UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2018
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________

Commission File No.: 001-38033
DOWNLOADA06.JPG
DXC TECHNOLOGY COMPANY
 
(Exact name of Registrant as specified in its charter)
 
Nevada
61-1800317
(State of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
1775 Tysons Boulevard
 
Tysons, Virginia
22102
(Address of principal executive offices)
(zip code)
 
 
Registrant's telephone number, including area code: (703) 245-9675

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    x Yes  o No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer      x                 Accelerated Filer o

Non-accelerated Filer o

Smaller reporting company o                 Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     o Yes   x    No

268,271,187 shares of common stock, par value $0.01 per share, were outstanding on January 31, 2019.


TABLE OF CONTENTS

Item
 
 
Page
 
 
 
 
 
 
 
1.
 
2.
 
3.
 
4.
 
 
 
 
 
 
 
 
 
 
 
 
1.
 
1A.
 
2.
 
3.
 
4.
 
5.
 
6.
 




PART I

ITEM 1. FINANCIAL STATEMENTS

Index to Condensed Consolidated Financial Statements
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 




1

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

 
 
Three Months Ended
 
Nine Months Ended
(in millions, except per-share amounts)
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
 
 
 
 
 
 
 
 
 
Revenues
 
$
5,178

 
$
5,460

 
$
15,473

 
$
16,149

 
 
 
 
 
 
 
 
 
Costs of services (excludes depreciation and amortization and restructuring costs)
 
3,725

 
4,051

 
11,110

 
12,230

Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)
 
491

 
447

 
1,500

 
1,484

Depreciation and amortization
 
508

 
440

 
1,463

 
1,264

Restructuring costs
 
76

 
210

 
418

 
585

Interest expense
 
81

 
73

 
249

 
220

Interest income
 
(27
)
 
(27
)
 
(92
)
 
(59
)
Other income, net
 
(145
)
 
(75
)
 
(336
)
 
(291
)
Total costs and expenses
 
4,709

 
5,119

 
14,312

 
15,433

 
 
 
 
 
 
 
 
 
Income from continuing operations before income taxes
 
469

 
341

 
1,161

 
716

Income tax expense (benefit)
 
3

 
(365
)
 
205

 
(303
)
Income from continuing operations
 
466

 
706

 
956

 
1,019

Income from discontinued operations, net of taxes
 
—

 
73

 
35

 
198

Net income
 
466

 
779

 
991

 
1,217

Less: net income attributable to non-controlling interest, net of tax
 
4

 
3

 
8

 
26

Net income attributable to DXC common stockholders
 
$
462

 
$
776

 
$
983

 
$
1,191

 
 
 
 
 
 
 
 
 
Income per common share:
 
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.68

 
$
2.46

 
$
3.38

 
$
3.48

Discontinued operations
 
—

 
0.26

 
0.12

 
0.70

 
 
$
1.68

 
$
2.72

 
$
3.50

 
$
4.18

Diluted:
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.66

 
$
2.43

 
$
3.33

 
$
3.43

Discontinued operations
 
—

 
0.25

 
0.12

 
0.68

 
 
$
1.66

 
$
2.68

 
$
3.45

 
$
4.11

 
 
 
 
 
 
 
 
 


The accompanying notes are an integral part of these condensed consolidated financial statements.





2


DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

 
 
 
 
Three Months Ended
 
Nine Months Ended
(in millions)
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Net income
 
$
466

 
$
779

 
$
991

 
$
1,217

Other comprehensive (loss) income, net of taxes:
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of tax (1)
 
(64
)
 
(47
)
 
(472
)
 
62

 
Cash flow hedges adjustments, net of tax (2)
 
14

 
5

 
(16
)
 
—

 
Available-for-sale securities, net of tax
 
—

 
—

 
(1
)
 
—

 
Pension and other post-retirement benefit plans, net of tax:
 
 
 
 
 
 
 
 
 
 
Prior service cost, net of tax (3)
 
(23
)
 
—

 
(23
)
 
—

 
 
Amortization of prior service cost, net of tax  (4)
 
(4
)
 
(3
)
 
(10
)
 
(10
)
 
Pension and other post-retirement benefit plans, net of tax
 
(27
)
 
(3
)
 
(33
)
 
(10
)
Other comprehensive (loss) income, net of taxes
 
(77
)
 
(45
)
 
(522
)
 
52

Comprehensive income
 
389

 
734

 
469

 
1,269

 
Less: comprehensive income attributable to non-controlling interest
 
9

 
6

 
8

 
34

Comprehensive income attributable to DXC common stockholders
 
$
380

 
$
728

 
$
461

 
$
1,235

        

(1) There was no tax expense related to foreign currency translation adjustments during three and nine months ended December 31, 2018. Tax expense related to foreign currency translation adjustments was  $14  and  $77  for the three and nine months ended December 31, 2017, respectively.
(2) Tax expense (benefit) related to cash flow hedge adjustments was $5 and $(5) for the three and nine months ended December 31, 2018, respectively. Tax expense related to cash flow hedge adjustments was $3  and  $0 for the three and nine months ended December 31, 2017, respectively.
(3) Tax benefit related to prior service costs was  $5  and  $5 for the three and nine months ended December 31, 2018, respectively.
(4) Tax benefit related to amortization of prior service costs was  $0  and  $1 for the three and nine months ended December 31, 2018, respectively, and  $2  and  $3  for the three and nine months ended December 31, 2017, respectively.



The accompanying notes are an integral part of these condensed consolidated financial statements.



3

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
 
 
As of
(in millions, except per-share and share amounts)
 
December 31, 2018
 
March 31, 2018
ASSETS
 
 
 

Current assets:
 
 
 
 
Cash and cash equivalents
 
$
2,475

 
$
2,593

Receivables and contract assets, net of allowance for doubtful accounts of $57 and $40
 
5,096

 
5,481

Prepaid expenses
 
626

 
496

Other current assets
 
325

 
469

Assets of discontinued operations
 
—

 
581

Total current assets
 
8,522

 
9,620

 
 
 
 
 
Intangible assets, net of accumulated amortization of $4,050 and $3,369
 
6,770

 
7,179

Goodwill
 
7,593

 
7,619

Deferred income taxes, net
 
407

 
373

Property and equipment, net of accumulated depreciation of $3,654 and $3,686
 
3,186

 
3,363

Other assets
 
2,393

 
2,404

Assets of discontinued operations - non-current
 
—

 
3,363

Total Assets
 
$
28,871

 
$
33,921

 
 
 
 
 
LIABILITIES and EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Short-term debt and current maturities of long-term debt
 
$
1,580

 
$
1,918

Accounts payable
 
1,345

 
1,513

Accrued payroll and related costs
 
705

 
744

Accrued expenses and other current liabilities
 
3,228

 
3,120

Deferred revenue and advance contract payments
 
1,542

 
1,641

Income taxes payable
 
122

 
127

Liabilities of discontinued operations
 
—

 
789

Total current liabilities
 
8,522

 
9,852

 
 
 
 
 
Long-term debt, net of current maturities
 
5,980

 
6,092

Non-current deferred revenue
 
273

 
795

Non-current income tax liabilities and deferred tax liabilities
 
1,171

 
1,166

Other long-term liabilities
 
1,569

 
1,723

Liabilities of discontinued operations - long-term
 
—

 
456

Total Liabilities
 
17,515

 
20,084

 
 
 
 
 
Commitments and contingencies
 


 


 
 
 
 
 
DXC stockholders’ equity:
 
 
 
 
Preferred stock, par value $.01 per share, authorized 1,000,000 shares, none issued as of December 31, 2018 and March 31, 2018
 
—

 
—

Common stock, par value $.01 per share, authorized 750,000,000 shares, issued 271,631,683 as of December 31, 2018 and 286,393,147 as of March 31, 2018
 
3

 
3

Additional paid-in capital
 
11,343

 
12,210

Retained earnings
 
274

 
1,301

Accumulated other comprehensive (loss) income
 
(464
)
 
58

Treasury stock, at cost, 1,754,722 and 1,016,947 shares as of December 31, 2018 and March 31, 2018
 
(134
)
 
(85
)
Total DXC stockholders’ equity
 
11,022

 
13,487

Non-controlling interest in subsidiaries
 
334

 
350

Total Equity
 
11,356

 
13,837

Total Liabilities and Equity
 
$
28,871

 
$
33,921


The accompanying notes are an integral part of these condensed consolidated financial statements.

4

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
 
Nine Months Ended
(in millions)
 
December 31, 2018
 
December 31, 2017
Cash flows from operating activities:
 
 
 
 
Net income
 
$
991

 
$
1,217

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
1,514

 
1,387

Share-based compensation
 
57

 
76

Gain on dispositions
 
(137
)
 
—

Unrealized foreign currency exchange (gains) losses
 
(32
)
 
44

Other non-cash charges, net
 
(21
)
 
23

Changes in assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
 
Increase in assets
 
(1,012
)
 
(365
)
Decrease in liabilities
 
(325
)
 
(372
)
Net cash provided by operating activities
 
1,035

 
2,010

 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
Purchases of property and equipment
 
(219
)
 
(175
)
Payments for transition and transformation contract costs
 
(294
)
 
(259
)
Software purchased and developed
 
(183
)
 
(157
)
Cash acquired through Merger
 
—

 
974

Payments for acquisitions, net of cash acquired
 
(332
)
 
(193
)
Business dispositions
 
(65
)
 
—

Cash collections related to deferred purchase price receivable  
 
761

 
531

Proceeds from sale of assets
 
283

 
29

Other investing activities, net
 
9

 
20

Net cash (used in) provided by investing activities
 
(40
)
 
770

 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Borrowings of commercial paper
 
1,853

 
1,822

Repayments of commercial paper
 
(1,853
)
 
(1,706
)
Repayment of borrowings under lines of credit
 
—

 
(335
)
Borrowings on long-term debt, net of discount
 
1,646

 
621

Principal payments on long-term debt
 
(2,619
)
 
(1,291
)
Payments on capital leases and borrowings for asset financing
 
(710
)
 
(732
)
Borrowings for USPS spin transaction
 
1,114

 
—

Proceeds from bond issuance
 
753

 
647

Proceeds from stock options and other common stock transactions
 
40

 
107

Taxes paid related to net share settlements of share-based compensation awards
 
(52
)
 
(75
)
Repurchase of common stock
 
(1,253
)
 
(66
)
Dividend payments
 
(159
)
 
(123
)
Other financing activities, net
 
57

 
(5
)
Net cash used in financing activities
 
(1,183
)
 
(1,136
)
Effect of exchange rate changes on cash and cash equivalents
 
(66
)
 
44

Net (decrease) increase in cash and cash equivalents
 
(254
)
 
1,688

Cash and cash equivalents at beginning of year
 
2,729

 
1,268

Cash and cash equivalents at end of period
 
$
2,475

 
$
2,956

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

DXC TECHNOLOGY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

 
Three Months Ended December 31, 2018
(in millions, except shares in thousands)
Common Stock
Additional
Paid-in Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Treasury Stock (2)
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares
 
Amount
Balance at September 30, 2018
282,519

 
$
3

$
11,848

$
136

$
(382
)
$
(105
)
$
11,500

$
337

$
11,837

Net Income
 
 
 
 
462

 
 
462

4

466

Other comprehensive loss
 
 
 
 
 
(82
)
 
(82
)
5

(77
)
Share-based compensation expense
 
 
 
17

 
 
 
17

 
17

Acquisition of treasury stock
 
 
 
 
 
 
(29
)
(29
)
 
(29
)
Share repurchase program
(12,452
)
 
 
(525
)
(272
)
 
 
(797
)
 
(797
)
Stock option exercises and other common stock transactions
1,565

 
 
3

 
 
 
3

 
3

Dividends declared ($0.19 per share)


 
 
 
(52
)
 
 
(52
)
 
(52
)
Non-controlling interest distributions and other
 
 








 
—

(12
)
(12
)
Balance at December 31, 2018
271,632

 
$
3

$
11,343

$
274

$
(464
)
$
(134
)
$
11,022

$
334

$
11,356

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2017
(in millions, except shares in thousands)
Common Stock
Additional
Paid-in Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Treasury Stock
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares
 
Amount
Balance at September 30, 2017
285,943

 
$
3

$
12,158

$
110

$
(70
)
$
(61
)
$
12,140

$
367

$
12,507

Business acquired in purchase, net of issuance costs (1)


 




 
 
 
—

(6
)
(6
)
Net income
 
 
 
 
776

 
 
776

3

779

Other comprehensive income
 
 
 
 
 
(48
)
 
(48
)
3

(45
)
Share-based compensation expense
 
 
 
17

 
 
 
17

 
17

Acquisition of treasury stock
 
 
 
