and also are aware that they are omitting substantial material information. Defendants are aware that the merger is not in CSC's best interests, and that any combination does not make business sense to CSC. Defendants also are aware that they are not offering to buy CSC at a full or fair value, but simply want to buy CSC for less than its value through the exercise of the wrongful means described herein. 40. Defendants are aware of and have failed to disclose the numerous adverse effects that the proposed business combination would have on CSC and its business. CSC's strong financial position, as reflected by its 'A' credit rating, is critical to its ability to secure the large, long-term outsourcing contracts that are a key to growth in CSC's information technology business. A combined CSC and CAI would be irresponsibly leveraged and thus have a much lower credit rating (possibly not even investment quality) and be at a distinct disadvantage in the competition for such business. As CAI is aware, this would adversely affect the financial performance of any combined enterprise. Second, CSC's ability to provide independent solutions is a threshold and important issue for customers which demand platform neutrality. CAI is well aware that this neutrality would be severely compromised if CSC were to be acquired by CAI and, as a result, CSC would lose substantial credibility in the marketplace. Third, more than 25 percent of CSC's total anticipated revenues for fiscal 1999 are derived from outsourcing contracts that contain change in control provisions which would allow customers who are concerned about such issues or any involvement with CAI to move to another services firm. Fourth, software critical to CSC's data centers and other operations is licensed to CSC under contracts that are terminable by the licensor if CAI acquires CSC. Fifth, CSC's substantial work for the federal government and related defense clearance issues present significant problems in the proposed combination. 41. Given its negative reputation in the computer industry and past predatory practices, CAI cannot reasonably expect that all the employees of CSC will remain with the company if CAI were to complete a merger transaction. On information and belief, based on CAI's past practices, CAI does not reasonably intend to retain all of CSC's employees after a merger transaction, despite express statements to the contrary by Wang and Kumar. In fact, CAI's 15 representations in this respect contradict themselves. In their press release discussing their offer on February 11, CAI states that it intends to retain "all of CSC's valuable employees" (emphasis added), whatever that means. Similarly, in the letter to Honeycutt dated February 10, Kumar states that "we anticipate that all of the valuable CSC employees will be offered positions with a combined company," and that CAI intends to retain "key managers and employees." (Emphasis added). Then, in a letter dated February 11 to all CSC employees, Defendants wrote that it "will offer every employee a position in the combined company," and then stated that same day to the press that "we're committed to retaining all of CSC's employees" -- representations which are inherently incredible. As Wang himself acknowledged in Upside, "Most companies lie [about retaining employees in an acquisition]. They have no intention of keeping two legal departments, two administrative staffs, two this and two that after an acquisition, but they want to be popular. They want to be loved." 42. On information and belief, Defendants also made misstatements to banks to obtain financing commitments, to rating agencies, to the press and to the public. They minimized the negative impact of the transaction on CAI's financial position and earnings, and the dilutive effect on their performance. This is particularly true in light of CAI's past and present accounting practices such as those reported by the Center for Financial Research and Analysis in a 1996 evaluation. On information and belief, Defendants also failed to describe accurately the effects of a billion dollar charge to CAI's income due to the shares granted to CAI's three top executives as referenced above. Defendants then used "financing commitments" and a potential credit rating for a combined company, acquired as a result of this misinformation, to assist in its attempt to acquire CSC for less than its value. 43. Defendants' goal in engaging in this fraudulent conduct was to acquire CSC at a disadvantageous and unfair price in a transaction which would be detrimental to the interests of CSC and its customers, employees, and stockholders. They desire to move as quickly as possible and to exert maximum and continuing pressure on CSC in this respect. Defendants, by means of their misrepresentations, also intend to cast doubt on the credibility and motives of CSC's board in 16 rejecting CAI's offer, and therefore irreparably damage its ability to communicate effectively with CSC's shareholders, customers, and employees concerning CAI's offer. (E) CAI STEP NO. 5: INTERFERENCE WITH EMPLOYMENT RELATIONSHIP 44. Defendant CAI is engaged in a campaign of communicating with CSC employees and stating to them that the transaction is imminent. This has led to ongoing interference with the conduct of CSC's business, and threatens to damage CSC's reputation in the eyes of its employees, many of whom would consider CAI an unacceptable employer. As one example, CAI representatives have come to CSC's offices unsolicited and told CSC employees that CAI was taking over the company and that CAI would be its new employer. 45. CAI representatives have sought to dissuade prospective employees from interviewing with CSC. At one job fair, a CAI representative told prospective applicants applying at CSC's booth not to sign up with "those guys" since "we are going to buy them anyway." Prospective recruits have been convinced not to interview with or and become employed at CSC because of CAI's misconduct. 46. CAI's actions have damaged, and continue to damage, CSC's positive relationship with its employees -- who constitute the single most important part of its service business. (F) CAI STEP NO. 6: INTERFERENCE WITH CUSTOMER RELATIONSHIPS 47. CAI also improperly has been contacting customers of CSC and stating that it is taking over the relationship with those customers because of the transaction. Understandably, CSC's customers have been extremely upset. Because of the false representations of CAI about an imminent transaction and prior "agreements," CSC's customer relationships and new business opportunities are threatened with disruption. 17 SECOND CAUSE OF ACTION (IMPROPER ECONOMIC DURESS) (BY PLAINTIFF CSC AGAINST ALL DEFENDANTS) 48. Plaintiff CSC incorporates by reference and realleges Paragraphs 1 through 47 as if set forth in full herein. 49. As set forth in detail above, the Defendants have acted intentionally and unlawfully in attempting to exert improper influence and pressure on CSC and its directors, officers, employees and stockholders, and have injured CSC in its ongoing business operations and its favorable reputation in the information technology services and financial communities. 50. As a direct, proximate and foreseeable result of the above-described misconduct, CSC has suffered and will continue to suffer a significant loss of its good name and reputation and damages to its ongoing business operations in excess of $50 million, the precise amount to be determined at trial. 51. The wrongful actions of the Defendants alleged herein were willful, wanton, malicious and oppressive, and thus Plaintiff is entitled to exemplary and punitive damages appropriate to punish and make an example of all Defendants. THIRD CAUSE OF ACTION (CONSPIRACY TO ENGAGE IN WRONGFUL CONDUCT) (BY PLAINTIFF CSC AGAINST ALL DEFENDANTS) 52. Plaintiff CSC incorporates by reference and realleges Paragraphs 1 through 51 as if set forth in full herein. 53. Defendants, and each of them, knowingly and willfully conspired and agreed with one another to engage in the wrongful conduct set forth above. Defendants furthered the conspiracy by acting in furtherance of the conspiracy, by lending cooperation, aid and encouragement to the other co-conspirators, and by ratifying, accepting and adopting the wrongful acts alleged herein. 18 54. The wrongful actions of the Defendants alleged herein were willful, wanton, malicious and oppressive, and thus Plaintiff is entitled to exemplary and punitive damages appropriate to punish and make an example of all Defendants. FOURTH CAUSE OF ACTION (INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE AND CONTRACTUAL RELATIONS) (BY PLAINTIFF CSC AGAINST ALL DEFENDANTS) 55. Plaintiff CSC incorporates by reference and realleges Paragraphs 1 through 54 as if set forth in full herein. 56. CSC has established long-term business relationships with its customers and employees for the provision of computer services. Plaintiff has an honorable and respected reputation in the information technology services industry and with its employees and customers for trustworthiness and for dealing in good faith with them. 57. As set forth in detail above, the Defendants have acted intentionally and unlawfully in attempting to interfere, and interfering, with CSC's contractual relationships with its customers and employees. As further set forth in detail above, the Defendants have acted intentionally and unlawfully in attempting to interfere, and interfering, with CSC's prospective economic relationships with current customers and employees, as well as prospective customers and employees. Such conduct was independently wrongful as alleged above. 58. Defendants have engaged in this conduct to exert improper influence and pressure in an attempt to acquire the company on CAI's terms at an unfair price. Defendants also intended to injure CSC's business as a potential competitor. 