FAQs Impact of CSRA on Outstanding Equity Awards These Frequently Asked Questions explain the conversion of the different equity awards when CSC and CSRA legally separate: Fully Vested Stock Restricted Stock Units (RSUs) Performance Share Units (PSUs) Employee Stock Options CSC s Long Term Incentive (LTI) program is designed to attract and retain employees and encourage a sense of ownership in CSC. It also recognizes employees by enabling them to share in the rewards for making longterm contributions to the company and our shareholders. The underlying principal behind the treatment of all outstanding equity is to deliver to employees approximately the same value post separation as the value of the outstanding awards prior to separation. Some of the awards will vest upon separation, some will continue to vest as they currently do, and a few will convert into a different type of equity award. FULLY VESTED SHARES I have shares that had previously vested. What happens to them? At the time of the legal separation, any fully vested shares of CSC stock that you hold will be split between the two companies CSC and CSRA. For each share of CSC that you own at the time of separation, you will receive one share of CSC and one share of CSRA. Additionally, immediately following the separation, you will also receive a special dividend equivalent of $10.50 per share in aggregate from CSC and CSRA, of which $8.25 will be paid by CSRA and $2.25 will be paid by CSC. The example below illustrates the treatment of your shares at the time of the separation: Assumptions (for all examples): Post-spin values in aggregate equal the value of one CSC share immediately following spin. All charts below assume a pre-separation stock price of CSC $65.50 per share, and that the post-separation, post-dividend stock prices of CSC and CSRA will be $25 and $30 per share, respectively. Actual stock prices may vary. CSC $65.50 Applicable price of CSC stock pre separation CSC CSRA $2.25 Dividend $8.25 Dividend $25.00 Applicable price of CSC stock post separation $30.00 Applicable price of CSRA stock post separation FAQs on Equity Treatment Upon November 2015 1
Example: Before Transaction After Transaction 100 CSC Shares 100 CSC Shares $2,500 100 CSRA Shares $3,000 $2.25 Dividend* x 100 Shares = $225 $8.25 Dividend* x 100 Shares = $825 Total $5,500 Total $1,050 Total Value $6,550 Total Value $6,550 *Dividend equivalents for RSUs will be paid out when the underlying shares vest What will happen to the CSC shares I have in the MAP 401(k) Plan? If you currently participate in the CSC Matched Asset Plan (MAP) and have invested a portion of your plan account in the CSC Stock Fund, you have already received more detailed information about the stock split and your alternatives for receiving the dividend equivalents, or reinvesting them in either the MAP 401(k) Plan or the new CSRA 401(k) Plan. What about CSC shares that are unrelated to previous awards, such as shares that I purchased on the open market? If you hold long shares of CSC stock with other brokers (shares of CSC stock that you own), they will be treated in the same manner described above: one share of CSC stock, one share of CSRA stock, and $10.50 in dividend equivalents. RESTRICTED STOCK UNITS (RSUs) How will the separation impact my Restricted Stock Units (RSUs)? For each outstanding RSU, regardless of when granted, all participants will receive a CSC RSU, a CSRA RSU, and $10.50 in dividend equivalents. The RSUs will continue to vest according to their original vesting schedule. The dividend equivalents will be distributed at the same time the RSUs vest and the underlying shares are distributed. If the RSUs fail to vest, the dividend equivalents will be forfeited as well. FAQs on Equity Treatment Upon November 2015 2
PERFORMANCE RESTRICTED STOCK UNITS (PSUs) The performance measurement period for my FY14 PSU grant is supposed to end in March 2016. What will happen to the vesting of those PSUs? The performance measurement period will end at the time of the separation, with 200% of the target award being earned. 50% of the target award had previously vested in FY14 and FY15. The remaining 150% of the target award will vest at the time of separation. The vesting treatment will be applicable regardless of whether you were awarded your PSU grant as part of the FY14 annual cycle or during an off-cycle period, such as part of a new hire grant. How will the FY14 PSUs that will vest upon separation be treated? The portion (150%) of the target award that will vest at the time of separation will be converted on the same basis as all other fully-vested shares of CSC stock (see Fully Vested Shares section above). Grant Before Transaction After Transaction PSUs 100 Shares @ Target 50 Add l Shares for Over-Performance 100 Vested 50 Unvested PSUs 50 50 CSC Shares $1,250 50 CSRA Shares $1,500 Div @ $2.25 $112.50 Div @ $8.25 $412.50 100 CSC Shares $2,500 100 CSRA Shares $3,000 Div @ $2.25 $225 Div @ $8.25 $825 Value $2,750 Value $525.00 Value $5,500 Value $1,050 Total Value $3,275 Total Value $3,275 Total Value from Over-Performance $6,550 There are still 16 months remaining in the