 
 
 
(22
)
(22
)
 
(22
)
Stock option exercises and other common stock transactions
611

 
 
26

 
 
 
26

 
26

Dividends declared ($0.18 per share)

 
 
 
 
(52
)
 
 
(52
)
 
(52
)
Non-controlling interest distributions and other
 
 
 
 
 
 
 
—

(2
)
(2
)
Balance at December 31, 2017
286,554

 
$
3

$
12,201

$
834

$
(118
)
$
(83
)
$
12,837

$
365

$
13,202



6

 
Nine Months Ended December 31, 2018
(in millions, except shares in thousands)
Common Stock
Additional
Paid-in Capital
Retained Earnings
Accumulated
Other
Comprehensive
Loss
Treasury Stock (2)
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares
 
Amount
Balance at March 31, 2018
286,393

 
$
3

$
12,210

$
1,301

$
58

$
(85
)
$
13,487

$
350

$
13,837

Cumulative effect of adopting the new revenue standard


 




114





114



114

Net Income
 
 
 
 
983

 
 
983

8

991

Other comprehensive loss
 
 
 
 
 
(522
)
 
(522
)


(522
)
Share-based compensation expense
 
 
 
57

 
 
 
57

 
57

Acquisition of treasury stock
 
 
 
 
 
 
(49
)
(49
)
 
(49
)
Share repurchase program
(17,680
)
 


(776
)
(472
)
 
 
(1,248
)
 
(1,248
)
Stock option exercises and other common stock transactions
2,919

 


29

 
 

29

 
29

Dividends declared ($0.57 per share)

 
 
 
 
(161
)
 
 
(161
)
 
(161
)
Non-controlling interest distributions and other
 
 








 
—

(24
)
(24
)
Divestiture of USPS
 
 
 
(177
)
(1,491
)


 
(1,668
)


(1,668
)
Balance at December 31, 2018
271,632

 
$
3

$
11,343

$
274

$
(464
)
$
(134
)
$
11,022

$
334

$
11,356

 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended December 31, 2017
(in millions, except shares in thousands)
Common Stock
Additional
Paid-in Capital
(Accumulated Deficit) Retained Earnings
Accumulated
Other
Comprehensive
Loss
Treasury Stock
Total
DXC Equity
Non-
Controlling Interest
Total Equity
Shares
 
Amount
Balance at March 31, 2017
141,299

 
$
1

$
2,219

$
(170
)
$
(162
)
$
—

$
1,888

$
278

$
2,166

Business acquired in purchase, net of issuance costs (1)
141,741

 
2

9,848

 
 
 
9,850

55

9,905

Net income
 
 
 
 
1,191

 
 
1,191

26

1,217

Other comprehensive income
 
 
 
 
 
44

 
44

8

52

Share-based compensation expense
 
 
 
74

 
 
 
74

 
74

Acquisition of treasury stock
 
 
 
 
 
 
(83
)
(83
)
 
(83
)
Share repurchase program
(842
)
 


(36
)
(30
)
 
 
(66
)
 
(66
)
Stock option exercises and other common stock transactions
4,356

 


96

 
 
 
96

 
96

Dividends declared ($0.54 per share)

 
 
 
 
(157
)
 
 
(157
)
 
(157
)
Non-controlling interest distributions and other
 
 
 
 
 
 
 
—

(2
)
(2
)
Balance at December 31, 2017
286,554

 
$
3

$
12,201

$
834

$
(118
)
$
(83
)
$
12,837

$
365

$
13,202


(1) See Note 3 - " Acquisitions "
(2) 1,754,722 treasury shares as of December 31, 2018



The accompanying notes are an integral part of these condensed consolidated financial statements.

7


DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Note 1 - Summary of Significant Accounting Policies

Business

DXC Technology Company ("DXC" or the "Company") is a world leading independent, end-to-end IT services company, serving nearly 6,000 private and public-sector clients from a diverse array of industries across 70 countries. The company's technology independence, global talent and extensive partner network deliver transformative digital offerings and solutions that help clients harness the power of innovation to thrive on change.

Basis of Presentation

In order to make this report easier to read, DXC refers throughout to (i) the interim unaudited Condensed Consolidated Financial Statements as the “financial statements,” (ii) the Condensed Consolidated Statements of Operations as the “statements of operations,” (iii) the Condensed Consolidated Statement of Comprehensive Income as the "statements of comprehensive income," (iv) the Condensed Consolidated Balance Sheets as the “balance sheets,” and (v) the Condensed Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references throughout to numbered “Notes” refer to the numbered Notes in these Notes to Condensed Consolidated Financial Statements, unless otherwise noted.

The accompanying financial statements include the accounts of DXC, its consolidated subsidiaries, and those business entities in which DXC maintains a controlling interest. Investments in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method. Other investments are accounted for by the cost method. Non-controlling interests are presented as a separate component within equity in the balance sheets. Net earnings attributable to the non-controlling interests are presented separately in the statements of operations and comprehensive income attributable to non-controlling interests are presented separately in the statements of comprehensive income. All intercompany transactions and balances have been eliminated. Certain amounts reported in the previous year have been reclassified to conform to the current year presentation.

The financial statements of the Company have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission for quarterly reports and accounting principles generally accepted in the United States ("GAAP"). Certain disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules. These financial statements should therefore be read in conjunction with the audited consolidated financial statements and accompanying notes for the fiscal year ended March 31, 2018 ("fiscal 2018") included in Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 16, 2018.

Use of Estimates

The preparation of financial statements in conformity with GAAP, requires the Company's management to make estimates and assumptions that affect amounts reported in the financial statements. The Company bases its estimates on assumptions regarding historical experience, currently available information and anticipated developments that it believes are reasonable and appropriate. However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates. In the opinion of the Company's management, the accompanying financial statements of DXC contain all adjustments, including normal recurring adjustments, necessary to present fairly the Company's financial statements. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2019 ("fiscal 2019").


8
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Separation of USPS

On May 31, 2018, DXC completed the separation of its U.S. Public Sector business ("USPS") (the "Separation"), and combination with Vencore Holding Corp. ("Vencore") and KeyPoint Government Solutions ("Keypoint") (the "Mergers") to form Perspecta Inc. ("Perspecta"), an independent public company (collectively, the "USPS Separation and Mergers"). Under the terms of the separation agreements, on May 31, 2018, stockholders who held DXC common stock at the close of business on May 25, 2018 (the “Record Date”), received a distribution of one share of Perspecta common stock for every two shares of DXC common stock held as of the Record Date (the "Distribution"). See Note 4 - " Divestitures " for more information.

As a result of the Separation, the statements of operations, balance sheets, and related financial information reflect USPS's operations, assets and liabilities as discontinued operations for all periods presented. The cash flows of USPS have not been segregated and are included in the statements of cash flows for all periods presented. In addition, USPS is no longer a reportable segment. DXC's reportable segments are Global Business Services ("GBS") and Global Infrastructure Services ("GIS").

Revenue Recognition

Effective April 1, 2018, the Company adopted ASU 2014-09, “Revenue from Contracts with Customers (ASC 606),” using the modified retrospective method. Refer to Note 2 - “ Recent Accounting Pronouncements ” and Note 12 - “ Revenue ” for further discussion of the impact of adoption and other required disclosures. The Company’s accounting policy related to the new revenue standard is summarized below.

The Company's primary service offerings are information technology outsourcing, other professional services, or a combination thereof. Revenues are recognized when control of the promised goods or services is transferred to DXC's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

DXC determines revenue recognition through the five-step model as follows:
•
Identification of the contract, or contracts, with a customer
•
Identification of the performance obligations in the contract
•
Determination of the transaction price
•
Allocation of the transaction price to the performance obligations in the contract
•
Recognition of revenue when, or as, the Company satisfies a performance obligation

DXC's IT outsourcing arrangements typically reflect a single performance obligation that comprises a series of distinct services which are substantially the same and provided over a period of time using the same measure of progress. Revenue derived from these arrangements is recognized over time based upon the level of services delivered in the distinct periods in which they are provided using an input method based on time increments. DXC's contracts often include upfront fees billed for activities to familiarize DXC with the client's operations, take control over their administration and operation, and adapt them to DXC's solutions. Upfront fees are generally recognized ratably over the contract period, which approximates the manner in which the services are provided. These activities typically do not qualify as performance obligations, and the related revenues are allocated to the relevant performance obligations and recognized ratably over time as the performance obligation is satisfied during the period in which DXC provides the related service, which is typically the life of the contract. Software transactions that include multiple performance obligations are described below.

For contracts with multiple performance obligations, DXC allocates the contract’s transaction price to each performance obligation based on the relative standalone selling price of each distinct good or service in the contract. Other than software sales involving multiple performance obligations, the primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that distinct good or service.

The transaction price of a contract is determined based on fixed and variable consideration. Variable consideration related to the Company’s IT outsourcing offerings often include volume-based pricing that are allocated to the distinct days of the

9
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


services to which the variable consideration pertains. However, in certain cases, estimates of variable consideration, including penalties, contingent milestone payments and rebates are necessary. The Company only includes estimates of variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. These judgments involve consideration of historical and expected experience with the customer and other similar customers, and the facts and circumstances specific to the arrangement.

The Company generally provides its services under time and materials contracts, unit price contracts, fixed-price contracts, and software contracts for which revenue is recognized in the following manner:

Time and materials contracts . Revenue is recognized over time at agreed-upon billing rates when services are provided.

Unit-price contracts. Revenue is recognized over time based on unit metrics multiplied by the agreed upon contract unit price or when services are delivered.

Fixed-price contracts. For certain fixed-price contracts, revenue is recognized over time using a method that measures the extent of progress towards completion of a performance obligation, generally using a cost-input method (referred to as the percentage-of-completion cost-to-cost method). Under the percentage-of-completion cost-to-cost method, revenue is recognized based on the proportion of total cost incurred to estimated total costs at completion. A performance obligation's estimate at completion includes all direct costs such as materials, labor, subcontractor costs, overhead, and a ratable portion of general and administrative costs. If output or input measures are not available or cannot be reasonably estimated, revenue is deferred until progress can be measured and costs are not deferred unless they meet the criteria for capitalization. Under the percentage-of-completion cost-to-cost method, progress towards completion is measured based on either achievement of specified contract milestones, costs incurred as a proportion of estimated total costs, or other measures of progress when appropriate. Profit in a given period is reported at the estimated profit margin to be achieved on the overall contract.

Software contracts. Certain of DXC's arrangements involve the sale of DXC proprietary software, post contract customer support, and other software-related services. The standalone selling price generally is determined for each performance obligation using an adjusted market assessment approach based on the price charged where each deliverable is sold separately. In certain limited cases (typically for software licenses) when the historical selling price is highly variable, the residual approach is used. This approach allocates revenue to the performance obligation equal to the difference between the total transaction price and the observable standalone selling prices for the other performance obligations. Revenue from distinct software licenses is recognized at a point in time when the customer can first use the software license. If significant customization is required, software revenue is recognized as the related software customization services are performed in accordance with the percentage-of-completion method described above. Revenue for post contract customer support and other software services is recognized over time as those services are provided.

Practical Expedients and Exemptions

DXC does not adjust the promised amount of consideration for the effects of a significant financing component when the period between when DXC transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

In addition, the Company reports revenue net of any revenue-based taxes assessed by a governmental authority that are imposed on and concurrent with specific revenue-producing transactions, such as sales taxes and value-added taxes.

Contract Balances

The timing of revenue recognition, billings and cash collections results in accounts receivable (billed receivables, unbilled receivables and contract assets) and deferred revenue and advance contract payments (contract liabilities) on the Company's balance sheets. In arrangements that contain an element of customized software solutions, amounts are generally billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g. monthly) or upon achievement of certain contractual milestones. Generally, billing occurs subsequent to revenue recognition, sometimes resulting in contract assets if the related billing is conditional upon more than just the passage of time. However, the Company sometimes receives advances or deposits from customers, before revenue is recognized,

10
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


which results in the generation of contract liabilities. Payment terms vary by type of product or service being provided as well as by customer, although the term between invoicing and when payment is due is generally an insignificant period of time.

Costs to Obtain a Contract

Certain sales commissions earned by the Company's sales force are considered incremental and recoverable costs of obtaining a contract with a customer. The majority of sales commissions are paid based on the achievement of quota-based targets. These costs are deferred and amortized on a straight-line basis over an average period of benefit determined to be five years. The Company determined the period of benefit considering the length of its customer contracts, its technology and other factors. The period of benefit approximates the average stated contract terms, excluding expected future renewals, because sales commissions are paid upon contract renewal in a manner commensurate with the initial commissions. Some commission payments are not capitalized because they are expensed during the fiscal year as the related revenue is recognized. Capitalized sales commissions costs are classified within other assets and amortized in selling, general and administrative expenses.