59. As a direct, proximate and foreseeable result of the above-described misconduct, CSC has suffered and will continue to suffer a significant loss of its good name and reputation and damages to its ongoing business operations in excess of $50 million, the precise amount to be determined at trial. 19 60. The wrongful actions of the Defendants alleged herein were willful, wanton, malicious and oppressive, and thus Plaintiff is entitled to exemplary and punitive damages appropriate to punish and make an example of all Defendants. PRAYER WHEREFORE, Plaintiff prays for judgment against the Defendants, as specified in each Cause of Action set forth above, as follows: FOR CAUSE OF ACTION ONE, that Defendants be preliminarily and permanently restrained and enjoined, and that CSC be paid restitution, as follows: (a) Enjoin Defendants from engaging in, and continuing to engage in, the unlawful, unfair and fraudulent business acts and practices set forth above; (b) Enjoin Defendants from engaging in, and continuing to engage in, any violations of California law as set forth above; (c) Based on Defendants' persistent and gross misconduct, enjoin them from proceeding with their proposed acquisition of CSC and from any further acquisition of shares or any attempt to solicit the shareholders of CSC; (d) Enjoin Defendants from attempting illegally to buy the loyalty of any of CSC's officers, directors, employees or representatives or from attempting to induce them to breach their fiduciary duties; (e) Enjoin Defendants from attempting to coerce improperly CSC or its officers, directors, employees or representatives to sell CSC to CAI at a disadvantageous and unfair price and in a transaction which would be detrimental to the interests of CSC, its customers, employees, stockholders and the public interest; 20 (f) Enjoin Defendants from making false and fraudulent representations to the public about any meetings or communications with any CSC representatives, including the false and fraudulent representations concerning the purported negotiations or "agreements;" (g) Require Defendants to issue statements to the public correcting the false and fraudulent representations to the public about meetings and communications with any CSC representatives, including the false or fraudulent representations concerning the purported negotiations or "agreements;" (h) Enjoin Defendants from making false and fraudulent representations to the public about the prospects of a combined company, as well as the minimal negative impact a combination would have on CAI's financial position and earnings, particularly in light of its past and present accounting practices; (i) Require Defendants to issue statements to the public correcting the false and fraudulent representations to the public about the prospects for the combined company, as well as the minimal negative impact a combination would have on CAI's financial position and earnings; (j) Enjoin Defendants from communicating in any way, directly or indirectly, with CSC's customers and employees about any proposed transaction; and, (k) Pay restitution to CSC in an amount to be determined at trial. FOR CAUSES OF ACTION TWO THROUGH FOUR, 1. For damages in excess of $50 million; 2. For interest thereon at the statutory rate; 3. For exemplary and punitive damages; 21 4. For reasonable attorneys' fees and expenses; 5. For costs of suit incurred herein; 6. For such other and further relief as this Court deems just and proper. DATED: February 23, 1998 GIBSON, DUNN & CRUTCHER LLP WAYNE W. SMITH DAVID A. BATTAGLIA MICHELLE H. TREMAIN ROBYN C. CROWTHER By: /s/ DAVID A. BATTAGLIA --------------------------- David A. BATTAGLIA Attorneys for Plaintiffs COMPUTER SCIENCES CORPORATION 22 - -------------------------------------------------------------------------------- SUPERIOR COURT OF CALIFORNIA, COUNTY OF LOS ANGELES - -------------------------------------------------------------------------------- SHORT CASE TITLE CASE NUMBER Computer Sciences Corporation v. Computer Associates International, Inc. CERTIFICATE OF ASSIGNMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- File this certificate with all cases presented for filing in all districts of the Los Angeles Superior Court. - -------------------------------------------------------------------------------- [X] JURY TRIAL [ ] NON-JURY TRIAL [XX] TIME ESTIMATED FOR TRIAL 20 [ ]HOURS/[X] DAYS. The undersigned declares that the above entitled matter is filed for proceedings in the Central District of the Los Angeles Superior Court under Section 392 et seq., Code of Civil Procedure and Rule 2 (b), (c) and (d) of this court for the reasons checked below. The address of the accident, performance, party, detention, place of business, or other factor which qualifies this case for filing in the above designated district is as follows: - -------------------------------------------------------------------------------- NAME: (INDICATE TITLE OR OTHER QUALIFYING FACTOR) ADDRESS: Computer Sciences Corporation 2100 East Grand Avenue - ----------------------------------------------------------------- CITY: STATE: ZIP CODE: El Segundo CA 90245
- ------------------------------------------------------------------------------------------------------------------------------------ CHECK ONLY ONE NATURE OF ACTION. - ------------------------------------------------------------------------------------------------------------------------------------ NATURE OF ACTION GROUND NATURE OF ACTION GROUND - ------------------------------------------------------------------------------------------------------------------------------------ [ ] A7100 Vehicle Accident Local Rule 2 sets forth the No. of Minors Involved:________ One or more of the party [ ] A7210 Med Malpractice provisions for mandatory filings [ ] A5520 Regular Dissolution litigants resides within [ ] A7200 Other Personal Inj. in the Central District and [ ] A5525 Summary Dissolution the district.** [ ] A7220 Product Liability optional filings in the Central [ ] A5530 Nullity [ ] A6050 Other Malpractice District or District other than [ ] A5510 Legal Separation (Not a requirement [ ] A6012 Collection/Note the Central District in [ ] A6135 Foreign Support for filing in Central [XX] A6040 Injunct. Relief "Los Angeles County." [ ] A6136 Foreign Custody District--Rule 2) [ ] A6030 Declar. Relief [ ] A6122 Domestic Violence [ ] A6170 Late Claim Relief If this is a Class Action, [ ] A6130 Family Law Complaint- [XX] A6000 Other Complaint mark this box: Other (Specify): Business Tort [ ] Class Action ---------------------------------------------------------------- - ---------------------------------------------------------------- No. of Minors Involved:________ Child resides or deceased [ ] A6011 Contract/Commercial Performance in the district is [ ] A6080 Paternity father's probate would be expressly provided for.** [ ] A6131 DA Paternity filed in the district.** - ---------------------------------------------------------------- (DA use only) [ ] A7300 Eminent Domain/ The property is located within [ ] A6133 DA Agreement Inverse Condemnation the district.** (DA use only) No. of Parcels____________ [ ] A6600 Habeas Corpus Family Child is held within the [ ] A6020 Landlord/Tenant (UD) Law district.** [ ] A6060 Real Property Rights ----------------------------------------------------------------- - ---------------------------------------------------------------- [ ] A6101 Agency Adoption Petitioner resides within [ ] A6140 Admin Award The administrative tribunal is [ ] A6102 Independent Adoption the district.** located within the district.** [ ] A6104 Stepparent Adoption or - ---------------------------------------------------------------- [ ] A6103 Adult Adoption Consent to out-of-state [ ] A6160 Abstract The judgment debtor holds [ ] A6106 Sole Custody Petition adoption, consentor resides [ ] A6141 Sister State property within the [ ] A6105 Abandonment within the district.** Judgment district.** ----------------------------------------------------------------- [ ] A6107 Confession of [ ] A6210 Probate Will-Letters Decedent resided within the Judgment Testamentary district.** - ---------------------------------------------------------------- [ ] A6211 Probate Will-Letters or [ ] A7221 Asbestos Pers. Inj. Must be filed in the Administration Decedent resided out of the [ ] A6070 Asbestos Prop. Dam. Central District. [ ] A6212 Letters of district, but held property [ ] A6137 RESL Initiating Administration within the district.** Petition [ ] A6213 Letters of Special or [ ] A6138 RESL Responding Administration Petitioner, conservatee or Petition [ ] A6214 Set Aside Sm. ward resides within this [ ] A6139 RESL Reg of Foreign Estate (6602 PC) district.** Support [ ] A6215 Spousal Property [ ] A6111 Minor's Contract [ ] A6216 Succession to Real [ ] A6190 Election Contest Property - ---------------------------------------------------------------- [ ] A6217 Summary [ ] A6110 Name Change One or more of the party Probate (7660 PC) [ ] A6121 Civil Harassment litigants resides within [ ] A6218 Real Prop. Sm. [ ] A6100 Other Petition the district.** Value (13200 PC) (Specify):___________________ [ ] A6230 Conservatorship P & E - ---------------------------------------------------------------- [ ] A6231 Conservatorship Person [ ] A6151 Mandamus* The defendant functions [ ] A6232 Conservatorship Estate [ ] A6152 Prohibition* wholly within the [ ] A6233 Medical Treatment [ ] A6150 Other Writ* district.** without Consent (Specify):___________________ [ ] A6240 Guardianship P & E [ ] A6241 Guardianship Person [ ] A6242 Guardianship Estate [ ] A6243 Spouse Lacks Capacity [ ] A6254 Trust Proceedings [ ] A6260 Comp. Minor's Claim [ ] A6180 Petition to Establish Fact of Birth, Death or Marriage. [ ] A6200 Probate Other (Specify):______________________ - ------------------------------------------------------------------------------------------------------------------------------------