performance measurement period for my FY15 PSU grant. What will happen to the vesting of those PSUs? Like the FY14 PSU award, the performance measurement period will end at the time of separation, with 70% of the target award being earned, which represents the forecasted achievement at separation. Twenty-five percent (25%) of the award had previously vested in FY15 and an additional 45% of the target award will vest at the time of separation. Because the performance period was shortened, employees did not have the opportunity to earn the remaining 30% of the award. As a result, the remaining 30% of the target award will convert to time-vested RSUs. Half of the RSUs will vest in May 2016 and the remaining RSUs will vest in May 2017, subject to the terms of the award. The vesting treatment will be applicable regardless of whether you were awarded your PSU grant as part of the FY15 annual cycle or during an off-cycle period, such as part of a new hire grant. FAQs on Equity Treatment Upon November 2015 3
How will the FY15 PSUs that will vest upon separation be treated? The portion (45%) of the target award that will vest at the time of separation will be converted on the same basis as all other fully-vested shares of CSC stock (see Fully Vested Shares section above). How will my remaining unvested FY15 PSUs be converted to time vested RSUs? For each FY15 PSU that is converted into a time vested RSU, you will receive one CSC RSU, one CSRA RSU, and $10.50 in dividend equivalents. The dividend equivalents will be distributed at the same time the RSUs vest. If the RSUs fail to vest, the dividend equivalents will be forfeited as well. Below is an example of how the conversion will work: With the conversion, you retain the same approximate overall pre-separation stock value just split post separation between CSC and CSRA shares and the accompanying dividends. Example: Grant Before Transaction After Transaction 100 PSUs Vest 70% minus 25% previously vested Conversion to RSUs Previously Vested 25 Unvested PSUs 75 45 CSC Shares $1,125 45 CSRA Shares $1,350 $2.25 Dividend x 45 Shares $101.25 $8.25 Dividend x 45 Shares $371.25 30 CSC RSUs $750 30 CSRA RSUs $900 $2.25 Div Equiv* x 30 RSUs $67.50 $8.25 Div Equiv* x 30 RSUs $247.50 Subtotal $2,475 Subtotal $472.50 Subtotal $1,650 Subtotal $315 Value $4,912.50 Total $2,947.50 Total $1,965 *Dividend equivalents for RSUs will be paid out when the underlying shares vest What about the FY16 PSU awards that we received earlier this year? FY16 PSUs will remain on their original vesting schedule and will convert to PSUs with respect to the stock of the company that employs you after the separation. The Earnings per Share (EPS) goals, which determine payout, will be reset based on the company under which you are employed after the separation. Why are the FY16 PSUs being treated differently than the FY14 and FY15 PSUs? Since most of the performance measurement periods for the FY14 and FY15 PSU grants included the performance of NPS, management felt it appropriate to reward participants for their role in standing up the two organizations to operate as independent companies. Given that most of the performance measurement period for the FY16 PSU grants will be under the separated companies, it is appropriate for the PSUs to be converted into PSUs of the company that employs you post separation. FAQs on Equity Treatment Upon November 2015 4
The chart below illustrates the treatment of PSUs. How will you ensure that my FY16 PSUs retain the same approximate value post separation as they had prior to separation? Because only a few months of the three year performance measurement period for the FY16 PSUs will have lapsed at the time of the separation, these awards will be reset. New vesting criteria (i.e., threeyear EPS performance) will be established based on the operations of each of the post-separation companies and the awards will be converted into PSUs of the company that employs you post separation. The number of PSUs you receive will be adjusted to take into account a conversion ratio based on the ratio of the applicable price of your employer s stock following the separation divided by the applicable price of CSC stock prior to the separation. The applicable price may be based on an average trading price for a specified period before or after the separation, or may be based on a spot price as of immediately before or after the separation. The example below illustrates the adjustment to a PSU granted in FY16: Example: Grant Before Transaction After Transaction Convert to PSUs of Post Company CSC Employees 100 CSC PSUs $6,550 CSC Post Spin / CSC Pre Spin $25.00/ $65.50 = 0.3816 262 CSC PSUs $6,550 CSRA Employees 100 CSC PSUs $6,550 CSRA Post Spin / CSC Pre Spin $30.00/$65.50 = 0.4580 218 CSRA PSUs $6,540 Vests over original schedule FAQs on Equity Treatment Upon November 2015 5