Costs to Fulfill a Contract

Certain contract setup costs incurred upon initiation or renewal of an outsourcing contract that generate or enhance resources to be used in satisfying future performance obligations are capitalized when they are deemed recoverable. Judgment is applied to assess whether contract setup costs are capitalizable. Costs that generate or enhance resources often pertain to activities that enhance the capabilities of the services, improve customer experience and establish a more effective and efficient IT environment. The Company recognizes these transition and transformation contract costs as intangible assets, which are amortized over the respective contract life.

Note 2 - Recent Accounting Pronouncements

Effective April 1, 2018, DXC adopted the following Accounting Standards Updates ("ASU") issued by the Financial Accounting Standards Board:
Date Issued and ASU
Date Adopted and Method
Description
Impact
May 2014


ASU 2014-09 “Revenue from Contracts with Customers (Topic 606)"


April 1, 2018 Modified-retrospective
The core principle of this update, and the subsequent amendments, is that revenue is recognized when the transfer of goods or services to customers occurs in an amount that reflects the consideration to which DXC expects to be entitled in exchange for those goods or services. The guidance also addresses the timing of recognition of certain costs incurred to obtain or fulfill a customer contract. Further, it requires the disclosure of sufficient information to enable readers of DXC’s financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, and information regarding significant judgments and changes in judgments made. This update provides two methods of adoption: full retrospective and modified retrospective. Under the full retrospective method, the standard would be applied to all periods presented with previously disclosed periods restated under the new guidance. Under the modified retrospective method, prior periods would not be restated but rather a cumulative catch-up adjustment would be recorded on the adoption date.

                                                              
The Company adopted this standard using the modified retrospective method. The Company has applied the standard to only those contracts that were not completed at the adoption date. The adoption resulted in the following impacts.

The Company recorded a net increase to opening retained earnings, net of income taxes, of approximately $114 million as of April 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact primarily related to the capitalization of certain sales commissions of approximately $158 million offset by a reduction in income tax assets and liabilities of approximately $40 million. In addition, the Company has recorded a reduction in contract liabilities of approximately $381 million and other current assets and other assets of $385 million, primarily related to the net down of certain long-term contract asset and contract liability balances and the change in timing of revenue and costs recognized related to the Company's software contracts.
                                                                    Refer to Note 12 - “Revenue” for further discussion of the impact of adoption and other required disclosures.
 


11
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


March 2017

ASU 2017-07 “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost"
April 1, 2018 Retrospective
This update is intended to improve the presentation of net periodic pension cost and net periodic post-retirement benefit cost in an entity's financial statements by requiring the service cost component be disaggregated from other components of net benefit costs and presented in the same line item or items as other compensation costs for the employees. Additionally, only the service cost component of net benefit cost is eligible for capitalization when applicable. This update must be applied retrospectively.
DXC reclassified non-service cost components of net periodic pension (income) expense from "costs of services" and "selling, general and administrative" to "other income, net" in the statements of operations for the three and nine months ended December 31, 2017. The aggregate service cost component of net periodic pension income remaining in "costs of services" and "selling, general and administrative" is $30 million and $96 million, for the three and nine months ended December 31, 2017, respectively.

August 2016

ASU 2016-15 “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments"
April 1, 2018 Retrospective
This update addressed eight cash flow classification issues that have created diversity in practice, providing definitive guidance on classification of certain cash receipts and payments. This update must be adopted retrospectively for all periods presented but may be applied prospectively if retrospective application would be impracticable
ASU 2016-15 requires the company to classify cash receipts related to its beneficial interests in securitization transactions, which is the deferred purchase price (the “DPP”) recorded in connection with the Company's Receivables Securitization Facility, within investing activities in its statements of cash flows. The Company adopted ASU 2016-15 effective April 1, 2018, and retrospectively adjusted prior fiscal periods, using each month’s transactional activity as the unit of account in determining the portions of transferred trade receivables as operating activities and investing activities. As disclosed in prior quarters the Company was evaluating the unit of account used in implementing ASU 2016-15. During the third quarter of fiscal 2019, the Company completed its evaluation and determined that it was necessary to change the unit of account from each month's transactional activity to each day's transactional activity. The Company reflected this change on a retrospective basis as further discussed in Note 21 - "Reconciliation of Previously Reported Amounts to Recast Financial Statements. See Note 6 - "Sale of Receivables" for more information about the Receivables Securitization Facility.

November 2016

ASU 2016-18 “Statement of Cash Flows (Topic 230): Restricted Cash (A Consensus of the FASB Emerging Issues Task Force")
April 1, 2018 Retrospective
This update requires that amounts described as restricted cash or restricted cash equivalents must be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This update must be applied retrospectively.

DXC reclassified restricted cash to beginning-of-period and end-of-period cash and cash equivalents on the statement of cash flows.

See Note 21 - "Reconciliation of Previously Reported Amounts to Recast Financial Statements" for the financial statement impact of the adoption of these ASU's.

12
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



The following ASUs were recently issued but have not yet been adopted by DXC:
Date Issued and ASU
DXC Effective Date
Description
Impact
February 2016

ASU 2016-02 "Leases (Topic 842)"


Fiscal 2020
This update is intended to increase transparency and comparability among organizations by recognizing virtually all lease assets and lease liabilities on the balance sheet and disclosing key information about lease arrangements. Early adoption of this update is permitted. This update must be adopted using a modified retrospective transition at the beginning of the earliest period presented or at the adoption date recognizing a cumulative adjustment to the opening balance of retained earnings in the period of adoption and provides for certain practical expedients.
DXC is currently evaluating the effect the adoption of this standard will have on its existing accounting policies and the financial statements in future reporting periods. The Company expects there will be a material increase in assets and liabilities on its balance sheets at adoption due to the recording of right-of-use assets and corresponding lease liabilities for lease obligations that are currently classified as operating leases. The Company is in the process of implementing changes to its systems, processes and controls, including the implementation of a lease accounting software solution to comply with the new standard.
DXC expects to adopt certain transition expedients permitted under Topic 842, as follows:


DXC expects to adopt this standard on a modified retrospective basis beginning on the adoption date, with comparative period disclosures following ASC 840 requirements. DXC does not expect to reassess lease determination, lease classification or indirect cost capitalization for leases that commenced prior to the adoption date. DXC does not expect to recognize on the balance sheet leases that both (i) have a ‘lease term’ of 12 months or less and (ii) do not contain a ‘reasonably certain’ purchase option.
                                                                
 
August 2017

ASU 2017-12 "Derivatives & Hedging (Topic 815)"
Fiscal 2020 with early adoption expected in the fourth quarter of Fiscal 2019
This update is intended to improve the financial reporting of hedge relationships to better portray the economic results of an entity's risk management activities in its financial statements, by revising and expanding items eligible for hedge accounting, simplifying hedge effectiveness testing and changing the timing of recognition and presentation of certain hedge items. Early adoption is permitted.
DXC does not expect the adoption of this standard to have a material impact on its financial statements. DXC expects to adopt this standard on a modified retrospective basis.

Other recently issued ASUs effective after December 31, 2018 are not expected to have a material effect on DXC's consolidated financial statements.

Note 3 - Acquisitions

Fiscal 2019 Acquisitions

Molina Medicaid Solutions Acquisition

On October 1, 2018, DXC completed its acquisition of Molina Medicaid Solutions ("MMS"), a Medicaid Management Information Systems business, from Molina Healthcare, Inc. for total consideration of $232 million . The combination of MMS with DXC expands DXC’s ability to provide services to state agencies in the administration of Medicaid programs, including business processing, information technology development and administrative services.

The Company’s purchase price allocation for the MMS acquisition is preliminary and subject to revision as additional information related to the fair value of assets and liabilities becomes available. The preliminary purchase price was based upon the current determination of fair values at the date of acquisition as follows: $93 million  to current assets,

13
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


$69 million to intangible assets other than goodwill,  $11 million to other assets, $45 million  to current liabilities, $19 million to other liabilities and  $123 million  to goodwill. The goodwill is associated with the Company's GBS segment and is tax deductible. The amortizable lives associated with the intangible assets acquired includes customer relationships and developed technology which have a  13 -year weighted average estimated useful life.

Other Acquisitions

In addition to the MMS acquisition, DXC completed  six  acquisitions to complement the Company's Microsoft Dynamics and ServiceNow offerings and to provide opportunities for future growth. The acquired businesses are included in the results for the GBS segment. The purchase consideration of $193 million included cash of $152 million and contingent consideration with an estimated fair value of $41 million . The Company's purchase price allocation for these acquisitions is preliminary and subject to revision as additional information related to the fair value of assets and liabilities become available.

Fiscal 2018 Acquisitions

HPES Merger

On April 1, 2017, Computer Sciences Corporation ("CSC"), Hewlett Packard Enterprise Company (“HPE”), Everett SpinCo, Inc. (“Everett”), and New Everett Merger Sub Inc., a wholly-owned subsidiary of Everett (“Merger Sub”), completed the strategic combination of CSC with the Enterprise Services business of HPE to form DXC (the "HPES Merger"). The combination was accomplished through a series of transactions that included the transfer by HPE of its Enterprise Services business, HPES, to Everett, and spin-off by HPE of Everett on March 31, 2017, and the merger of Merger Sub with and into CSC on April 1, 2017. At the time of the HPES Merger, Everett was renamed DXC, and as a result of the HPES Merger, CSC became a direct wholly owned subsidiary of DXC. DXC common stock began regular-way trading on the New York Stock Exchange on April 3, 2017. The strategic combination of the two complementary businesses was to create a versatile global technology services business, well positioned to innovate, compete and serve clients in a rapidly changing marketplace.

The transaction involving HPES and CSC was a reverse merger acquisition, in which DXC was considered the legal acquirer of the business and CSC was considered the accounting acquirer. While purchase consideration transferred in a business combination is typically measured by reference to the fair value of equity issued or other assets transferred by the accounting acquirer, CSC did not issue any consideration in the HPES Merger. CSC stockholders received one share of DXC common stock for every one share of CSC common stock held immediately prior to the HPES Merger. DXC issued a total of 141,298,797 shares of DXC common stock to CSC stockholders, representing approximately 49.9% of the outstanding shares of DXC common stock immediately following the HPES Merger.

Under the acquisition method of accounting, total consideration exchanged was:
(in millions)
 
Amount
Fair value of purchase consideration received by HPE stockholders (1)  
 
$
9,782

Fair value of HPES options assumed by CSC (2)
 
68

Total consideration transferred
 
$
9,850

        

(1)  
Represents the fair value of consideration received by HPE stockholders to give them 50.1% ownership in the combined company. The fair value of the purchase consideration transferred was based on a total of 141,865,656 shares of DXC common stock distributed to HPE stockholders as of the close of business on the record date ( 141,741,712 after the effect of 123,944 cancelled shares) at CSC's closing price of $69.01 per share on March 31, 2017.
(2)  
Represents the fair value of certain stock-based awards of HPES employees that were unexercised on March 31, 2017, which were converted to DXC stock-based awards.


14
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


The purchase price allocation for the HPES Merger was finalized during the fourth quarter of fiscal 2018. The Company's allocation of the purchase price to the assets acquired and liabilities assumed as of the HPES Merger date is as follows:
(in millions)
 
Fair Value
Cash and cash equivalents
 
$
938

Accounts receivable (1)
 
4,102

Other current assets
 
530

Total current assets
 
5,570

Property and equipment
 
2,581

Intangible assets
 
6,384

Other assets
 
1,571

Total assets acquired
 
16,106

Accounts payable, accrued payroll, accrued expenses, and other current liabilities
 
(4,605
)
Deferred revenue
 
(1,315
)
Long-term debt, net of current maturities
 
(4,806
)
Long-term deferred tax liabilities and income tax payable
 
(1,550
)
Other liabilities
 
(1,322
)
Total liabilities assumed
 
(13,598
)
Net identifiable assets acquired
 
2,508

Add: Fair value of non-controlling interests
 
(50
)
Goodwill
 
7,392

Total estimated consideration transferred
 
$
9,850

        

(1) Includes aggregate adjustments of $203 million received from HPE in accordance with the provisions of the Separation Agreement.

Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the HPES Merger date. The goodwill recognized with the HPES Merger was attributable to the synergies expected to be achieved by combining the businesses of CSC and HPES, expected future contracts and the acquired workforce. The cost-saving opportunities are expected to include improved operating efficiencies and asset optimization. The goodwill arising from the HPES Merger was allocated to the Company's reportable segments as  $2.8 billion  to the GBS segment,  $2.6 billion  to the GIS segment and  $2.0 billion  to the USPS segment. The goodwill is not deductible for tax purposes. 