I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct and this declaration was executed on February 23, 1998 at Los Angeles, California. /s/ David A. Battaglia - ------------------------------------ (SIGNATURE OF ATTORNEY/FILING PARTY) David A. Battaglia * Perogative writs concerning a Court of inferior jurisdiction shall be filed in Central District. **Rule 2 allows optional filing in Central District. THE COURT MAY IMPOSE SANCTIONS OR OTHER PENALTIES FOR FAILURE TO FILE IN THE PROPER DISTRICT 4 76C134 CERTIFICATE OF ASSIGNMENT RULE 2 LASCR EX-99.(G)(7) 7 COURT ORDER US DISTRICT COURT/NEVADA FOR DEC. REL Exhibit (g)(7) UNITED STATES DISTRICT COURT DISTRICT OF NEVADA COMPUTER ASSOCIATES ) CV-S-98-00278-LDG (RLH) INTERNATIONAL, INC., ) ) Plaintiff ) ) v. ) ORDER ) COMPUTER SCIENCES CORPORATION, ) et al., ) ) Defendants ) ) - ------------------------------- Before the court is plaintiff's motion for an expedited briefing schedule and hearing on claims for expedited relief (#2). Because the motion was originally brought ex parte, this court entered an order on February 18, 1998 requiring plaintiff Computer Associates International, Inc. ("CA"), to serve the motion on defendant Computer Sciences Corporation ("CSC"), and shortening the time for Computer Science's response. The court has now received CSC's response (#12) and CA's reply brief. In mid-February 1998, CA formally commenced an unsolicited tender offer, filed preliminary proxy materials with the SEC, and initiated this action seeking declaratory and injunctive relief. In their lawsuit, CA asked the court to interpret the CSC bylaws and declare, inter alia, that (a) a majority of the outstanding voting shares are sufficient to amend the bylaws by written consent; (b) two-thirds of the outstanding voting shares, acting by consent, are sufficient to remove at least a majority of the directors; and (c) a majority of the outstanding voting shares are sufficient to fill vacancies caused by removal of directors by written consent. On February 18, 1998, CSC's board of directors convened. At that time, the board rejected CA's offer as ill-conceived, and undertook to alter CSC's corporate governance structure. Among other things, the board amended its bylaws relating to action by vote at a stockholder meeting and by written consent. Previously, Article VIII, Section 1 previously provided that a majority of outstanding voting shares were sufficient to amend the bylaws by written consent. The board action revised the bylaw to require an 80% vote of stockholders to amend the bylaws. Furthermore, Article II, Section 10 of the bylaws was amended to provide that any action, except the election of directors, could be taken without a meeting and without notice if authorized by the written consent of stockholders holding at least 90% of the voting power. The CSC board also (1) amended Article III, Section 2 of the bylaws to provide that a director may only be removed by a 90% shareholder vote, (2) amended the bylaws to "opt out" of the provisions of the "Acquisitions of Controlling Interest" component of Nevada General Corporation Law, thus eliminating shareholder's power to call a special meeting, and (3) amended Article II, Section 2 of the bylaws to remove the default date of August 10, 1998, for the next annual meeting, and provide that the scheduling of the annual meeting rested with the sound discretion of the board. Thus, CSC claims that most of CA's claims for relief in this action are moot under the new governance structure. CA argues that the CSC board amendments are an attempt to prevent the CSC shareholders from voting on CA's proposals, and to render CA's consent solicitation ineffectual, and should be declared an invalid attempt to disenfranchise the shareholders of a proxy contest without justification. Further, CA argues that the CSC boards actions makes expedited review in this matter all the more essential. 2 Because this case has now taken on the added inquiry of the validity of the CSC board actions, and because a material delay carries the potential of impeding the tender offer, the court concludes that an expedited disposition of the issues is warranted. While the parties have raised arguments in support of and against the CSC board's amendment actions, the order of the court did not request briefing on that matter, and the court will not presume that the parties' arguments have been fully developed. Therefore, the court will allow further supplemental briefing, and schedule a hearing date on the matter. Finally, CSC does not object to the prompt consideration of CA's section 14 claim for declaratory relief. Section 14 of the Exchange Act prohibits fraud or misrepresentation in connection with tender offers. CSC asserts that it must conduct preliminary discovery before deposing CA's principals regarding this aspect of the case. Though CA urges that no discovery is necessary for the section 14 analysis, the court is not convinced that at least limited discovery may not be needed for development of that claim. The court sees no reason, however, why discovery on the section 14 issues cannot proceed during the briefing and arguments on the remaining claims. Therefore, the court will defer to the magistrate judge to manage the discovery of the section 14 aspects of this litigation, with the recommendation from this court that the discovery of those aspects be completed within 60 days, if possible, so that the section 14 issues may be timely and meaningfully addressed. Based on the above, IT IS HEREBY ORDERED that plaintiff's motion for an expedited briefing schedule and hearing on claims for expedited relief (#2) is GRANTED. IT IS FURTHER ORDERED that no later than March 6, 1998, defendants shall file (with a courtesy copy delivered to chambers) a supplemental response to the briefs now on file. IT IS FURTHER ORDERED that no later than March 11, 1998, plaintiff shall file (with a courtesy copy delivered to chambers) a supplemental reply to defendants' supplemental response. 3 IT IS FURTHER ORDERED that a hearing on plaintiff's claims for declaratory relief shall be conducted at 1:00 p.m. on March 16, 1998. IT IS FURTHER ORDERED the magistrate judge shall manage the discovery of the section 14 aspects of this litigation, with the recommendation from this court that the discovery as to those aspects be completed within 60 days, if possible, so that the section 14 issues may be timely and meaningfully addressed. DATED this 26th day of February, 1998 LLOYD D. GEORGE -------------------------- Lloyd D. George United States District Judge 4 EX-99.(G)(8) 8 COMPLAINT OF CSC - US DISTRICT COURT CALIF. 3/2/98 Exhibit (g)(8) ELIA WEINBACH, SBN 79665 PATRICIA A. BENSON, SBN 60565 RICHARD B. SHELDON, JR., SBN 150092 MITCHELL, SILBERBERG & KNUPP LLP 11377 West Olympic Boulevard Los Angeles, California 90064-1683 (310) 312-2000 Attorneys for Plaintiff COMPUTER SCIENCES CORPORATION UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA COMPUTER SCIENCES CORPORATION, ) CASE NO. 98-1440 ABC a Nevada corporation, ) ) Plaintiff, ) COMPLAINT FOR INJUNCTIVE RELIEF ) AND DAMAGES FOR: v. ) ) (1) VIOLATION OF FEDERAL COMPUTER ASSOCIATES INTERNATIONAL, INC., ) SECURITIES LAWS a Delaware corporation; CAI COMPUTER SERVICES ) CORP., a Delaware corporation; ) (2) MISAPPROPRIATION OF TRADE BEAR, STEARNS AND CO., INC., a Delaware ) SECRETS; corporation; MICHAEL URFIRER, an individual; ) CHARLES B. WANG, an individual; and SANJAY ) (3) CONSPIRACY TO MISAPPROPRIATE KUMAR, an individual, ) TRADE SECRETS; ) Defendants. ) (4) INTERFERENCE WITH ADVANTAGEOUS BUSINESS RELATIONS; (5) CONSPIRACY TO INTERFERE WITH ADVANTAGEOUS BUSINESS RELATIONS; (6) BREACH OF FIDUCIARY DUTY; (7) AIDING AND ABETTING BREACH OF FIDUCIARY DUTY; AND (8) UNFAIR COMPETITION DEMAND FOR JURY TRIAL Computer Sciences Corporation ("CSC") complains and alleges as to defendants, and each of them, as follows: JURISDICTION AND VENUE 1. This is an action for injunctive relief and damages pursuant to Sections 14(a), and 14(e) of the Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. Sections 78j(b), 78(n)(a) and 17n(e), and the rules and regulations of the Securities and Exchange Commission promulgated thereunder, and pursuant to California state law. 2. This Court has jurisdiction pursuant to Section 27 of the Exchange Act, 15 U.S.C. Section 78aa; 28 U.S.C. Sections 1331 and 1337, and under principles of pendent jurisdiction. This Court also has jurisdiction under 28 U.S.C. Section 1332 in that this is an action between citizens of different states and the amount in controversy, exclusive of interest and costs, exceeds the sum of $75,000. 3. Venue is properly laid in this district because the claims averred herein arose in this district. THE PARTIES 4. Plaintiff CSC is, and at all times relevant hereto was, a Nevada corporation with its principal place of business in El Segundo, California. CSC common stock is listed on the New York Stock Exchange and is registered with the SEC pursuant to Section 12(b) of the Exchange Act, 15 U.S.C. Section 78L. As of January 30, 1998, there were approximately 78,433,041 shares of CSC common stock outstanding, held by approximately 66,000 stockholders of record. 5. CSC is informed and believes, and based thereon alleges, that defendant Computer Associates International, Inc. ("CAI") is a Delaware corporation with its principal place of business in Islandia, New York. 2 6. CSC is informed and believes, and based thereon alleges, that defendant CAI Computer Services Corp. ("CAI-Computer Services") is a Delaware corporation, with its principal place of business in Islandia, New York and is a wholly-owned subsidiary of CAI which was organized to acquire CSC. 7. CSC is informed and believes, and based thereon alleges, that defendant Bear, Stearns and Co., Inc. ("Bear Stearns") is a Delaware corporation with its principal place of business in New York, New York. 8. CSC is informed and believes, and based thereon alleges, that defendant Michael Urfirer ("Urfirer") is a citizen of the State of New York, and is currently employed by Bear Stearns as Senior Managing Director and the co-head of Bear Stearns' Technology Group. 