Please note that any fractional shares that result as part of the conversion will be rounded down to the nearest whole share. There will be no payout of fractional shares. Because the value of the $10.50 dividend has been factored into the conversion ratio, you will not be credited with any dividend equivalents with respect to the $10.50 dividend on your post-separation FY16 PSUs. STOCK OPTIONS Will there be a change to the vesting schedule for unvested stock options? The vesting schedule for your stock option grants will depend on the Fiscal Year (FY) in which they were granted, regardless of whether they were awarded as part of the annual cycle or during an offcycle period. Please note, however, that retention stock option grants will retain their original vesting schedule. Almost all stock options granted in FY13 and prior years will have vested by the time of the separation. If you have unvested FY13 stock options, they will vest at the time of separation. Many of the stock options granted in FY14 will have vested by the time of the separation. Regardless of the percent of the FY14 option grant that was vested prior to separation, the remaining unvested stock options will vest at the time of separation. Some of the stock options granted in FY15 will have vested by the time of the separation. Regardless of the percent of the FY15 option grant that was vested prior to the separation, additional vesting will occur such that 2/3 rds of the original stock option award is vested at the time of separation. The remaining 1/3 rd of the stock options granted in FY15 will vest in two equal installments in May 2016 and May 2017, subject to the terms of the award. Stock options granted in FY16 will remain on the original vesting schedule and will convert to the stock options of the company that employs you post separation. Will I receive stock options in CSC or CSRA? The treatment of your vested and unvested stock options will depend on the Fiscal Year (FY) in which they were granted, regardless of whether they were awarded as part of the annual cycle or during an off-cycle period. All unexercised stock options, vested or unvested, granted before FY16 will convert into both CSC and CSRA stock options. FY16 stock options will convert into stock options of the company that employs you post separation. FAQs on Equity Treatment Upon November 2015 6
The chart below illustrates the treatment of stock options. Previously Vested Additional Vesting Immediately After Spin Vests After Spin How will you ensure that my pre-fy16 stock options retain the same approximate value post separation as they had prior to separation? Following the separation, the price of CSC stock and the price of CSRA stock will be lower than the price of CSC stock prior to the separation. To protect option holders from the decline in stock price due to separation and the distribution of dividends, both the number of options and the exercise price will be adjusted. For stock options granted prior to FY16, the exercise price of the post-separation CSC and CSRA stock options will be adjusted by the ratio of the applicable price of your post-separation employer s stock following the separation divided by the applicable price of CSC stock prior to the separation. Additionally, the number of shares subject to each stock option will be adjusted by the ratio of the pre-dividend applicable stock price to the post-dividend applicable stock price. The applicable price may be based on an average trading price for a specified period before or after the separation, or may be based on a spot price as of immediately before or after the separation. The example below illustrates the adjustment to a stock option granted prior to FY16: Additional Assumptions: The original exercise price was $48.00 per share. Intrinsic value means the difference between the assumed stock price and exercise price. FAQs on Equity Treatment Upon November 2015 7
Example: Grant After Transaction Before Transaction Convert to CSC and CSRA Options Share Ratio Adjust Exercise Price Exercise Price = $48 Price Ratio 100 CSC Options 100 CSC Options CSC Post Spin + CSC Dividend / CSC Post Spin $25 + $2.25 / $25.00 1.0900 = 109 CSC Options CSC Post Spin / CSC Pre Spin x Ex Price $25 / $65.50 x $48.00 = Adjusted Exercise Price = $18.33 $727.03 Exerc Price: $48.00 100 CSRA Options CSRA Post Spin + CSRA Dividend / CSRA Post Spin $30 + $8.25 / $30 1.2750 = 127 CSRA Options CSRA Post Spin / CSC Pre Spin x Ex Price $30 / $65.50 x $48.00 Adjusted Exercise Price = $21.99 $1,017.27 $1,750 Total Intrinsic Value $1,744.30 Please note that any fractional shares that result as part of the conversion will be rounded down to the nearest whole share. There will be no payout of fractional shares. Additionally, exercise prices will be rounded up to the nearest whole cent. How will you ensure that my FY16 stock options retain the same approximate value post separation as they had prior to separation? The stock options granted in FY16 will be converted into options to purchase the stock of your employer after the separation. The exercise price of the post-separation stock options will be adjusted by the ratio of the applicable price of your post-separation employer s stock following the separation divided by the applicable price of CSC stock prior to the separation. The number of shares subject to the pre-separation stock options will be multiplied by the ratio of the applicable price of CSC stock prior to the separation, divided by the applicable price of your post-separation employer s stock following the separation. The applicable price may be based on an average trading price for a specified period before or after the separation, or may be based on a spot price as of immediately before or after the separation. The example below illustrates the adjustment to a stock option granted in FY16: Additional Assumptions: The original exercise price was $68.48 per share. Intrinsic value means the difference between the assumed stock price and exercise price. FAQs on Equity Treatment Upon November 2015 8