Subsequent to the HPES Merger, the Company divested USPS which was acquired in the HPES Merger. See Note 4 - "Divestitures" for additional information about the divestiture of USPS.

Tribridge Acquisition

On July 1, 2017, DXC acquired all of the outstanding capital stock of Tribridge Holdings LLC, an independent integrator of Microsoft Dynamics 365, for total consideration of $152 million . The acquisition includes the Tribridge affiliate company, Concerto Cloud Services LLC. The combination of Tribridge with DXC expands DXC’s Microsoft Dynamics 365 global systems integration business.

The purchase price is allocated to assets acquired and liabilities assumed based upon determination of fair values at the date of acquisition as follows: $32 million to current assets, $4 million to property and equipment, $62 million to intangible assets other than goodwill, $24 million to current liabilities and $78 million to goodwill. The goodwill is primarily associated with the Company's GBS segment and is tax deductible. The amortizable lives associated with the intangible assets acquired includes customer relationships which have a 12 -year estimated useful life.

15
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 4 - Divestitures

Separation of USPS

On May 31, 2018, DXC completed the USPS Separation and Mergers to form Perspecta, an independent public company.

Implementation of the Separation and DXC's post-Separation relationship with Perspecta is governed by several agreements, including the following:

•
a Separation and Distribution Agreement;
•
an Employee Matters Agreement;
•
a Tax Matters Agreement;
•
an Intellectual Property Matters Agreement;
•
a Transition Services Agreement;
•
a Real Estate Matters Agreement; and
•
a Non-US Agency Agreement.

These agreements provide for the allocation of assets, employees, liabilities and obligations (including property, employee benefits, litigation, and tax-related assets and liabilities) between DXC and Perspecta attributable to periods prior to, at and after the Separation. In addition, DXC and Perspecta have service and commercial contracts that generally extend through fiscal 2023.

Pursuant to the Separation and Distribution Agreement, immediately prior to the Separation Perspecta made a net cash payment of $984 million to DXC, which reflects transaction consideration of $1,050 million less $66 million in principal amount of debt that was outstanding at a subsidiary of Perspecta. Perspecta financed the payment through borrowings under a new senior secured term loan facility.

J. Michael Lawrie serves as DXC's Chairman and Chief Executive Officer and Paul N. Saleh serves as DXC's Chief Financial Officer. Effective as of the Separation, Mr. Lawrie also serves as Chairman of Perspecta and Mr. Saleh also serves as a Director of Perspecta. Due to Mr. Lawrie's and Mr. Saleh's leadership positions at DXC and Perspecta, Perspecta is considered a related party under ASC 850 "Related Party Disclosures" for periods subsequent to the Separation. Transactions with Perspecta were immaterial to the Company's financial statements for the three and nine months ended December 31, 2018 and balances due to and from Perspecta were immaterial to the Company's balance sheet as of December 31, 2018 .

16
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



The following is a summary of the assets and liabilities distributed as part of the Separation of USPS on May 31, 2018:

 
 
As of
(in millions)
 
May 31, 2018
Assets:
 
 
Cash and cash equivalents
 
$
95

Receivables, net
 
458

Prepaid expenses
 
82

Other current assets
 
35

Total current assets of discontinued operations
 
670

Intangible assets, net
 
882

Goodwill
 
2,029

Property and equipment, net
 
294

Other assets
 
157

Total non-current assets of discontinued operations
 
3,362

Total assets
 
$
4,032

 
 
 
Liabilities:
 
 
Short-term debt and current maturities of long-term debt
 
$
161

Accounts payable
 
165

Accrued payroll and related costs
 
17

Accrued expenses and other current liabilities
 
358

Deferred revenue and advance contract payments
 
53

Income tax payable
 
18

Total current liabilities of discontinued operations
 
772

Long-term debt, net of current maturities
 
1,320

Non-current deferred revenue
 
5

Non-current income tax liabilities and deferred tax liabilities
 
196

Other long-term liabilities
 
71

Total long-term liabilities of discontinued operations
 
1,592

Total liabilities
 
$
2,364




17
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


The following is a summary of the assets and liabilities of USPS that have been classified as assets and liabilities of discontinued operations:

 
 
As of
(in millions)
 
March 31, 2018
Assets:
 
 
Cash and cash equivalents
 
$
68

Receivables, net
 
432

Prepaid expenses
 
75

Other current assets
 
6

Total current assets of discontinued operations
 
581

Intangible assets, net
 
912

Goodwill
 
2,033

Property and equipment, net
 
283

Other assets
 
135

Total non-current assets of discontinued operations
 
3,363

Total assets
 
$
3,944

 
 
 
Liabilities:
 
 
Short-term debt and current maturities of long-term debt
 
$
155

Accounts payable
 
195

Accrued payroll and related costs
 
22

Accrued expenses and other current liabilities
 
346

Deferred revenue and advance contract payments
 
53

Income tax payable
 
18

Total current liabilities of discontinued operations
 
789

Long-term debt, net of current maturities
 
214

Non-current deferred revenue
 
7

Non-current income tax liabilities and deferred tax liabilities
 
163

Other long-term liabilities
 
72

Total long-term liabilities of discontinued operations
 
456

Total liabilities
 
$
1,245




18
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


The following is a summary of the operating results of USPS which have been reflected within income from discontinued operations, net of tax:

 
 
Three Months Ended
 
Nine Months Ended
(in millions)
 
December 31, 2017
 
December 31, 2018 (1)
 
December 31, 2017
Revenue
 
$
726

 
$
431

 
$
2,113

 
 
 
 
 
 
 
Costs of services
 
544

 
311

 
1,589

Selling, general and administrative
 
37

 
50

 
94

Depreciation and amortization
 
41

 
33

 
115

Restructuring costs
 
3

 
1

 
10

Interest expense
 
4

 
8

 
11

Other income, net
 
—

 
(25
)
 
—

Total costs and expenses
 
629

 
378

 
1,819

Total income from discontinued operations, before income taxes
 
97

 
53

 
294

Income tax expense
 
24

 
18

 
96

Total income from discontinued operations
 
$
73

 
$
35

 
$
198

        

(1) Results for the nine months ended December 31, 2018 reflect operations through the Separation date of May 31, 2018, not the full nine-month period as shown for prior periods.

There was no gain or loss on disposition recognized as a result of the Separation.

The following selected financial information of USPS is included in the statements of cash flows:
 
 
Nine Months Ended
(in millions)
 
December 31, 2018 (1)
 
December 31, 2017
Depreciation
 
$
16

 
$
62

Amortization
 
$
17

 
$
53

Capital expenditures
 
$
—

 
$
(8
)
Significant operating non-cash items:
 
 
 
 
Gain on dispositions
 
$
24

 
$
—

        

(1) Results for the nine months ended December 31, 2018 reflect cash flows through the Separation date of May 31, 2018, not the full nine-month period as shown for prior periods.


19
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 5 - Earnings per Share

Basic EPS is computed using the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the incremental shares issuable upon the assumed exercise of stock options and equity awards. The following table reflects the calculation of basic and diluted EPS:


Three Months Ended
 
Nine Months Ended
(in millions, except per-share amounts)

December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
Net income attributable to DXC common shareholders:
 
 
 
 
 
 
 
 
From continuing operations
 
$
462

 
$
703

 
$
948

 
$
993

From discontinued operations
 
$
—

 
$
73

 
$
35

 
$
198

 
 
 
 
 
 
 
 
 
Common share information:
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for basic EPS
 
275.66

 
285.38

 
280.47

 
284.70

Dilutive effect of stock options and equity awards
 
3.33

 
4.39

 
4.23

 
4.83

Weighted average common shares outstanding for diluted EPS
 
278.99

 
289.77

 
284.70

 
289.53

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.68

 
$
2.46

 
$
3.38

 
$
3.48

Discontinued operations
 
$
—

 
$
0.26

 
$
0.12

 
$
0.70

Total
 
$
1.68

 
$
2.72

 
$
3.50

 
$
4.18

 
 
 
 
 
 
 
 
 
Diluted
 
 
 
 
 
 
 
 
Continuing operations
 
$
1.66

 
$
2.43

 
$
3.33

 
$
3.43

Discontinued operations
 
$
—

 
$
0.25

 
$
0.12

 
$
0.68

Total
 
$
1.66

 
$
2.68

 
$
3.45

 
$
4.11


Certain share based equity awards were excluded from the computation of dilutive EPS because inclusion of these awards would have had an anti-dilutive effect. The number of awards excluded were as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
Stock Options
 
—

 
—

 
—

 
24,850

RSUs
 
230,803

 
10,552

 
28,585

 
21,030


Note 6 - Sale of Receivables

Receivables Securitization Facility

The Company has a  $600 million  accounts receivable securitization facility (as amended or supplemented to date, the "Receivables Facility") with certain unaffiliated financial institutions (the "Purchasers") for the sale of commercial accounts receivable in the United States. Under the Receivables Facility, the Company and certain of its subsidiaries (the "Sellers") sell billed and unbilled accounts receivable to DXC Receivables LLC ("DXC Receivables"), a wholly owned bankruptcy-remote entity. DXC Receivables in turn sells such purchased accounts receivable in their entirety to the Purchasers pursuant to a receivables purchase agreement. Sales of receivables by DXC Receivables occur continuously and are settled on a monthly basis. The proceeds from the sale of these receivables comprise a combination of cash and a

20
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


deferred purchase price receivable ("DPP"). The DPP is realized by the Company upon the ultimate collection of the underlying receivables sold to the Purchasers. The adoption of ASU 2016-15 described in Note 2 - "Recent Accounting Pronouncements" requires cash receipts on the DPP to be classified as cash flows from investing activities instead of the Company's former presentation as cash flows from operating activities.

The amount available under the Receivables Facility fluctuates over time based on the total amount of eligible receivables generated during the normal course of business after deducting excess concentrations. As of  December 31, 2018 , the total availability under the Receivables Facility was approximately  $424 million and the drawn amount was $438 million . As of December 31, 2018 , the Company recorded a $14 million liability within accounts payable because the amount of cash proceeds received by the Company under the Receivables Facility exceeded the maximum funding limit. The Receivables Facility terminates on August 21, 2019, but provides for one or more optional one -year extensions, if agreed to by the Purchasers. The Company uses the proceeds from receivables sales under the Receivables Facility for general corporate purposes.

The Company has no retained interests in the transferred receivables, other than collection and administrative services and its right to the DPP. The DPP is included in receivables at fair value on the balance sheets and was $598 million and $233 million as of December 31, 2018 and March 31, 2018, respectively. On August 22, 2018, the Company amended the Receivables Facility to include additional Sellers and increase the facility limit from $250 million to $600 million . On September 24, 2018, the Company amended the Receivables Facility with the Purchasers and pursuant to this amendment, the Company repurchased certain of its subsidiaries' receivables.

The fair value of the sold receivables approximated book value due to the short-term nature, and as a result  no  gain or loss on sale of receivables was recorded.

The Company’s risk of loss following the transfer of accounts receivable under the Receivables Facility is limited to the DPP outstanding and any short-falls in collections for specified non-credit related reasons after sale. Payment of the DPP is not subject to significant risks other than delinquencies and credit losses on accounts receivable sold under the Receivables Facility.

Certain obligations of sellers under the Receivables Facility and DXC, as initial servicer, are guaranteed by the Company under a performance guaranty, made in favor of an administrative agent on behalf of the Purchasers. However, the performance guaranty does not cover DXC Receivables’ obligations to pay yield, fees or invested amounts to the administrative agent or any of the Purchasers.

The following table is a reconciliation of the beginning and ending balances of the DPP:
 
 
As of and for the Three Months Ended
 
As of and for the Nine Months Ended
(in millions)
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
Beginning balance
 
$
540

 
$
272

 
$
233

 
$
252

Transfers of receivables
 
1,199

 
539

 
4,175

 
1,662

Collections
 
(1,215
)
 
(593
)
 
(3,115
)
 
(1,717
)
Change in funding availability
 
74

 
23

 
(236
)
 
54

Facility amendments
 
—

 
—

 
(457
)
 
—

Fair value adjustment
 
—

 
8

 
(2
)
 
(2
)
Ending balance
 
$
598

 
$
249

 
$
598

 
$
249


Federal Receivables Sales Facility

Since July 14, 2017, the Company has given a parent guaranty in connection with a federal receivables sales facility with certain financial institutions, under which certain subsidiaries of the Company previously sold eligible federal government obligor receivables, including billed and certain unbilled receivables. In connection with the Separation, the sellers and servicers of the receivables sold under the Federal Receivables Sales Facility were divested and, effective May 31, 2018, the parent guaranty was terminated.