9. CSC is informed and believes, and based thereon alleges, that defendant Charles B. Wang ("Wang") is a citizen of the State of New York, and is and was Chief Executive Officer, Chairman of the Board and a Director of CAI. Wang is a controlling person of CAI within the meaning of Section 20 of the Exchange Act, 15 U.S.C. Section 87t. 10. CSC is informed and believes, and based thereon alleges, that defendant Sanjay Kumar ("Kumar) is a citizen of the state of New York, and is and was the President, Chief Operating Officer, and a director of CAI. Kumar is a controlling person of CAI within the meaning of Section 20 of the Exchange Act, 15 U.S.C. Section 78t. 11. CSC is informed and believes, and based thereon alleges, that at all times relevant hereto, each defendant was and is an agent and employee of each and every other defendant and, in performing the acts hereinafter alleged, was acting within the course and scope of said agency and employment. CSC is further informed and believes, and 3 based thereon alleges, that each of the corporate defendants named herein was acting within the authorization of the remaining corporate defendants and that each corporate defendant approved, authorized, ratified and received the benefits of the conduct alleged herein. NATURE OF THE ACTION 12. This action seeks preliminary and permanent injunctive relief against defendants' plan and scheme to acquire control of CSC at an inadequate price by conducting (1) an unlawful tender offer and (2) an unlawful proxy solicitation seeking to remove the incumbent Board of Directors of CSC and elect as new directors defendants Wang and Kumar, and other individuals who are puppets of defendants, so that defendants can amend CSC's bylaws and force a waiver of Nevada statutes to eliminate provisions therein which are designed to protect CSC's stockholders from unlawful schemes such as that which defendants are attempting to perpetrate. 13. In making the tender offer and the proxy solicitation, defendants unlawfully obtained and have been in possession of confidential, material and non-public information about, among other things, the sales, earnings, profits, business, financial results, projections, and other trade secrets of CSC that defendants Bear Stearns and Urfirer unlawfully misappropriated in late November 1997, and possibly before and after, in their capacity as agents for CSC's former partner, Equifax, Inc., a Georgia corporation ("Equifax"). Defendants knew or should have known that such material, non-public information had been provided to Bear Stearns in confidence and for the sole and limited purpose of valuing Equifax's interest in the partnership. This confidential and non-public information in defendants' possession is material to the decisions of CSC's stockholders in connection with both the tender offer and the proxy solicitation. 4 14. Defendants may not proceed with their tender offer without disclosing the material, non-public information they obtained unlawfully and now possess. At the same time, Defendants may not, because of the very nature of the information they possess, lawfully disclose to third parties the information they have unlawfully misappropriated. As a result, defendants' tender offer is irreversibly tainted and must be enjoined. 15. As a result of the material misrepresentations and omissions that have been made and are being made by the defendants, CSC's stockholders are being deprived of information that would be important to stockholders in making the decision whether or not to tender their shares. However, disclosure of this information would severely damage CSC by making available to CSC's competitors confidential, proprietary and trade secret information that derives independent economic value from not being known to competitors. The injunctive relief sought herein is therefore necessary: (1) to prevent the defendants from the continued execution of their deceptive and unlawful scheme; (2) to preserve the integrity of the market for CSC's stock; (3) to protect CSC and its stockholders from defendants attempt to acquire CSC for inadequate consideration; and (4) to preserve and protect CSC's confidential and proprietary business and trade secret information. ALLEGATIONS COMMON TO ALL CAUSES OF ACTION 16. CSC provides a wide range of professional services to its many clients, including management consulting, information systems consulting, development and integration, outsourcing, and operations support. It has approximately 44,000 employees in nearly 600 offices worldwide. 5 THE PARTNERSHIP BETWEEN CSC AND EQUIFAX 17. On or about December 28, 1990, CSC, through several of its subsidiaries, entered into a partnership agreement with subsidiaries of Equifax. The partnership agreement contained a confidentiality provision which, among other things, prohibited Equifax from disclosing any confidential or proprietary information belonging to CSC, or any information designated by CSC as confidential or proprietary. The confidentiality provision required Equifax to use its reasonable efforts to prevent any present or former employee, agent, or representative of Equifax from disclosing to others any confidential information belonging to CSC or the partnership without CSC's prior written consent. 18. On or about April 8, 1997, Equifax notified CSC that it desired to withdraw from the partnership. The partnership agreement provided that upon the receipt of an election to withdraw, the withdrawing partner was to receive the value of its interest in the partnership, and further provided that each partner could retain an investment banker to appraise the withdrawing partner's interest in the partnership if the withdrawing partner and the remaining partner could not agree on the amount of the liquidating distribution. In seeking to come to an agreement on a value for Equifax's interest in the partnership, CSC and Equifax engaged their investment bankers to assist in that process. Equifax retained Bear Stearns as its investment banker to advise it in connection with the valuation of its partnership interest upon withdrawal from the partnership. 19. In connection with the valuation of Equifax's interest in the partnership, and only after Equifax reaffirmed in writing its obligations on behalf of itself, its employees and agents to maintain the confidentiality of CSC's information, CSC provided Equifax with highly confidential, non-public, proprietary and trade secret information which would be of value to CSC's competitors or to anyone seeking to purchase CSC. This 6 information constituted trade secrets belonging to CSC and included, but was not limited to, the following: (a) Confidential, non-public, proprietary, trade secret information and documents concerning CSC's internal valuation of the partnership and several of its constituent entities. CSC compiled the information at great expense and effort and never released such information to the public. (b) Confidential, non-public, and proprietary information and documents showing a portion of CSC's revenues broken down by certain subsidiaries and divisions. (c) Confidential, non-public, and proprietary information concerning CSC's internal projections for several of its subsidiaries and divisions. (d) Confidential, non-public, and proprietary historical financial information for one of CSC's subsidiaries engaged in the outsourcing business. "Outsourcing" refers to the performance of traditionally in-house services by a separate company. Examples of services that may be "outsourced" include data centers, networks, client server environments, payroll, insurance claims, benefit packages, etc. CSC is informed and believes, and based thereon alleges, that CAI is particularly interested in CSC's outsourcing business because CAI desires to force CSC's customers to use CAI's software, and will have a captive market if CAI acquires CSC. (e) Confidential, non-public, and proprietary information concerning the capital expenditures of a CSC subsidiary involved in the outsourcing business. 7 (f) Other confidential, non-public, and proprietary financial information concerning CSC and several of its subsidiaries, including such information as revenues, profits, and cash flow by division, as well as the synergies realized by the interrelationship of other CSC affiliates and the lack of interdependence of others. 20. All of the information described above constitutes trade secrets belonging to CSC and would be valuable to any entity attempting to acquire CSC because it shows, among other things, which constituent elements of CSC are profitable, which can be leveraged or spun off, and which are likely to generate the most revenue, profits and cash flow in the future. In the hands of a potential acquirer making a cash offer for stock, this type of confidential, non-public and proprietary information would be extremely valuable in calculating the lowest possible purchase price, as well as financing, for the stock and would make it easier to "low ball" the purchase price. THE NOVEMBER 25, 1997 TELEPHONE CONFERENCE INVOLVING BEAR STEARNS AND MICHAEL URFIRER 21. On or about November 25, 1997, representatives of CSC had a telephone conference with representatives of Equifax to discuss the valuation of Equifax's interest in the partnership and the confidential, non-public, proprietary and material information that had been provided by CSC to Equifax in connection therewith. In making arrangements for this telephone conference a few days earlier, CSC learned for the first time that Equifax had retained Bear Stearns as its investment advisor to advise and assist Equifax in valuing its partnership interest. At the commencement of the telephone conference, CSC was introduced to four representatives from Bear Stearns who were working on the matter and 8 who participated in the telephone conference. One of the Bear Stearns representatives introduced at the telephone conference was Michael Urfirer. 