Example: Grant Before Transaction Convert to CSC and CSRA Options After Transaction Adjust Exercise Price CSC Employees 100 CSC Options CSC Pre Spin / CSC Post Spin 262 CSC $65.50/$25.00 Ex Price: $68.48 2.6200 Options $(298)* CSRA Employees 100 CSC Options Ex Price: $68.48 $(298)* Share Ratio CSC Pre Spin / CSRA Post Spin $65.50/$30 2.1833 * For illustration purposes only; options cannot have intrinsic value below $0. = = 218 CSRA Options Exercise Price = $68.48 Price Ratio CSC Post Spin / CSC Pre Spin x Ex Price $25 / $65.50 x $68.48 = Adjusted Exercise Price = $26.14 CSRA Post Spin / CSC Pre Spin x Ex Price $30 / $65.50 x $68.48= Adjusted Exercise Price = $31.37 $(298.68) $(298.68) Please note that any fractional shares that result as part of the conversion will be rounded down to the nearest whole share. There will be no payout of fractional shares. Additionally, exercise prices will be rounded up to the nearest whole cent. I have outstanding Stock Appreciation Rights (SARs). How will those be treated? For employees in Australia with SARs, they will be treated in the same manner as stock options. GENERAL INFORMATION What is the record date associated with the conversion? Is there any action required by me related to the record date? The record date, November 18, 2015, helps identify outstanding shares and LTI equity awards that are eligible for conversion in connection with the separation. There is no action required by LTI participants associated with the record date. Will there be a blackout period right before or after the legal separation occurs? Yes, there will be a blackout period. This period of time is needed to be able to settle all transactions in a timely manner prior to the November 18, 2015, record date and to allow CSC plan administrators time to set up and reconfigure grant data following the legal separation. The blackout period will begin after the close of the market on November 13, 2015 and is expected to end on or about December 23, 2015. During the blackout period, you will not be able to exercise any stock options, including cash exercises, stock swaps, or same-day sales. In addition, the settlement of shares of any underlying RSUs and PSUs which may vest during the blackout period will be delayed until after the blackout period ends. Shares of CSC stock you may already own are not affected. FAQs on Equity Treatment Upon November 2015 9
Will my employment be deemed to have terminated as a result of the separation for purposes of my awards? No. If you are a current employee of CSC, your employment will deemed to continue for purposes of your awards for as long as you remain employed by either CSC or CSRA following the separation. In addition, any years of service you had accrued prior to the separation will be recognized for purposes of your awards following the separation, regardless of whether you are employed by CSC or CSRA. What are outstanding awards? What is the difference between vested and unvested awards? Outstanding awards refer to all of the unexercised stock options (vested and unvested) and RSUs and PSUs that have not yet been settled in shares at a given point in time. Vested awards mean that your right to exercise the award or receive a share in payment of the award is no longer subject to forfeiture if your employment terminates, except as otherwise provided under the terms of the award. Unvested awards mean that your right to exercise the award or receive a share in payment of the award is contingent on your future performance of services and/or the achievement of performance goals in accordance with the applicable vesting schedule of the award. What are the tax implications for my converted award(s)? As each individual s tax situation is unique, we cannot provide tax advice on the impact of the separation on your converted awards. You are strongly advised to seek appropriate professional advice as to how the tax regulations and/or other laws in the country(ies) to which you are subject will apply to your specific situation with respect to the separation and your converted awards. Also note that in some countries, the treatment of equity summarized in this document may be different. My new hire letter specifies that I will receive a grant following the separation of CSRA from CSC. Will that grant be subject to conversion? Conversion applies only to outstanding equity as of the record date. Since your new hire grant will not have been awarded prior to the record date, it will not be subject to the conversion associated with the separation. How can I find out how many outstanding stock options, RSUs, and/or PSUs I currently have? Information on your current outstanding grants can be found by logging into your account at Fidelity at NetBenefits.com. If you have any questions about your log-in information or account, you should contact Fidelity at 800-544-9354 (US participants). Participants outside the US can access a list of contact numbers by clicking here. Where can I find information regarding my converted stock options, RSUs and/or PSUs? You will receive a communication from Fidelity following the Blackout Period notifying you when your account has been updated to reflect the conversion of your outstanding equity grants. FAQs on Equity Treatment Upon November 2015 10