21
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



The following table reflects activity of the Federal Receivables Sales Facility, prior to the Separation:
(in millions)
 
For the
Nine Months Ended
December 31, 2018 (1)
Transfers of receivables
 
$
464

Collections
 
$
521

Operating cash flow effect
 
$
(57
)
        

(1) Results for the nine months ended December 31, 2018 reflect operations through the Separation date of May 31, 2018, not the full nine-month period.


Note 7 - Fair Value

Fair Value Measurements on a Recurring Basis

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, excluding pension assets and derivative assets and liabilities. See Note 8 - " Derivative Instruments " for information about the fair value of the Company's derivative assets and liabilities. There were no transfers between any of the levels during the periods presented.
 
 
 
 
Fair Value Hierarchy
(in millions)
 
December 31, 2018
Assets:
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Money market funds and money market deposit accounts
 
$
75

 
$
75

 
$
—

 
$
—

Time deposits (1)
 
124

 
124

 
—

 
—

Other debt securities (2)
 
53

 
—

 
48

 
5

Deferred purchase price receivable
 
598

 
—

 
—

 
598

Total assets
 
$
850

 
$
199

 
$
48

 
$
603

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Contingent consideration
 
$
41

 
$
—

 
$
—

 
$
41

Total liabilities
 
$
41

 
$
—

 
$
—

 
$
41




22
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


 
 
March 31, 2018
Assets:
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
Money market funds and money market deposit accounts
 
$
84

 
$
84

 
$
—

 
$
—

Time deposits (1)
 
114

 
114

 
—

 
—

Other debt securities (2)
 
59

 
—

 
53

 
6

Deferred purchase price receivable
 
233

 
—

 
—

 
233

Total assets
 
$
490

 
$
198

 
$
53

 
$
239

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Contingent consideration
 
$
5

 
$
—

 
$
—

 
$
5

Total liabilities
 
$
5

 
$
—

 
$
—

 
$
5

        

(1) Cost basis approximated fair value due to the short period of time to maturity.
(2) Other debt securities include available-for-sale investments with Level 2 inputs that have a cost basis of $39 million and $42 million , and unrealized gains of $9 million and $11 million , as of December 31, 2018 and March 31, 2018, respectively.

The fair value of money market funds, money market deposit accounts, and time deposits, reported as cash and cash equivalents, are based on quoted market prices or amounts payable on demand at the reporting date. The fair value of other debt securities, included in other long-term assets, is based on actual market prices. Fair value of the DPP, included in receivables, net, is determined by calculating the expected amount of cash to be received and is principally based on unobservable inputs consisting primarily of the face amount of the receivables adjusted for anticipated credit losses. The fair value of contingent consideration, presented in other liabilities, is based on contractually defined targets of financial performance and other considerations.

The increase in the fair value of contingent consideration during the nine months ended December 31, 2018 was due to the acquisitions described in Note 3 - "Acquisitions."

Other Fair Value Disclosures

The carrying amounts of the Company’s financial instruments with short-term maturities, primarily accounts receivable, accounts payable, short-term debt, and financial liabilities included in other accrued liabilities, are deemed to approximate their market values. If measured at fair value, these financial instruments would be classified in Level 2 or Level 3 of the fair value hierarchy.

The Company estimates the fair value of its long-term debt, primarily by using quoted prices obtained from third party providers such as Bloomberg, and by using an expected present value technique that is based on observable market inputs for instruments with similar terms currently available to the Company. The estimated fair value of the Company's long-term debt, excluding capitalized lease liabilities, was $5.5 billion and $6.0 billion as of December 31, 2018 and March 31, 2018 , respectively, as compared with carrying value of $5.6 billion and $5.9 billion as of December 31, 2018 and March 31, 2018 , respectively. If measured at fair value, long-term debt, excluding capitalized lease liabilities would be classified in Level 1 or Level 2 of the fair value hierarchy.

Non-financial assets such as goodwill, tangible assets, intangible assets and other contract related long-lived assets are recorded at fair value in the period they are initially recognized, and such fair value may be adjusted in subsequent periods if an event occurs or circumstances change that indicate that the asset may be impaired. The fair value measurements, in such instances, would be classified in Level 3. There were no significant impairments recorded during the fiscal periods covered by this report.

Note 8 - Derivative Instruments

In the normal course of business, the Company is exposed to interest rate and foreign exchange rate fluctuations. As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward and option

23
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures. The Company’s objective is to reduce earnings volatility by offsetting gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them. The Company does not use derivative instruments for trading or any speculative purpose.

Derivatives Designated for Hedge Accounting

Cash flow hedges

During the three months ended June 30, 2018, the Company terminated certain interest rate swap agreements which had aggregate notional values of $375 million and fair values of $5 million and derecognized the relative derivative asset. The hedge gain of $5 million is recognized over the remaining original life of the swap against interest expense in the statements of operations. As of  December 31, 2018 , the Company had no interest rate swap agreements designated as cash flow hedges.

The Company has designated certain foreign currency forward contracts as cash flow hedges to reduce foreign currency risk related to certain Indian Rupee denominated intercompany obligations and forecasted transactions. T he notional amount of foreign currency forward contracts designated as cash flow hedges as of December 31, 2018 was $231 million , and the related forecasted transactions extend through February 2020 .

For the three and nine months ended December 31, 2018 and December 31, 2017 , the Company performed an assessment at the inception of the cash flow hedge transactions and determined all critical terms of the hedging instruments and hedged items matched. The Company performs an assessment of critical terms on an ongoing basis throughout the hedging period. During the three and nine months ended December 31, 2018 and December 31, 2017 , the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. As of December 31, 2018 , $6 million of the existing amount of losses related to the cash flow hedge reported in AOCI is expected to be reclassified into earnings within the next 12 months.

The current period pre-tax gain (loss) on derivatives designated for hedge accounting recognized in other comprehensive gain (loss) was $15 million and $(30) million for the three and nine months ended December 31, 2018 , respectively. The pre-tax loss on derivatives designated for hedge accounting recognized in income from continuing operations was $4 million and $9 million for three and nine months ended December 31, 2018 , respectively.

Derivatives not Designated for Hedge Accounting

The derivative instruments not designated as hedges for purposes of hedge accounting include interest rate swap agreements and certain short-term foreign currency forward contracts. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates.

Interest rate swap agreements

During the three months ended September 30, 2018, the Company elected to de-designate its interest rate swap agreements. The Company derecognized the related derivative asset and recognized the amount in earnings. The notional amount of interest rate swap agreements outstanding as of December 31, 2018 was $236 million . Gains on interest rate swap agreements not designated for hedge accounting and the recognition of the derivative asset in earnings were not material for the three and nine months ended December 31, 2018 .

Foreign currency forward contracts

The Company manages the exposure to fluctuations in foreign currencies by using foreign currency forward contracts to hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and forecasted transactions. The notional amount of the foreign currency forward contracts outstanding as of December 31, 2018 was $3.8 billion . Losses on foreign currency forward contracts not designated for hedge accounting, recognized within other income, net, were $18 million and $62 million during the three and nine months ended December 31, 2018 , respectively, and $3 million and $117 million during the three and nine months ended December 31, 2017 , respectively.


24
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Fair Value of Derivative Instruments

All derivatives are recorded at fair value. The Company’s accounting treatment for these derivative instruments is based on its hedge designation. The following tables present the fair values of derivative instruments included in the balance sheets:
 
 
Derivative Assets
 
 
 
 
As of
(in millions)
 
Balance Sheet Line Item
 
December 31, 2018
 
March 31, 2018
Derivatives designated for hedge accounting:
 
 
Interest rate swaps
 
Other assets
 
$
—

 
$
6

Foreign currency forward contracts
 
Other current assets
 
1

 
14

Total fair value of derivatives designated for hedge accounting
 
$
1

 
$
20

 
 
 
Derivatives not designated for hedge accounting:
 
 
Foreign currency forward contracts
 
Other current assets
 
$
7

 
$
4

Total fair value of derivatives not designated for hedge accounting
 
$
7

 
$
4


 
 
Derivative Liabilities
 
 
 
 
As of
(in millions)
 
Balance Sheet Line Item
 
December 31, 2018
 
March 31, 2018
Derivatives designated for hedge accounting:
 
 
 
 
Foreign currency forward contracts
 
Accrued expenses and other current liabilities
 
$
8

 
$
3

Total fair value of derivatives designated for hedge accounting:
 
$
8

 
$
3

 
 
 
 
 
 
Derivatives not designated for hedge accounting:
 
 
 
 
Foreign currency forward contracts
 
Accrued expenses and other current liabilities
 
$
6

 
$
6

Total fair value of derivatives not designated for hedge accounting
 
$
6

 
$
6


The fair value of foreign currency forward contracts represents the estimated amount required to settle the contracts using current market exchange rates and is based on the period-end foreign currency exchange rates and forward points which are classified as Level 2 inputs. The fair value of interest rate swaps is estimated based on valuation models that use interest rate yield curves which are classified as Level 2 inputs.

Other risks

The Company is exposed to the risk of losses in the event of non-performance by the counterparties to its derivative contracts. The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any, by which a counterparty's obligations exceed the obligations of the Company with that counterparty. To mitigate counterparty credit risk, the Company regularly reviews its credit exposure and the creditworthiness of the counterparties. As of  December 31, 2018 , the maximum amount of loss that the Company could incur was not material. The Company also enters into enforceable master netting arrangements with some of its counterparties. However, for financial reporting purposes, it is the Company's policy not to offset derivative assets and liabilities despite the existence of enforceable master netting arrangements.

25
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 9 - Intangible Assets
 
 
As of December 31, 2018
(in millions)
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Carrying Value
Software
 
$
3,695

 
$
2,070

 
$
1,625

Transition and transformation contract costs
 
1,721

 
941

 
780

Customer related intangible assets
 
5,333

 
1,016

 
4,317

Other intangible assets
 
71

 
23

 
48

Total intangible assets
 
$
10,820

 
$
4,050

 
$
6,770

 
 
As of March 31, 2018
(in millions)
 
Gross Carrying Value
 
Accumulated Amortization
 
Net Carrying Value
Software
 
$
3,484

 
$
1,918

 
$
1,566

Transition and transformation contract costs
 
1,569

 
766

 
803

Customer related intangible assets
 
5,405

 
666

 
4,739

Other intangible assets
 
90

 
19

 
71

Total intangible assets
 
$
10,548

 
$
3,369

 
$
7,179


Total intangible assets amortization was $288 million and $261 million for three months ended December 31, 2018 and December 31, 2017 , respectively, and included amortization of contract cost premiums recorded as reductions of revenue of $4 million and $2 million , respectively.

Total intangible assets amortization was $871 million and $740 million for the nine months ended December 31, 2018 and December 31, 2017 , respectively, and included amortization of contract cost premiums recorded as reductions of revenue of $18 million and $8 million , respectively.

Estimated future amortization related to intangible assets as of  December 31, 2018  is as follows:
Fiscal Year
 
(in millions)

Remainder of 2019
 
$
393

2020
 
$
1,149

2021
 
$
1,017

2022
 
$
857

2023
 
$
762


26
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 10 - Goodwill

The following table summarizes the changes in the carrying amount of goodwill, by segment, as of December 31, 2018 .
(in millions)
 
GBS
 
GIS
 
Total
Balance as of March 31, 2018, net
 
$
4,531

 
$
3,088

 
$
7,619

Acquisitions
 
242

 
—

 
242

Divestitures
 
(12
)
 
—

 
(12
)
Foreign currency translation
 
(153
)
 
(103
)
 
(256
)
Balance as of December 31, 2018, net
 
$
4,608

 
$
2,985

 
$
7,593


As a result of the Separation of USPS on May 31, 2018, USPS is no longer a reportable segment. The additions to goodwill during the nine months ended December 31, 2018 were due to the acquisitions described in Note 3 - Acquisitions . The foreign currency translation amounts reflect the impact of currency movements on non-U.S. dollar-denominated goodwill balances.

Goodwill Impairment Analyses

The Company tests goodwill for impairment on an annual basis, as of the first day of the second fiscal quarter and between annual tests if circumstances change, or if an event occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company's annual goodwill impairment analysis during the three months ended September 30, 2018 did not result in an impairment charge.

At the end of the third quarter of fiscal 2019, the Company assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of a reporting unit below its carrying amount and require goodwill to be tested for impairment. The Company determined that there have been no such indicators and therefore, it was unnecessary to perform an interim goodwill impairment test as of December 31, 2018 .