22. During the telephone conference, the confidential, non-public, and proprietary information provided by CSC to Equifax was discussed, as well as additional confidential, non-public, and proprietary information that was requested of CSC during the telephone conference. Defendant Michael Urfirer participated in the entire telephone conference. No Bear Stearns representative, including defendant Urfirer, indicated at any time that Bear Stearns had any conflict of interest in connection with its representation of Equifax, a partner of CSC, or that Bear Stearns intended to use or might use the confidential, non-public, and proprietary information provided by CSC for any purpose other than to assist CSC's partner, Equifax. 23. During and after the telephone conference, representatives of both Bear Stearns and Equifax requested CSC to provide additional confidential, non-public, and proprietary documentation and information, ostensibly for the purpose of completing the valuation of Equifax's partnership interest. At CSC's expense, CSC compiled the requested additional confidential, non-public, and proprietary documentation and information and provided the information and documents to Equifax and Bear Stearns. Most of the additional information requested by Bear Stearns and Equifax concerned the CSC subsidiary engaged in the outsourcing business. CAI, CAI-COMPUTER SERVICES, WANG, AND KUMAR ANNOUNCE A HOSTILE TAKEOVER BID FOR CSC AND RETAIN BEAR STEARNS AND MICHAEL URFIRER AS ADVISORS 24. On or about December 17, 1997 -- just 15 business days after CSC had first disclosed its non-public, confidential and proprietary business information to Bear Stearns and Urfirer in their capacity as agents for CSC's former partner, Equifax -- 9 defendant Kumar contacted CSC to request a meeting with Van Honeycutt, the Chairman of the Board, President, and Chief Executive Officer of CSC, and proposed a merger with CAI and CAI-Computer Services on terms very unfavorable to CSC and its stockholders. During the course of the December 18, 1997 meeting, CAI, Wang, and Kumar, using improper means and methods, sought, and seek, to acquire CSC for an amount well below its true value. CSC rebuffed CAI's efforts to acquire CSC for an amount below CSC's true value. 25. On or about February 17, 1998, CAI and CAI-Computer Services launched a hostile takeover offer for 100% of CSC's common stock at $108 per share (the "Offer"). The Offer is conditioned on, among other things: (1) the tender of sufficient shares to provide CAI-Computer Services with a majority of CSC's total outstanding shares and rights on a fully diluted basis; (2) the Rights under CSC's Shareholder Rights Agreement ("the Rights") having been redeemed by the CSC Board of Directors or CAI-Computer Services having been satisfied that the Rights have been invalidated or are otherwise inapplicable to the Offer; (3) CAI-Computer Services having been satisfied that the Nevada Control Share Acquisition Statute is inapplicable to the Offer and the proposed merger; (4) CAI-Computer Services having been satisfied that the Nevada Business Combination Statute is inapplicable to the Offer and the proposed merger; and other terms and conditions. By its terms, the Offer expires at midnight 12:00 p.m. (New York City time) on March 16, 1998. 26. CAI and CAI-Computer Services retained Bear Stearns and Urfirer to provide financial advice in connection with CAI's hostile takeover bid for CSC. In connection with CAI's retention of Bear Stearns, CSC is informed and believes, and based thereon alleges, as follows: (a) that Bear Stearns is acting as Dealer Manager in connection with the Offer; 10 (b) that CAI has agreed to pay Bear Stearns a fee of not less than five million dollars if CAI acquires CSC or more than 50 percent of its outstanding voting securities; (c) that Bear Stearns is entitled to act as sole lead underwriter, placement agreement and financial advisor in connection with certain debt and equity financings (and certain refinancings) and certain asset sales for a specified period following the acquisition and to receive fees in connection therewith; (d) that CAI has retained Bear Stearns in the past to assist it with acquisitions, including CAI's acquisition of Uccel Corp. in 1987; (e) that the same Michael Urfirer, who was reviewing CSC's confidential, non-proprietary and confidential information and documents in late November 1997, December 1997, and early January 1998 in connection with CSC's former partner, Equifax, leads the team of Bear Stearns employees assisting CAI in its attempted acquisition of CSC, a fact confirmed by numerous public filings with the federal securities and Exchange Commission ("SEC"), and news articles and trade announcements concerning CAI's hostile takeover bid; (f) that the same Michael Urfirer assisted CAI in its takeover of Uccel Corp. in 1987; (g) that the same Michael Urfirer has a long history with CAI; and (h) that Michael Urfirer and Bear Stearns have disclosed to CAI and to CAI-Computer Services the confidential, non-public information referred to above, without the knowledge or consent of CSC. 11 DEFENDANTS' FAILURE TO DISCLOSE CONFIDENTIAL INFORMATION IN THEIR POSSESSION 27. In connection with the Offer, on February 17, 1998, CAI and CAI-Computer Services filed with the United States Securities and Exchange Commission ("SEC") and disseminated to the investing public an Offer to Purchase dated February 17, 1998 and a Schedule 14D-1. In the Offer and the accompanying 14d-1 Schedule, and amendments thereto, Defendants did not make the disclosures required by the Exchange Act and the rules and regulations promulgated thereunder in that, among other things, they failed to disclose that they were in possession of material information not available to the investing public, described in paragraphs XX above, which would have indicated to CSC's stockholders that the Offer price was well below the true value of CSC. Nevertheless, in a further effort to defraud the stockholders of CSC, CAI has stated in proxy solicitation material recently disseminated to CSC's stockholders and described in further detail below, that "the $108 price may not be sustainable over a long period of time." THE SOLICITATION OF CONSENTS 28. CSC is informed and believes, and on the basis of such information and belief alleges, that in connection with and as part of defendants' plan and scheme to acquire CSC through the use of the non-public, confidential and proprietary information referred to above, prior to launching its hostile takeover bid CAI and CAI-Computer Services acquired all or the vast majority of 170,000 shares of CSC common stock. 29. On February 17, 1998, CAI and CAI-Computer Services filed preliminary copies of solicitation materials with the SEC. CAI and CAI-Computer Services have indicated that they intend to solicit holders of CSC shares with respect to written consents to act in lieu of a meeting, proxies to act at any meeting of stockholders, and agent designations for 12 the call of a special meeting, each consent to adopt proposals targeted at replacing the incumbent directors of CSC, calling a special stockholders' meeting to elect as replacement directors defendants Wang and Kumar, and other individuals who are puppets of defendants, so that defendants can eliminate CSC's Shareholder Rights Agreement, force a waiver of Nevada statutes designed to protect stockholders' interest, and amend CSC's bylaws to eliminate provisions therein which are designed to protect CSC's stockholders from unlawful schemes such as that which defendants are attempting to perpetrate. FIRST CLAIM FOR RELIEF (FOR VIOLATION OF SECTION 14 (e) OF THE EXCHANGE ACT) (AGAINST ALL DEFENDANTS) 30. CSC realleges and incorporates here by this reference each and every allegation contained in paragraphs 1 through 29, inclusive. 31. CSC is informed and believes, and on the basis of such information and belief alleges, that defendants knowingly and intentionally have engaged in a continuing plan and scheme and conspiracy to defraud through the use of the mails and other means and instrumentalities of interstate commerce in connection with their purchase of CSC stock and in connection with the Offer; have employed devices, schemes and artifices to defraud CSC and its stockholders; and have omitted to state material facts necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading. 