When can I initiate transactions following the conversion of my equity grants? You may initiate transactions only after the end of the blackout period. In addition, if you are considered a Financial Insider, you will still be subject to open trading window restrictions and the pre-clearance process. What further action do I need to take? You do not need to do anything to effect the conversion of your stock options, RSUs and/or PSUs this will happen automatically. If you wish to perform transactions related to any of your vested awards prior to the separation, you must do so before the stock market closes on November 13, 2015, which is the beginning of the blackout period. You should carefully consider the need to perform any transaction related to any of your vested awards before the start of the blackout period, in light of potential share price fluctuation during the Blackout Period and your inability to transact in your vested awards during that period. Where can I get more information? CSC will hold webinars prior to the separation date during which we will share information on the conversion approach for each type of equity and allow you an opportunity to ask questions. Details on the dates and times of the webinars will be announced shortly. What else do I need to know? The terms of any stock options, RSUs and PSUs you may own are subject to the terms and conditions of the applicable plans and award agreements under which the awards are granted. In the event of any conflict between the terms of such plans and award agreements and the terms hereof, the terms of the plans and award agreements shall control. Also note that the equity awards under the LTI program are granted by CSC in its sole discretion. Any outstanding equity granted under the LTI program does not create any contractual or other right to future participation in the LTI program or to receive future grants. Equity awards are not considered part of your normal or expected compensation and do not create an employment relationship with CSC or CSRA. FAQs on Equity Treatment Upon November 2015 11
Stock Options RSUs PSUs Fiscal Year FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 2014 (May 2013) 200% vesting at separation. 50% already vested; additional vesting of 150% at separation Each vested PSU is converted into a CSC RSU, a CSRA RSU, and $10.50 in dividend equivalents 50% 150% Treated same as shareholder: $10.50 in dividend equivalents 1 share of CSC 1 share of CSRA 2015 (May 2014) 70% vesting at separation. 25% already vested; additional vesting of 45% at separation Remaining 30% converted to time-based CSC RSUs, CSRA RSUs, and $10.50 in dividend equivalents Converted to time-based RSUs: Will receive both CSC and CSRA RSUs 25% 45% 15% May 2016 15% May 2017 2016 (May 2015) 100% unvested; no additional vesting Retain original vesting schedule EPS goals of final employer Convert to either CSC or CSRA PSUs based on company under which you are employed post separation Vests per original schedule EPS Goals reset to reflect final employer Vesting according to original schedule; no additional vesting Each pre-separation RSU is converted into a CSC RSU, a CSRA RSU, and $10.50 in dividend equivalents 2013 (May 2012) 100% vested Converts into CSC and CSRA Options, with adjustments 100% Convert to both CSC and CSRA options, with adjustments 2014 (May, 2013) 100% vesting at separation. 2/3 already vested; additional vesting of 1/3 at separation Converts into CSC and CSRA Options, with adjustments 66.7% 33.3% Convert to both CSC and CSRA options, with adjustments 2015 (May 2014) 2/3 vesting at separation. 1/3 already vested; additional vesting of 1/3 at separation (excluding retention grants) Remaining unvested 1/3 vests in 2016 and 2017 Converts into CSC and CSRA options, with adjustments Convert to both CSC and CSRA options, with adjustments 33.3% 33.3% 16.7% May 2016 16.7% May 2017 2016 (May 2015) 100% unvested; no additional vesting Retain original vesting schedule Converts into CSC or CSRA Options depending on company of employment, with adjustments Convert to either CSC or CSRA Options, with adjustments, based on company under which you are employed post separation Vests per original schedule Converted to options of final employer Previously Vested Additional Vesting Immediately Before Spin Additional Vesting Immediately After Spin Vests After Spin FAQs on Equity Treatment Upon November 2015 12