27
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 11 - Debt

The following is a summary of the Company's debt:
(in millions)
 
Interest Rates
 
Fiscal Year Maturities
 
December 31, 2018
 
March 31, 2018
Short-term debt and current maturities of long-term debt
 
 
 
 
 
 
 
 
Euro-denominated commercial paper (1)
 
(0.1)% - 0.02% (2)
 
2019
 
$
800

 
$
863

Current maturities of long-term debt
 
Various
 
2019 - 2020
 
240

 
439

Current maturities of capitalized lease liabilities
 
1.0% - 12.0%
 
2019 - 2020
 
540

 
616

Short-term debt and current maturities of long-term debt
 
 
 
 
 
$
1,580

 
$
1,918

 
 
 
 
 
 
 
 
 
Long-term debt, net of current maturities
 
 
 
 
 
 
 
 
GBP term loan
 
1.3% - 1.5% (3)
 
2019
 
$
—

 
$
260

EUR term loan
 
1.75% (4)
 
2020
 
—

 
493

AUD term loan
 
2.72% (5)
 
2021
 
563

 
—

AUD term loan
 
2.9% - 3.3% (6)
 
2022
 
—

 
210

GBP term loan
 
1.60% (7)
 
2022
 
571

 
—

EUR term loan
 
0.9% (8)
 
2022
 
—

 
187

USD term loan
 
3.1% - 3.3% (9)
 
2022
 
—

 
899

$500 million Senior notes
 
2.875%
 
2020
 
501

 
502

$500 million Senior notes
 
3.0% - 3.3 (10)
 
2021
 
497

 
646

$274 million Senior notes
 
4.45%
 
2023
 
277

 
278

$171 million Senior notes
 
4.45%
 
2023
 
172

 
173

$500 million Senior notes
 
4.25%
 
2025
 
507

 
507

£250 million Senior notes
 
2.75%
 
2025
 
315

 
346

€650 million Senior notes
 
1.75%
 
2026
 
738

 
—

$500 million Senior notes
 
4.75%
 
2028
 
509

 
509

$234 million Senior notes
 
7.45%
 
2030
 
275

 
277

Lease credit facility
 
2.8% - 3.5%
 
2019 - 2023
 
30

 
46

Capitalized lease liabilities
 
1.0% - 12.0%
 
2019 - 2024
 
1,182

 
1,235

Borrowings for assets acquired under long-term financing
 
2.3% - 4.1%
 
2019 - 2024
 
451

 
405

Mandatorily redeemable preferred stock outstanding
 
6.0%
 
2023
 
62

 
61

Other borrowings
 
0.5% - 7.4%
 
2019 - 2022
 
110

 
113

Long-term debt
 
 
 
 
 
6,760

 
7,147

Less: current maturities
 
 
 
 
 
780

 
1,055

Long-term debt, net of current maturities
 
 
 
 
 
$
5,980

 
$
6,092

        

(1)  
At DXC's option, DXC can borrow up to a maximum of €1 billion .
(2)  
Approximate weighted average interest rate.
(3) Three-month LIBOR rate plus 0.65% .
(4) Three-month EURIBOR rate plus 1.75% .
(5) Variable interest rate equal to the bank bill swap bid rate for a one-, two-, three- or six-month interest period plus 0.60% to 0.95% based on the published credit ratings of DXC.
(6) Variable interest rate equal to the bank bill swap bid rate for a one-, two-, three- or six-month interest period plus 0.95% to 1.45% based on the published credit ratings of DXC.
(7) Three-month LIBOR rate plus 0.80% .
(8)  At DXC’s option, the EUR term loan bears interest at the Eurocurrency Rate for a one-, two-, three-, or six-month interest period, plus a margin of between 0.75% and 1.35% , based on published credit ratings of DXC.

28
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


(9) At DXC’s option, the USD term loan bears interest at the Eurocurrency Rate for a one-, two-, three-, or six-month interest period, plus a margin of between 1.00% and 1.75% , based on published credit ratings of DXC or the Base Rate plus a margin of between 0.00% and 0.75% , based on published credit ratings of DXC.
(10) Three-month LIBOR plus 0.95% .

Senior Notes and Term Loans

Interest on the Company's term loans is payable monthly or quarterly in arrears at the election of the borrowers. The Company fully and unconditionally guarantees term loans issued by its 100% owned subsidiaries. Interest on the Company's senior notes is payable semi-annually in arrears, except for interest on the £250 million Senior Notes due 2025 and €650 million Senior Notes due 2026 which is payable annually in arrears, and interest on the $500 million Senior Notes due 2021 which is payable quarterly in arrears. Generally, the Company's notes are redeemable at the Company's discretion at the then-applicable redemption premium plus accrued interest.

Note 12 - Revenue

Revenue Recognition

The following table presents DXC's revenues disaggregated by geography, based on the location of incorporation of the DXC entity providing the related goods or services:
 
 
Three Months Ended
 
Nine Months Ended
(in millions)
 
December 31, 2018
 
December 31, 2017 (1)
 
December 31, 2018
 
December 31, 2017 (1)
United States
 
$
1,917

 
$
1,980

 
$
5,667

 
$
6,046

United Kingdom
 
749

 
861

 
2,309

 
2,494

Australia
 
377

 
418

 
1,222

 
1,255

Other Europe
 
1,384

 
1,382

 
3,994

 
3,950

Other International
 
751

 
819

 
2,281

 
2,404

Total Revenues
 
$
5,178

 
$
5,460

 
$
15,473

 
$
16,149

        

(1) Prior period amounts have not been recast under the modified retrospective transition method.

The revenue by geography pertains to both of the Company’s reportable segments. Refer to Note 19 - " Segment Information " for the Company’s segment disclosures.

Remaining Performance Obligations

Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency. As of December 31, 2018 , approximately $29.0 billion of revenue is expected to be recognized from remaining performance obligations. The Company expects to recognize revenue on approximately 48% of these remaining performance obligations in Fiscal 2019 and Fiscal 2020, with the remainder of the balance recognized thereafter.

Contract Balances

The following table provides information about the balances of the Company's trade receivables and contract assets and contract liabilities:

29
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


 
 
As of
(in millions)
 
December 31, 2018
 
April 1, 2018
Trade receivables, net
 
$
3,351

 
$
3,937

Contract assets
 
$
334

 
$
444

Contract liabilities
 
$
1,815

 
$
2,053


Change in contract liabilities were as follows:
(in millions)
 
Three months ended December 31, 2018
 
Nine months ended December 31, 2018
ASC 605 Balance, beginning of period (1)
 
$
—

 
$
2,434

Adjustment related to Topic 606 adoption (1)
 
—

 
(381
)
ASC 606 Balance, beginning of period
 
1,743

 
2,053

Deferred revenue
 
750

 
1,922

Recognition of deferred revenue
 
(682
)
 
(1,989
)
Currency translation adjustment
 
(29
)
 
(166
)
Other
 
33

 
(5
)
Balance, end of period
 
$
1,815

 
$
1,815

        

(1) ASC 606 was adopted at the beginning of fiscal 2019, as such there was no ASC 605 balance at the beginning of the period or cumulative adjustment related to Topic 606 adoption for the three months ended December 31, 2018.

The following table provides information about the Company’s capitalized costs to obtain and fulfill a contract:
(in millions)
 
As of December 31, 2018
Capitalized sales commission cost (1)
 
$
198

Transition and transformation contract costs, net (2)
 
$
780

        

(1) Capitalized sales commission costs are included within other assets in the accompanying balance sheets. For the three and nine months ended December 31, 2018, amortization expense of $17 million and $51 million , respectively, related to the capitalized sales commission assets is included in selling, general, and administrative expenses in the accompanying statements of operations.
(2) Transition and transformation contract costs, net reflect the Company’s setup costs incurred upon initiation of an outsourcing contract that are classified as intangible assets in the accompanying balance sheets. For the three and nine months ended December 31, 2018, amortization expense of $59 million and $188 million , respectively, is included within depreciation and amortization in the accompanying statements of operations.
Financial Statement Impact

The impact of adoption of ASC 606 on the selected captions of the Company's statements of operations and balance sheets was as follows:
Statement of Operations (Selected Captions)
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2018
(in millions)
 
As Reported
 
Amounts Without Adoption of ASC 606
 
Effect of Change Higher/(Lower)
Revenues
 
$
5,178

 
$
5,171

 
$
7

Costs of services
 
$
3,725

 
$
3,726

 
$
(1
)
Selling, general and administrative
 
$
491

 
$
506

 
$
(15
)
Interest income
 
$
(27
)
 
$
(30
)
 
$
(3
)
Income tax expense (benefit)
 
$
3

 
$
(5
)
 
$
8

Net income attributable to DXC common stockholders
 
$
462

 
$
450

 
$
12



30
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Statement of Operations (Selected Captions)
 
 
 
 
 
 
 
 
Nine Months Ended December 31, 2018
(in millions)
 
As Reported
 
Amounts Without Adoption of ASC 606
 
Effect of Change Higher/(Lower)
Revenues
 
$
15,473

 
$
15,452

 
$
21

Costs of services
 
$
11,110

 
$
11,114

 
$
(4
)
Selling, general and administrative
 
$
1,500

 
$
1,542

 
$
(42
)
Interest income
 
$
(92
)
 
$
(102
)
 
$
(10
)
Income tax expense
 
$
205

 
$
189

 
$
16

Net income attributable to DXC common stockholders
 
$
983

 
$
942

 
$
41


Balance Sheet (Selected Captions)
 
 
 
 
 
 
 
 
As of December 31, 2018
(in millions)
 
As Reported
 
Amounts Without Adoption of ASC 606
 
Effect of Change Higher/(Lower)
Assets:
 
 
 
 
 
 
Receivables and contract assets, net of allowance for doubtful accounts
 
$
5,096

 
$
5,109

 
$
(13
)
Other current assets
 
$
325

 
$
372

 
$
(47
)
Deferred income taxes, net
 
$
407

 
$
421

 
$
(14
)
Other assets
 
$
2,393

 
$
2,463

 
$
(70
)
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Accrued expenses and other current liabilities
 
$
3,228

 
$
3,230

 
$
(2
)
Deferred revenue and advance contract payments
 
$
1,542

 
$
1,623

 
$
(81
)
Income taxes payable
 
$
122

 
$
102

 
$
20

Non-current deferred revenue
 
$
273

 
$
520

 
$
(247
)
Non-current income tax liabilities and deferred tax liabilities
 
$
1,171

 
$
1,150

 
$
21

 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
Retained earnings
 
$
274

 
$
122

 
$
152

Accumulated other comprehensive loss
 
$
(464
)
 
$
(459
)
 
$
(5
)

The adoption of ASC 606 did not materially impact the statement of cash flows.


31
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 13 - Restructuring Costs

The Company recorded restructuring costs of $76 million and $210 million , net of reversals, for the three months ended December 31, 2018 and December 31, 2017 , respectively. For the nine months ended December 31, 2018 and December 31, 2017, the Company recorded $418 million and $585 million , net of reversals, respectively. The costs recorded during the three and nine months ended December 31, 2018 were largely a result of the Fiscal 2019 Plan (defined below).

The composition of restructuring liabilities by financial statement line item is as follows:
 
 
As of
(in millions)
 
December 31, 2018
Accrued expenses and other current liabilities
 
$
356

Other long-term liabilities
 
118

Total
 
$
474


Summary of Restructuring Plans

Fiscal 2019 Plan

During the nine months ended December 31, 2018 , management approved global cost savings initiatives designed to better align the Company's organizational structure with its strategic initiatives and continue the integration of HPES and other acquisitions (the "Fiscal 2019 Plan"). The Fiscal 2019 Plan includes workforce optimization and rationalization of facilities and data center assets.

Fiscal 2018 Plan

In June 2017, management approved a post-HPES Merger restructuring plan to optimize the Company's operations in response to a continuing business contraction (the "Fiscal 2018 Plan"). The additional restructuring initiatives are intended to reduce the company's core structure and related operating costs, improve its competitiveness, and facilitate the achievement of acceptable and sustainable profitability. The Fiscal 2018 Plan focuses mainly on optimizing specific aspects of global workforce, increasing the proportion of work performed in low cost offshore locations and re-balancing the pyramid structure. Additionally, this plan included global facility restructuring, including a global data center restructuring program. C osts incurred to date under the Fiscal 2018 Plan total $806 million , comprising $614 million in workforce reductions and $192 million of facilities costs.

Fiscal 2017 Plan

In May 2016, the Company initiated a restructuring plan to realign the Company's cost structure and resources to take advantage of operational efficiencies following recent acquisitions. During the fourth quarter of fiscal 2017, the Company expanded the plan to strengthen the Company's competitiveness and to optimize the workforce by increasing work performed in low-cost locations (the "Fiscal 2017 Plan"). Costs incurred to date under the Fiscal 2017 Plan total $216 million , comprising $207 million in workforce reductions and $9 million of facilities costs.