32. In the Offer, defendants have failed to disclose confidential and material financial and business information about CSC that it has obtained and possessed during the formulation of its bid for CSC's shares, as more particularly described above, and also have failed to disclose their possession and use of such information. These material 13 omissions were purposefully designed to mislead the investing public, and are currently having that effect. These material omissions in the Offer include, but are not limited to the following: (a) Defendants disclosed in the Offer that early in the week of December 15, 1997 they placed a telephone call to Van Honeycutt, the Chairman and Chief Executive Officer of CSC, to arrange a meeting but did not disclose at that time, that defendants' investment bankers were Bear, Stearns and Urfirer, the same investment bankers who, just 15 business days before, had been given access to and were then subsequently in the process of reviewing CSC's confidential, non-public, and proprietary information in connection with assisting CSC's former partner Equifax to appraise the value of the partnership between CSC and Equifax; (b) Defendants disclosed in the Offer that defendants Wang and Kumar met on December 18, 1997 with Van Honeycutt of CSC to "discuss the merits of combining CA and CSC" but did not disclose in the Offer that defendants' investment bankers were Bear, Stearns and Urfirer, the same investment bankers who, just 16 business days before, had been given access to and were then in the process of reviewing CSC's confidential, non-public, and proprietary information in connection with assisting CSC's former partner Equifax to appraise the value of the partnership between CSC and Equifax; (c) Defendants disclosed in the Offer that on January 21 and 23, 1998, CA "through a wholly owned subsidiary bought 170,000 shares [of CSC]" but did not disclose in the Offer that defendants' investment bankers were Bear, Stearns and Urfirer, the same investment bankers who had been given access to and were then in the process of reviewing CSC's confidential, non-public, and proprietary information 14 in connection with assisting CSC's former partner Equifax to appraise the value of the partnership between CSC affiliates, and a third party partner; d. Defendants disclosed in the Offer that on February 10, 1998, defendant Kumar wrote a letter to Van Honeycutt of CSC which is incorporated in the Offer; that the letter represented that CA had "conducted an extensive analysis of CSC based on publicly available information," but did not disclose that CA and CAI-Computer Services's analysis of CSC was not based solely upon publicly available information but was based upon information and documents that had been provided to them by Bear, Stearns and Urfirer who had been given access to and were then in the process of reviewing CSC's confidential, non-public, and proprietary information in connection with assisting CSC's former partner Equifax to appraise the value of the partnership between CSC affiliates, Equifax affiliates, and a third party partner; 33. As a consequence of the foregoing omissions in the Offer, defendants have violated and are continuing to violate Section 14(e) of the Exchange Act, 15 U.S.C. Section 78(n)(e), and the rules and regulations promulgated thereunder. SECOND CLAIM FOR RELIEF (FOR INJUNCTIVE RELIEF AND DAMAGES FOR MISAPPROPRIATION OF TRADE SECRETS) (AGAINST ALL DEFENDANTS) 34. CSC realleges and incorporates herein by this reference each and every allegation contained in paragraphs 1 through 33 hereinabove, inclusive. 35. Through substantial effort and expense, CSC has developed confidential, non-public, and proprietary information which would be of value to its competitors and to 15 any company or individual seeking to acquire CSC. This information includes, but is not limited to, the information and documents described in paragraph 16 above. CSC's confidential, non-public, and proprietary information concerning its assets, revenues, costs, value, projections, and other financial information derives economic value from the fact that it is unknown to CSC's competitors and others and would be of assistance to those competitors or others who might wish to compete with CSC or attempt a hostile takeover of CSC. 36. By virtue of Urfirer's and Bear Stearns' involvement in the appraisal of Equifax's partnership interest, defendants Urfirer, Bear Stearns, CAI, Wang, and Kumar, and each of them, obtained access to confidential, non-public, and proprietary information constituting trade secrets of CSC. CSC is informed and believes, and based thereon alleges, that each defendant had or has access to some or all of the information described above. 37. Defendants Urfirer, Bear Stearns, CAI, Wang, and Kumar knew, or should have known, that the information concerning CSC provided to Urfirer and Bear Stearns constituted confidential, non-public, and proprietary information of CSC and that such information would be of value to CSC's competitors and others, including defendants CAI, Wang, and Kumar, who are attempting a hostile takeover of CSC at less than its true value. 38. CSC has never authorized defendants or any person outside of CSC to use or disclose its confidential, non-public, and proprietary business information in any manner other than to benefit CSC, and CSC never authorized Equifax, Urfirer, Bear Stearns, CAI, Wang, or Kumar to use the confidential, non-public, and proprietary information provided by CSC to Equifax for any reason other than to assist Equifax in the valuation of Equifax's interest in its partnership with CSC. 16 39. CSC utilizes reasonable security precautions to protect the confidentiality of its proprietary business information. These security precautions include, but are not limited to, the following: a. CSC, being a major defense contractor, has a contractual agreement with the United States government as holder of a cleared facility designation (top secret) at its Corporate Office. Thus, CSC is bound by government rules and regulations on accessing a cleared facility. All visitors, whether government or commercial, are bound by the same rules. b. Upon arrival, all visitors, consultants and vendors are personally responsible for completing a facility access log (Visitor/Vendor Register) which includes: (i) name, including last/first/middle initial and signature; (ii) company name/organization and name of the CSC contact being visited. c. The security officer notes the time of arrival, issues the visitor an escort-required badge, and notifies the person being visited that the guest is waiting. d. The visitor is met at the Lobby/Guard Station and escorted to the area being visited. e. Upon completion of the visit, the visitor is escorted back to the Lobby/Guard Station. 17 f. The visitor returns the badge, and the security officer logs time of departure. g. CSC's Corporate Office is a 24-hour-a-day, seven-days-a-week secured environment with live guard service, electronic access control, and closed circuit TV monitoring. The guards make periodic rounds, inside and outside, throughout the 24-hour period to assure that the facility, its employees and information are secure. h. CSC requires its key employees to sign confidentiality agreements. 40. CSC is informed and believes, and based thereon alleges, that defendants intend to utilize CSC's confidential, non-public, and proprietary business information and trade secrets, including those referred to in paragraph 16 above, in order to acquire CSC at less than its true value. Defendants CAI, Wang, and Kumar have retained Bear Stearns to advise them in connection with an attempted hostile takeover of CSC at less than its true value, and defendant Urfirer leads the team of Bear Stearns employees advising CAI, Wang, and Kumar. CSC is informed and believes, and based thereon alleges, that Urfirer has relied upon, or it is inevitable that he will rely upon, his extensive inside, confidential knowledge of CSC obtained as a result of his involvement with Equifax and his access to CSC's confidential information in connection therewith, and that Urfirer has divulged, or threatens to divulge, and has every economic incentive to divulge, to defendants CAI and CAI-Computer Services such confidential information to CAI, Wang, and Kumar in connection with their attempted hostile takeover of CSC. 41. CSC is informed and believes, and based thereon alleges, that defendants' activities have caused damage to CSC in an amount not presently ascertainable. 18 CSC will seek leave of Court to amend this complaint when the full amount of those damages has been ascertained. 42. Unless restrained and enjoined by this Court, the defendants, and each them, threaten and will continue to utilize the confidential information and trade secrets of CSC to unfairly assist them in their attempted hostile takeover of CSC at less than its true value. Such threats, acts, and continued conduct will, if carried out, result in disrupting CSC's businesses and depriving CSC of the benefit of confidential information which it took substantial effort and great expense to develop. 43. CSC has no adequate remedy at law to prevent the defendants from continuing to engage in the acts described above. Such conduct is continuing and will continue unless and until forthwith enjoined and restrained by order of this Court. Unless so enjoined, the injuries which CSC will sustain as a result of defendants' acts as set forth above, both threatened and continuing, are irreparable. 44. CSC is informed and believes, and based thereon alleges, that defendants' activities have been willful and malicious within the meaning of Civil Code Sections 3426.3 and 3426.4. CSC is therefore entitled to an award of exemplary damages and to damages in an amount equal to its attorneys' fees according to proof. 45. The tortious conduct of each of the defendants alleged hereinabove made it necessary for CSC to bring suit against the other defendants, and CSC is, therefore, entitled to an award of damages in an amount equal to its attorneys' fees, and according to proof, under the third party tortfeasor doctrine. 19 THIRD CLAIM FOR RELIEF (FOR CONSPIRACY TO MISAPPROPRIATE TRADE SECRETS) (AGAINST ALL DEFENDANTS) 46. CSC realleges and incorporates herein by this reference each and every allegation contained in paragraphs 1 through 45 above, inclusive. 47. CSC is informed and believes, and based thereon alleges, that beginning in or around December 1997, or possibly earlier, defendants CAI, CAI-Computer Services, Wang, and Kumar, and each of them, knowingly and willingly conspired and agreed among themselves to induce Urfirer to disclose CSC's confidential, non-public and proprietary information that Urfirer obtained while assisting Equifax. Defendants CAI, CAI-Computer Services, Wang, and Kumar knew, or should have known, that the CSC information imparted to Urfirer in connection with his services to Equifax was confidential, non-public, and proprietary information belonging to CSC, and that Urfirer was obligated to maintain the confidentiality of such information and not to disclose it to anyone. 48. Defendant Urfirer has in fact assisted CAI, CAI-Computer Services, Wang, and Kumar in connection with their attempted hostile takeover of CSC at less than its true value notwithstanding Urfirer's irreconcilable conflict of interest based upon his involvement in the Equifax matter. CSC is informed and believes, and based thereon alleges, that Urfirer has, or will in the future, disclose the confidential, non-public, and proprietary information that he obtained while assisting Equifax to CAI, CAI-Computer Services, Wang, and Kumar to the detriment of CSC. 20 49. CSC is informed and believes, and based thereon alleges, that defendants did the acts and things herein alleged pursuant to, and in furtherance of, the conspiracy and agreement alleged hereinabove. 50. As a proximate result of the wrongful acts herein alleged, CSC has suffered considerable damages in an amount not presently ascertainable, but expected to be not less than $50 million. CSC will seek leave of Court to amend this complaint when the full amount of those damages has been ascertained. 51. In doing the things herein alleged, defendants acted with fraud, oppression, and malice, and with an intent to injure CSC. CSC is therefore entitled to an award of exemplary damages in an amount according to proof. 52. The tortious conduct of each of the defendants alleged hereinabove made it necessary for CSC to bring suit against the other defendants and CSC is, therefore, entitled to an award of damages in an amount equal to its attorneys' fees, and according to proof, under the third party tortfeasor doctrine. FOURTH CLAIM FOR RELIEF (FOR INTERFERENCE WITH ADVANTAGEOUS BUSINESS RELATIONS) (AGAINST ALL DEFENDANTS) 53. CSC realleges and incorporates herein by this reference each and every allegation contained in paragraphs 1 through 52 hereinabove, inclusive. 54. CSC has advantageous business relationships with its customers, employees, and independent contractors for, among other things, the provision of computer services. These relationships, unless interfered with, are likely to continue indefinitely into 21 the future. CSC is informed and believes, and based thereon alleges, that defendants, with full knowledge of these existing relationships, intentionally acted, and are intentionally acting, to interfere with such relationships. Such conduct is and was independently wrongful as alleged above. 55. CSC is informed and believes, and based thereon alleges, that it has suffered damages as a result of this interference in an amount not presently ascertainable. CSC will seek leave of Court to amend this complaint when the full amount of those damages has been ascertained. 56. CSC is informed and believes, and based thereon alleges, that defendants' actions in interfering with CSC's advantageous relationships were undertaken with fraud, oppression, and malice, and with an intent to injure CSC. CSC is therefore entitled to an award of exemplary damages in an amount according to proof. 57. The tortious conduct of each of the defendants alleged hereinabove made it necessary for CSC to bring suit against the other defendants and CSC is, therefore, entitled to an award of damages in an amount equal to its attorneys' fees, and according to proof, under the third party tortfeasor doctrine. FIFTH CLAIM FOR RELIEF (FOR CONSPIRACY TO INTERFERE WITH ADVANTAGEOUS BUSINESS RELATIONS) (AGAINST ALL DEFENDANTS) 58. CSC realleges and incorporates herein by this reference each and every allegation contained in paragraphs 1 through 57 hereinabove, inclusive. 22 59. CSC is informed and believes, and based thereon alleges, that beginning in or around December 1998, or possibly earlier, defendants Bear Stearns, Urfirer, CAI, CAI-Computer Services, Wang, and Kumar, and each of them, knowingly and willfully conspired and agreed among themselves to interfere with CSC's advantageous business relationships with its customers, employees, and independent contractors. 60. Said defendants did in fact interfere with CSC's advantageous business relationships with its customers, employees, and independent contractors. 61. As a proximate result of the wrongful acts alleged above, CSC has been damaged in an amount which is not presently ascertainable. CSC will seek leave of Court to amend this complaint when the full amount of those damages has been ascertained. 62. CSC is informed and believes, and based thereon alleges, that defendants' actions in conspiring to interfere with its advantageous business relationships have been undertaken with fraud, oppression, and malice, and with an intent to injure CSC. CSC is therefore entitled to an award of exemplary damages in an amount according to proof. 63. The tortious conduct of each of the defendants alleged hereinabove has made it necessary for CSC to bring suit against each of the other defendants and CSC is, therefore, entitled to an award of damages in an amount equal to its attorneys' fees, and according to proof, under the third party tortfeasor doctrine. SIXTH CLAIM FOR RELIEF (BREACH OF FIDUCIARY DUTY) 23 (AGAINST DEFENDANTS BEAR STEARNS AND URFIRER) 64. CSC realleges and incorporates herein by reference each and every allegation set forth in paragraphs 1 through 63 hereinabove, inclusive. 65. Bear, Stearns and Urfirer were retained by Equifax, a former partner of CSC, to assist in evaluating Equifax's interest in its partnership with CSC. As partners, CSC and Equifax owed, and continue to owe, fiduciary duties to one another. Bear Stearns and Urfirer, as agents and/or representatives of Equifax, also owed fiduciary duties to CSC. CSC reposed trust and confidence in Bear Stearns and Urfirer, as agents and/or representatives of CSC's fiduciary, Equifax, not to disclose any of the confidential, non-public, and proprietary information provided by CSC to Equifax in connection with the valuation of Equifax's partnership interest. By virtue of Bear Stearns' and Urfirer's involvement with Equifax and the valuation of Equifax's interest in its partnership with CSC, Bear Stearns and Urfirer owed, and continue to owe, fiduciary duties to CSC to protect and preserve CSC's interests and property. 66. By engaging in the acts alleged above, Bear Stearns and Urfirer breached their fiduciary duties to CSC. 67. As set forth above, Bear Stearns and Urfirer have and will continue to breach their fiduciary duties to CSC unless and until enjoined and restrained by this Court. Such breaches will, if carried out, result in disrupting and destroying CSC's business and assist CAI, Wang, and Kumar in acquiring CSC at less than its fair market value. 68. CSC has no adequate remedy at law to prevent Bear Stearns and Urfirer from continuing to breach their fiduciary duties to CSC. 24 69. As a proximate result of the wrongful acts herein alleged, CSC has suffered considerable damages in an amount not presently ascertainable, but expected to be not less than $50 million. CSC will seek leave of Court to amend this complaint when the full amount of those damages has been ascertained. 70. CSC is informed and believes, and based thereon alleges, that as a further proximate result of the foregoing breaches of fiduciary duty, Bear Stearns and Urfirer have been unjustly enriched, or have postured to become, the full extent of which is presently unknown, but proof of which shall be presented at trial. 71. Bear Stearns and Urfirer engaged in their wrongful conduct alleged above with malice, fraud, and oppression. CSC is therefore entitled to an award of exemplary damages against Bear Stearns and Urfirer in an amount to be proven at trial. SEVENTH CLAIM FOR RELIEF (AIDING AND ABETTING BREACH OF FIDUCIARY DUTY) (AGAINST DEFENDANTS CAI, CAI-COMPUTER SERVICES, WANG AND KUMAR) 72. CSC realleges and incorporates herein by reference each and every allegation set forth in paragraphs 1 through 71 hereinabove, inclusive. 73. CSC is informed and believes, and based thereon alleges, that the fiduciary obligations owed by defendants Bear Stearns and Urfirer to CSC were well known by defendants CAI, Wang, and Kumar. 74. CAI, CAI-Computer Services, Wang, and Kumar, with full knowledge of the fiduciary obligations owed by Bear Stearns and Urfirer to CSC, and for their own financial gain, provided substantial material assistance to and conspired with Bear Stearns 25 and Urfirer in engaging in the acts set forth above. CAI, CAI-Computer Services, Wang, and Kumar are thus liable to CSC as aiders and abettors of the breach of fiduciary duties. 75. As set forth above, CAI, CAI-Computer Services, Wang, and Kumar will continue to aid and abet Bear Stearns and Urfirer to breach their fiduciary duties to CSC unless and until enjoined and restrained by this Court. Such breaches will, if carried out, result in disrupting and destroying CSC's business and assist CAI, Wang, and Kumar in acquiring CSC at less than its fair market value. 76. CSC has no adequate remedy at law to prevent CAI, CAI-Computer Services, Wang, and Kumar from aiding and abetting Bear Stearns and Urfirer to breach their fiduciary duties to CSC. 77. The wrongful acts of CAI, CAI-Computer Services, Wang, and Kumar as hereinabove alleged have directly and proximately caused damage to CSC in a sum the precise amount of which is not presently ascertainable. CSC will seek leave of Court to amend this complaint when the full amount of those damages has been ascertained. 78. CAI, CAI-Computer Services, Wang, and Kumar engaged in the wrongful conduct alleged above with malice, fraud, and oppression. CSC is therefore entitled to an award of exemplary damages against each of those defendants in an amount to be proven at trial. EIGHTH CLAIM FOR RELIEF (FOR UNFAIR COMPETITION) (AGAINST ALL DEFENDANTS) 26 79. CSC realleges and incorporates herein by reference each and every allegation contained in paragraphs 1 through 78 hereinabove, inclusive. 