Other Prior Year Plans

Other prior year plans are comprised of the Fiscal 2016 Plan and Fiscal 2015 Plan. As of December 31, 2018, activities under these plans are substantially complete.

Acquired Restructuring Liabilities

As a result of the HPES Merger, DXC acquired restructuring liabilities under restructuring plans that were initiated for HPES under plans approved by the HPE Board of Directors.


32
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Restructuring Liability Reconciliations by Plan
 
 
Restructuring Liability as of March 31, 2018
 
Costs Expensed, Net of Reversals (1)
 
Costs Not Affecting Restructuring Liability (2)
 
Cash Paid
 
Other (3)
 
Restructuring Liability as of December 31, 2018
Fiscal 2019 Plan
 
 
 
 
 
 
 
 
 
 
 
 
Workforce Reductions
 
$
—

 
$
307

 
$
(1
)
 
$
(139
)
 
$
(4
)
 
$
163

Facilities Costs
 
—

 
129

 
(5
)
 
(50
)
 
(3
)
 
71

Total
 
$
—

 
$
436

 
$
(6
)
 
$
(189
)
 
$
(7
)
 
$
234

 
 
 
 
 
 
 
 
 
 
 
 
 
Fiscal 2018 Plan
 
 
 
 
 
 
 
 
 
 
 
 
Workforce Reductions
 
$
257

 
$
(10
)
 
$
—

 
$
(124
)
 
$
(16
)
 
$
107

Facilities Costs
 
98

 
(10
)
 
(3
)
 
(36
)
 
(6
)
 
43

Total
 
$
355

 
$
(20
)
 
$
(3
)
 
$
(160
)
 
$
(22
)
 
$
150

 
 
 
 
 
 
 
 
 
 
 
 
 
Fiscal 2017 Plan
 
 
 
 
 
 
 
 
 
 
 
 
Workforce Reductions
 
$
19

 
$
—

 
$
—

 
$
(10
)
 
$
(1
)
 
$
8

Facilities Costs
 
3

 
—

 
—

 
(3
)
 
—

 
—

Total
 
$
22

 
$
—

 
$
—

 
$
(13
)
 
$
(1
)
 
$
8

 
 
 
 
 
 
 
 
 
 
 
 
 
Other Prior Year Plans
 
 
 
 
 
 
 
 
 
 
 
 
Workforce Reductions
 
$
4

 
$
(1
)
 
$
—

 
$
(1
)
 
$
—

 
$
2

Facilities Costs
 
2

 
—

 
—

 
(1
)
 
—

 
1

Total
 
$
6

 
$
(1
)
 
$
—

 
$
(2
)
 
$
—

 
$
3

 
 
 
 
 
 
 
 
 
 
 
 
 
Acquired Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Workforce Reductions
 
$
110

 
$
2

 
$
—

 
$
(52
)
 
$
(3
)
 
$
57

Facilities Costs
 
$
27

 
1

 
—

 
(6
)
 
—

 
22

Total
 
$
137

 
$
3

 
$
—

 
$
(58
)
 
$
(3
)
 
$
79

        

(1)  Costs expensed, net of reversals include $23 million , $2 million and $1 million of costs reversed from the Fiscal 2018 Plan, the Fiscal 2017 Plan and Other Prior Year Plans, respectively.
(2) Pension benefit augmentations recorded as a pension liability and asset impairments.
(3) Foreign currency translation adjustments.

Note 14 - Pension and Other Benefit Plans

The Company offers a number of pension and other post-retirement benefit ("OPEB") plans, life insurance benefits, deferred compensation and defined contribution plans. Most of the Company's pension plans are not admitting new participants; therefore, changes to pension liabilities are primarily due to market fluctuations of investments for existing participants and changes in interest rates.

Defined Benefit Plans

The Company sponsors a number of defined benefit and post-retirement medical benefit plans for the benefit of eligible employees. The benefit obligations of the Company's U.S. pension, U.S. OPEB, and non-U.S. OPEB represent an insignificant portion of the Company's pension and other post-retirement benefits. As a result, the disclosures below include the Company's U.S. and non-U.S. pension plans on a global consolidated basis.

The Company contributed $12 million and $52 million to the defined benefit pension and other post-retirement benefit

33
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


plans during the three and nine months ended December 31, 2018 , respectively. The Company expects to contribute an additional $30 million during the remainder of fiscal 2019, which does not include certain salary deferral programs and future potential termination benefits related to the Company's potential restructuring activities.

The components of net periodic pension income were:
 
 
Three Months Ended
 
Nine Months Ended
(in millions)
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
Service cost
 
$
21

 
$
30

 
$
66

 
$
96

Interest cost
 
62

 
63

 
190

 
184

Expected return on assets
 
(139
)
 
(133
)
 
(426
)
 
(393
)
Amortization of prior service costs
 
(4
)
 
(5
)
 
(11
)
 
(13
)
Contractual termination benefit
 
2

 
10

 
2

 
21

Curtailment gain
 
—

 
(40
)
 
(1
)
 
(40
)
Recognition of actuarial loss
 
—

 
23

 
—

 
23

Net periodic pension income
 
$
(58
)
 
$
(52
)
 
$
(180
)
 
$
(122
)

The service cost component of net periodic pension income is presented in cost of services and selling, general and administrative and the other components of net periodic pension income are presented in other income, net in the Company’s statements of operations. See Note 2 - " Recent Accounting Pronouncements ," for further discussion of the updated guidance related to the presentation of net periodic pension cost.

The weighted-average rates used to determine net periodic pension cost for the three and nine months ended December 31, 2018  and  December 31, 2017  were:
 
 
December 31, 2018
 
December 31, 2017
Discount or settlement rates
 
2.3
%
 
2.4
%
Expected long-term rates of return on assets
 
5.3
%
 
5.0
%
Rates of increase in compensation levels
 
2.0
%
 
2.7
%

U.K. Pension Equalization Ruling

On October 26, 2018 the High Court of Justice in the United Kingdom (the "High Court") issued a ruling related to the equalization of benefits payable to men and women for the effect of guaranteed minimum pensions under U.K. defined benefit pension plans. As a result of this ruling, the Company estimated the impact of retroactively increasing benefits in its U.K. plans in accordance with the High Court ruling. The Company treated the additional benefits as a prior service cost which resulted in an increase to its projected benefit obligation and accumulated other comprehensive loss of  $28 million . The Company will amortize this cost over the average remaining life expectancy of the U.K. participants. Given the immaterial effect on the U.K. plan's projected benefit, an interim remeasurement was not performed. 

Deferred Compensation Plans

Effective as of the HPES Merger, DXC assumed sponsorship of the Computer Sciences Corporation Deferred Compensation Plan, which was renamed the “DXC Technology Company Deferred Compensation Plan” (the “DXC DCP”) and adopted the Enterprise Services Executive Deferred Compensation Plan (the “ES DCP”). Both plans are non-qualified deferred compensation plans maintained for a select group of management, highly compensated employees and non-employee directors.

The DXC DCP covers eligible employees who participated in CSC’s Deferred Compensation Plan prior to the HPES Merger. The ES DCP covers eligible employees who participated in the HPE Executive Deferred Compensation Plan prior to the HPES Merger. Both plans allow participating employees to defer the receipt of current compensation to a future

34
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


distribution date or event above the amounts that may be deferred under DXC’s tax-qualified 401(k) plan, the DXC Technology Matched Asset Plan. Neither plan provides for employer contributions. As of April 3, 2017, the ES DCP does not admit new participants.

Certain management and highly compensated employees are eligible to defer all, or a portion of, their regular salary that exceeds the limitation set forth in Internal Revenue Section 401(a)(17) and all or a portion of their incentive compensation. Non-employee directors are eligible to defer up to 100% of their cash compensation. The liability, which is included in other long-term liabilities in the Company's balance sheets, was $61 million as of December 31, 2018 and $65 million as of March 31, 2018 .

Note 15 - Income Taxes

The Company's income tax expense (benefit) was $3 million and $(365) million for the three months ended December 31, 2018 and December 31, 2017 , respectively, and $205 million and $(303) million for the nine months ended December 31, 2018 and December 31, 2017 , respectively. For the three months ended December 31, 2018 , the primary drivers of the effective tax rate ("ETR") were the global mix of income, the net decrease in valuation allowances on certain foreign deferred tax assets, and the decrease in transition tax liability. For the nine months ended December 31, 2018 , the primary drivers of the ETR were the global mix of income, the net decrease in valuation allowances on certain foreign deferred tax assets, the decrease in transition tax liability, the filing of the October 31, 2017 U.S. federal tax return and the impact of U.S. proposed regulations on the ability to claim certain foreign tax credits. For the three and nine months ended December 31, 2017 , the primary drivers of the ETR were the remeasurement of deferred tax assets and liabilities as a result of the Act, the remeasurement of a deferred tax liability relating to the outside basis difference of HPES foreign subsidiaries, the accrual of a one-time transition tax on estimated unremitted foreign earnings and India dividend distribution tax (DDT) accrual on historic earnings and taxes.

As of each reporting date, management weighs new evidence, both positive and negative, that could affect its view of the future realization of its net deferred tax assets. Objective verifiable evidence, which is historical in nature, carries more weight than subjective evidence, which is forward looking in nature. As of March 31, 2018 , DXC's net deferred tax assets in certain DXC German entities were primarily the result of net operating loss carryforwards, pension, restructuring and other miscellaneous accruals. A full valuation allowance was recorded against these net deferred tax assets as of that reporting date. For the period ended December 31, 2018 , management has determined that the positive evidence, including the duration of current profitability due to realization of cost synergies relating to the HPES Merger , a legal entity restructuring allowing the future utilization of net operating loss carryforwards and the nonrecurring nature of the factors that primarily drove historical losses, outweighs the negative evidence of a three-year cumulative loss. Therefore, as of December 31, 2018 , management has had a change in judgment and has concluded that it is now more likely than not that the net deferred tax assets in these DXC German entities will be fully utilized. As a result, we have recorded a valuation allowance release of $113 million . This is comprised of $18 million related to current year utilization of net operating loss carryforwards recorded through the annual effective tax rate and $95 million recorded as a discrete income tax benefit in the current period.

On December 22, 2017 , the President of the United States signed into law comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Act"). The Act makes significant changes to the Internal Revenue Code of 1986 with varying effective dates. The Act reduces the maximum corporate income tax rate to  21%  effective as of January 1, 2018, requires companies to pay a one-time transition tax on certain unrepatriated earnings of foreign subsidiaries, broadens the tax base, generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, creates a new limitation on the deductibility of interest expense, limits the deductibility of certain executive compensation, and allows for immediate capital expensing of certain qualified property. It also requires companies to pay tax on certain foreign earnings of foreign subsidiaries and subjects certain payments from U.S. corporations to foreign related parties to additional taxes. U.S. generally accepted accounting principles require companies to revalue their deferred tax assets and liabilities with resulting income tax effects accounted for in the reporting period of enactment including retroactive effects.

The SEC staff issued SAB 118, which provides guidance on accounting for the tax effects of the Act effective in the reporting period of enactment. SAB 118 provides a measurement period that should not extend beyond one year from the Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC 740 is complete. To the

35
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


extent that a company’s accounting for certain income tax effects of the Act was incomplete but it was able to determine a reasonable estimate, it was required to record a provisional estimate in the financial statements. If a company was not able to determine a provisional estimate to include in the financial statements, it was required to continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Act.

While the measurement period under SAB 118 is now closed, DXC may in future periods need to further refine the Company's U.S. federal and state calculations, related to the Act, as the taxing authorities provide additional guidance and clarification. The taxing authorities issued additional guidance after the balance sheet date relating to the Act. DXC believes this guidance constitutes a subsequent event and will be accounted for in the period it was issued. DXC is not able to estimate the financial statement impact as time is needed to interpret the guidance and assess the impact. However, as of December 31, 2018 , DXC's accounting for the Act is complete based on the Company's interpretation of the guidance issued as of the balance sheet date. As noted in the Company's fiscal 2018 Annual Report on Form 10-K, the Company was able to record provisional amounts related to certain effects of the Act, as noted below.

For the following items, DXC did not record any additional material measurement period adjustments during the three month period ended December 31, 2018 :

Capital expensing:  During fiscal 2018 the Company recorded a provisional benefit of $87 million , which was based on its intent to fully expense all qualifying capital expenses for U.S. federal income tax purposes. This resulted in a decrease of approximately $87 million to the Company's current income taxes payable and a corresponding increase in its net deferred tax liabilities. During Q3 FY19, the Company finalized its estimate of the impact of the law change for purposes of SAB 118 and determined the incremental benefit of capital expensing was approximately $61 million . This resulted in a decrease of approximately $61 million to the Company's current income taxes payable and a corresponding increase in its net deferred tax liabilities. The Company filed its October 31, 2017 U.S. federal tax return and several of its state tax returns in the periods ending September 30, 2018 and December 31, 2018, respectively . In the three months ended December 31, 2018 the Company completed all of the computations necessary, including an analysis of expenditures that qualify for immediate expensing, noting no measurement period adjustments recorded.