80. As alleged above, defendants, and each of them, have engaged, are engaging, continue to engage in, and propose to continue to engage in, unlawful, unfair and fraudulent business acts and practices in violation of the California Unfair Business Practices Act, California Business and Professions Code Section 17200 et seq. 81. Unless and until restrained and enjoined by this Court, defendants' actions will continue to cause severe damage to the business of CSC and the value of the stockholders' interest in CSC. Therefore, as set forth more fully in the prayer below, CSC seeks to enjoin defendants from engaging in, and continuing to engage in, unlawful, unfair and fraudulent business acts and practices, and all violations of California law, and to enjoin defendants Bear Stearns and Michael Urfirer from in any way assisting CAI and CAI-Computer Services in their attempted takeover of CSC or providing any advice, consultation, services, or work whatsoever to CAI and CAI-Computer Services in connection with their attempted acquisition of CSC. WHEREFORE, CSC prays for judgment against defendants, and each of them, as follows: 1. On the First Claim for Relief, for a temporary restraining order, preliminary injunction, and permanent injunction, restraining and enjoining defendants, and all those acting in concert with defendants, from: a. Proceeding with the Offer to Purchase any shares of CSC stock; b. Acquiring or attempting to acquire any shares of CSC stock; 27 c. Filing or disseminating any false or misleading Schedule 14D-1 statements, proxy solicitation materials, offering materials or other documents or statements related to purchases and sales of, or any offer to purchase or sell my shares of CSC stock; d. Taking or attempting to take any other steps to acquire control of CSC. e. Divulging, making known, or making any use whatsoever of the non-public, confidential and proprietary business information and trade secrets of CSC that CSC gave in confidence to its then-partner Equifax or to affiliates of Equifax or to the present or former employees, agents and representatives of Equifax or its affiliates including, without limitation, Bear Stearns and/or Urfirer; f. As to defendants Bear Stearns and Urfirer providing any assistance, consultation, advice or services of any kind or nature whatsoever to CAI, CAI-Computer Services, Wang and/or Kumar in connection with any attempted acquisition of CSC or in connection with any solicitation of proxies, "agent designations," or consents from stockholders of CSC; g. As to defendants CAI, CAI-Computer Services, Wang and Kumar, requesting or receiving from Bear Stearns and/or Urfirer any assistance, consultation, advice or services of any kind whatsoever in connection with any attempted acquisition of CSC or in connection with any solicitation of proxies, "agent designations," or consents from stockholders of CSC. 28 2. On the Second Claim for Relief for a temporary restraining order, preliminary injunction, and permanent injunction, all restraining and enjoining defendants, and all those acting in concert with defendants, from: (a) Divulging, making known, or making any use whatsoever of the confidential, non-public, and proprietary business information of CSC; (b) Soliciting, directly or indirectly, any CSC shareholder, customer, employee or independent contractor with reference to the confidential, non-public, and proprietary business information of CSC; (c) Providing, with respect to defendants Bear Stearns and Urfirer, any assistance, consultation, advice, or services of any kind or nature whatsoever to CAI, CAI-Computer Services, Wang, and Kumar in connection with their attempted acquisition of CSC; (d) Requiring all defendants to immediately return to CSC all confidential, non-public and proprietary information from CSC in any form whatsoever; (e) Retaining any materials, notes, files, correspondence, records, or other documents obtained from CSC or Equifax, including originals and all copies or transcriptions, and concerning, without limitation, CSC's proprietary and confidential business information; and (f) Attempting to acquire a majority of the outstanding shares of CSC stock. 29 3. On the Third Claim for Relief, for a temporary restraining order, preliminary injunction, and permanent injunction, all restraining and enjoining defendants, and all those acting in concert with defendants, from: (a) Divulging, making known, or making any use whatsoever of the confidential, non-public, and proprietary business information of CSC; (b) Soliciting, directly or indirectly, any CSC shareholder, customer, employee or independent contractor with reference to the confidential, non-public, and proprietary business information of CSC; (c) Providing, with respect to defendants Bear Stearns and Michael Urfirer, any assistance, consultation, advice, or services of any kind or nature whatsoever to CAI, Wang, and Kumar in connection with their attempted acquisition of CSC; (d) Requiring all defendants to immediately return to CSC all confidential, non-public and proprietary information from CSC in any form whatsoever; (e) Retaining any materials, notes, files, correspondence, records, or other documents obtained from CSC or Equifax, including originals and all copies or transcriptions, and concerning, without limitation, CSC's proprietary and confidential business information; and (f) Attempting to acquire a majority of the outstanding shares of CSC. 30 4. On the Sixth Claim for Relief, for a temporary restraining order, preliminary injunction, and permanent injunction, all restraining and enjoining Bear Stearns and Urfirer, and all those acting in concert with Bear Stearns and Urfirer, from: (a) Divulging, making known, or making any use whatsoever of the confidential, non-public, and proprietary business information of CSC; (b) Soliciting, directly or indirectly, any CSC shareholder, customer, employee or independent contractor with reference to the confidential, non-public and proprietary business information of CSC; (c) Providing any assistance, consultation, advice, or services of any kind or nature whatsoever to CAI, Wang, and Kumar in connection with their attempted acquisition of CSC; (d) Requiring Bear Stearns and Urfirer to immediately return to CSC all confidential, non-public, and proprietary information from CSC in any form whatsoever; and (e) Retaining any materials, notes, files, correspondence, records, or other documents obtained from CSC or Equifax, including originals and all copies or transcriptions, and concerning, without limitation, CSC's proprietary and confidential business information. 5. On the Seventh Claim for Relief, for a temporary restraining order, preliminary injunction, and permanent injunction, all restraining and enjoining CAI, CAI-Computer Services, Wang, and Kumar, and all those acting in concert with defendants, from: 31 (a) Divulging, making known, or making any use whatsoever of the confidential, non-public, and proprietary business information of CSC; (b) Soliciting, directly or indirectly, any CSC shareholder, customer, employee or independent contractor with reference to the confidential, non-public, and proprietary business information of CSC; (c) Providing, with respect to defendants Bear Stearns and Urfirer, any assistance, consultation, advice, or services of any kind or nature whatsoever to CAI, CAI-Computer Services, Wang, and Kumar in connection with their attempted acquisition of CSC; (d) Requiring all defendants to immediately return to CSC all confidential, non-public and proprietary information from CSC in any form whatsoever; (e) Retaining any materials, notes, files, correspondence, records, or other documents obtained from CSC or Equifax, including originals and all copies or transcriptions, and concerning, without limitation, CSC's proprietary and confidential business information; and (f) Attempting to acquire a majority of the outstanding shares of CSC stock. 6. On the Eighth Claim for Relief, for a temporary restraining order, preliminary injunction, and permanent injunction, all restraining and enjoining defendants, and all those acting in concert with defendants, from: 32 (a) Divulging, making known, or making any use whatsoever of the confidential, non-public, and proprietary business information of CSC; (b) Soliciting, directly or indirectly, any CSC shareholder, customer, employee or independent contractor with reference to the confidential, non-public, and proprietary business information of CSC; (c) Providing, with respect to defendants Bear Stearns and Michael Urfirer, any assistance, consultation, advice, or services of any kind or nature whatsoever to CAI, CAI-Computer Services, Wang, and Kumar in connection with their attempted acquisition of CSC; (d) Requiring all defendants to immediately return to CSC all confidential, non-public and proprietary information from CSC in any form whatsoever; (e) Retaining any materials, notes, files, correspondence, records, or other documents obtained from CSC or Equifax, including originals and all copies or transcriptions, and concerning, without limitation, CSC's proprietary and confidential business information; and (f) Attempting to acquire a majority of the outstanding shares of CSC. 7. On the Eighth Claim for Relief, for restitution to CSC in an amount to be proved at trial. 33 8. On all Claims for Relief, for an award of compensatory damages according to proof. 9. On all Claims for Relief, for an award of exemplary damages according to proof. 10. For costs of suit incurred herein. 11. For such other and further relief as the Court deems just and proper. DATED: March 2, 1998 MITCHELL, SILBERBERG & KNUPP LLP ELIA WEINBACH PATRICIA A. BENSON RICHARD B. SHELDON, JR. By: /s/ ELIA WEINBACH ----------------------------------- Elia Weinbach Attorneys for Plaintiff COMPUTER SCIENCES CORPORATION 34 DEMAND FOR JURY TRIAL Computer Sciences Corporation demands a jury trial pursuant to F.R.Civ. P.38(b). DATED: March 2, 1998 MITCHELL, SILBERBERG & KNUPP LLP ELIA WEINBACH PATRICIA A. BENSON RICHARD B. SHELDON, JR. By: /s/ ELIA WEINBACH ----------------------------------- Elia Weinbach Attorneys for Plaintiff COMPUTER SCIENCES CORPORATION 35 -----END PRIVACY-ENHANCED MESSAGE-----