Executive compensation: As a result of changes made by the Act, starting with compensation paid in fiscal 2019, Section 162(m) will limit compensation deductions, including performance-based compensation, in excess of $1 million paid to anyone who, starting in 2018, serves as the Chief Executive Officer or Chief Financial Officer, or who is among the three most highly compensated executive officers for any fiscal year. The only exception to this rule is for compensation that is paid pursuant to a binding contract in effect on November 2, 2017 that would have otherwise been deductible under the prior Section 162(m) rules. Accordingly, any compensation paid in the future pursuant to new compensation arrangements entered into after November 2, 2017, even if performance-based, will count towards the $1 million fiscal year deduction limit if paid to a covered executive. During fiscal 2018, the Company recorded a provisional income tax expense estimate of $2 million for executive compensation relating to the change in covered individuals. The Company completed an analysis of the binding contract requirement on the various compensation plans and determined the impact of the law change was not material . As part of the fiscal 2019 forecasted ETR, the Company has estimated the IRS Code Section 162(m) adjustment under the new guidance for compensation arrangements entered into after November 2, 2017.

Reduction of US federal corporate income tax rate: As discussed above, the Act reduces the corporate tax rate to 21% , effective January 1, 2018. For certain deferred tax assets and deferred tax liabilities, the Company previously recorded a provisional deferred income tax discrete benefit of  $338 million , resulting in a  $338 million decrease in net deferred tax liabilities as of March 31, 2018. The Company filed its October 31, 2017 U.S. federal income tax return in the period ending September 30, 2018 which impacted the provisional amount recorded. The adjustment was not material. The Company finalized its analysis of the scheduling of the deferred tax assets and liabilities and determined the impact was not material. No additional measurement period adjustments were recorded during the period ended December 31, 2018 .

For the following provisional items, incremental measurement period adjustments were recognized during the three-month period ended December 31, 2018:

Deemed repatriation transition tax : The deemed repatriation one-time transition tax is a tax on previously untaxed accumulated and current earnings and profits ("E&P") of certain of the Company's non-U.S. subsidiaries. To determine the amount of the transition tax, the Company determined, in addition to other factors, the amount of post-1986 E&P of the

36
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


relevant non-U.S. subsidiaries, as well as the amount of non-U.S . income taxes paid on such earnings and the impact of various guidance including proposed regulations. The Company was able to calculate the transition tax and recorded a provisional transition tax obligation of  $361 million in fiscal 2018. Due to the revised E&P and cash computations that were completed during the reporting periods, DXC recognized an additional measurement-period adjustment to the transition tax obligation of $25 million for the three months ended June 30, 2018. During the three month period ending December 31, 2018, the Company has recorded a corresponding adjustment of $(70) million . The effect of the total measurement-period adjustments of $(45) million for the nine months ended December 31, 2018 on the fiscal 2019 effective tax rate is (3.88)% . The transition tax, which has now been determined to be complete, resulted in recording a total transition tax obligation of $316 million of which $324 million was recorded as income tax liability and $(8) million recorded as an unrecognized tax benefit receivable.

Indefinite reinvestment assertion : Beginning January 1, 2018, the Act provides a 100% deduction for dividends received from 10-percent owned non-U.S. corporations by U.S. corporate shareholders, subject to a one-year holding period. Although such dividend income is now generally exempt from U.S. federal income tax for U.S. corporate shareholders, companies must still account for the tax consequences of outside basis differences and other tax impacts of their investments in non-U.S. subsidiaries. During fiscal 2018 the Company recorded a provisional estimate for those subsidiaries for which DXC were able to make a reasonable estimate of the tax effects of such repatriation for withholding taxes, state taxes, and India dividend distribution tax of $12 million , $7 million and $80 million , respectively. For the three months ended December 30, 2018, the Company recognized an additional measurement-period adjustment of $9 million for state tax purposes recorded to discrete income tax expense. The Company has completed its analysis of the non-U.S. tax rules for certain non-U.S. subsidiaries for U.S. federal and state tax purposes for all material provisional amounts during the measurement-period.

Global intangible low taxed income ("GILTI"):   The Company continues to evaluate the impact of the GILTI provisions under the Act, which are complex and subject to continuing regulatory interpretation by the IRS. The Company is required to make an accounting policy election of either (i) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred (the “period cost method”) or (ii) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company has determined that it will account for the new GILTI tax rules under the period cost method.

The income tax expense associated with discontinued operations was $0 million and $24 million for the three months ended December 31, 2018 and December 31, 2017, respectively. The tax expense associated with discontinued operations was $18 million and $96 million for the nine months ended December 31, 2018 and December 31, 2017, respectively. The primary driver of the variance in the tax expense for these periods was the difference in income before tax for the respective periods.

The income tax assets and liabilities that were part of the balances classified as assets and liabilities of discontinued operations and that were distributed in the Separation of USPS include $154 million of deferred tax liabilities, $60 million of uncertain tax position liabilities, including interest, and income tax receivables of $162 million . In connection with the Separation, the Company entered into a tax matters agreement with Perspecta. Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the Separation of USPS. Income tax liabilities transferred to Perspecta primarily relate to pre-HPES Merger periods, for which the Company is indemnified by HPE for these liabilities, pursuant to the tax matters agreement between the Company and HPE. The Company is also liable to HPE for tax receivables and refunds which it receives from Perspecta related to pre-HPES Merger periods that were transferred to Perspecta. Pursuant to the tax matters agreement with Perspecta, the Company recorded a tax indemnification receivable from Perspecta of $162 million and a tax indemnification payable to Perspecta of $74 million related to income tax and other tax liabilities. The Company continues to have indemnification balances to and from HPE for the same amounts as a result of the HPES Merger.

The IRS is examining CSC's federal income tax returns for fiscal 2008 through 2017. With respect to CSC's fiscal 2008 through 2010 federal tax returns, the Company previously entered into negotiations for a resolution through settlement with the IRS Office of Appeals. The IRS examined several issues for this audit that resulted in various audit adjustments. The Company and the IRS Office of Appeals have an agreement in principle as to some, but not all of these adjustments. The Company has agreed to extend the statute of limitations associated with this audit through November 30, 2019. In October 2018, the HPES IRS exam related to fiscal years 2008 and 2009 was resolved resulting in a refund received by

37
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Perspecta that relates to a pre-HPES merger period. The refund received by Perspecta reduced the $162 million indemnification receivable from Perspecta and correspondingly reduced the indemnification payable to HPE by approximately $68 million .

In addition, during the first quarter of fiscal 2018, the Company received a Revenue Agent’s Report with proposed adjustments to CSC's fiscal 2011 through 2013 federal returns. The Company has filed a protest of certain of these adjustments to the IRS Office of Appeals. The Company has agreed to extend the statute of limitations associated with this audit through July 31, 2019. The IRS is also examining CSC's fiscal 2014 through 2017 federal income tax returns. The Company has not received any adjustments for this cycle. The Company continues to believe that its tax positions are more-likely-than-not sustainable and that the Company will ultimately prevail.

In addition, the Company may settle certain other tax examinations, have lapses in statutes of limitations, or voluntarily settle income tax positions in negotiated settlements for different amounts than the Company has accrued as uncertain tax positions. The Company may need to accrue and ultimately pay additional amounts for tax positions that previously met a more-likely-than-not standard if such positions are not upheld. Conversely, the Company could settle positions by payment with the tax authorities for amounts lower than those that have been accrued or extinguish a position through payment. The Company believes the outcomes that are reasonably possible within the next 12 months may result in a reduction in liability for uncertain tax positions of $19 million , excluding interest, penalties and tax carry-forwards.

Note 16 - Stockholders' Equity

Share Repurchases

On April 3, 2017, DXC announced the establishment of a share repurchase program approved by the Board of Directors with an initial authorization of $2.0 billion for future repurchases of outstanding shares of DXC common stock. On November 8, 2018, DXC announced that its board of directors approved an incremental $2.0 billion share repurchase authorization. An expiration date has not been established for this repurchase plan.

The shares repurchased are retired immediately and included in the category of authorized but unissued shares. The excess of purchase price over par value of the common shares is allocated between additional paid-in capital and retained earnings. The details of shares repurchased are shown below:
 
 
Fiscal 2019
 
Fiscal 2018
Fiscal Period
 
Number of Shares Repurchased
 
Average Price Per Share
 
Amount (in millions)
 
Number of Shares Repurchased
 
Average Price Per Share
 
Amount (in millions)
1st Quarter
 
3,779,194
 
$
85.86

 
$
324

 
250,000

 
$
77.39

 
$
19

2nd Quarter
 
1,448,729

 
$
87.16

 
$
127

 
591,505

 
$
78.20

 
$
47

3rd Quarter
 
12,452,514

 
$
63.96

 
$
797

 
—

 
$
—

 
$
—

Total
 
17,680,437

 
$
70.58

 
$
1,248

 
841,505

 
$
77.96

 
$
66



38
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Accumulated Other Comprehensive Income (Loss)

The following tables show the changes in accumulated other comprehensive income (loss), net of taxes:

 
 
Three Months Ended December 31,2018
(in millions)
 
Foreign Currency Translation Adjustments
 
Cash Flow Hedges
 
Available-for-sale Securities
 
Pension and Other Post-retirement Benefit Plans
 
Accumulated Other Comprehensive Loss
Balance at September 30, 2018
 
$
(669
)
 
$
(16
)
 
$
8

 
$
295

 
$
(382
)
Current-period other comprehensive loss
 
(64
)
 
5

 
—

 
(23
)
 
(82
)
Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
4

 
—

 
(4
)
 
—

Balance at December 31, 2018
 
$
(733
)
 
$
(7
)
 
$
8

 
$
268

 
$
(464
)


 
 
Nine Months Ended December 31,2018
(in millions)
 
Foreign Currency Translation Adjustments
 
Cash Flow Hedges
 
Available-for-sale Securities
 
Pension and Other Post-retirement Benefit Plans
 
Accumulated Other Comprehensive Income (Loss)
Balance at March 31, 2018
 
$
(261
)
 
$
9

 
$
9

 
$
301

 
$
58

Current-period other comprehensive loss
 
(472
)
 
(25
)
 
(1
)
 
(23
)
 
(521
)
Amounts reclassified from accumulated other comprehensive income (loss)
 
—

 
9

 
—

 
(10
)
 
(1
)
Balance at December 31, 2018
 
$
(733
)
 
$
(7
)
 
$
8

 
$
268

 
$
(464
)


39
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


 
 
Three Months Ended December 31,2017
(in millions)
 
Foreign Currency Translation Adjustments
 
Cash Flow Hedges
 
Pension and Other Post-retirement Benefit Plans
 
Accumulated Other Comprehensive Loss
Balance at September 30, 2017
 
$
(354
)
 
$
15

 
$
269

 
$
(70
)
Current-period other comprehensive loss
 
(47
)
 
5

 
—

 
(42
)
Amounts reclassified from accumulated other comprehensive income (loss)
 
(3
)
 
—

 
(3
)
 
(6
)
Balance at December 31, 2017
 
$
(404
)
 
$
20

 
$
266

 
$
(118
)


 
 
Nine Months Ended December 31,2017
(in millions)
 
Foreign Currency Translation Adjustments
 
Cash Flow Hedges
 
Pension and Other Post-retirement Benefit Plans
 
Accumulated Other Comprehensive Loss
Balance at March 31, 2017
 
$
(458
)
 
$
20

 
$
276

 
$
(162
)
Current-period other comprehensive income
 
62

 
—

 
—

 
62

Amounts reclassified from accumulated other comprehensive loss
 
(8
)
 
—

 
(10
)
 
(18
)
Balance at December 31, 2017
 
$
(404
)
 
$
20

 
$
266

 
$
(118
)



Note 17 - Stock Incentive Plans

Equity Plans

As a result of the Separation of USPS, shared-based awards issued by the Company were modified. The number of stock options and exercise price were adjusted to generally preserve the intrinsic value immediately prior to the Separation. There was no incremental share-based compensation expense recognized as a result of the modification of the awards.

As a result of the HPES Merger, all outstanding CSC awards of stock options, stock appreciation rights, restricted stock units ("CSC RSUs"), including performance-based restricted stock units, relating to CSC common stock granted under the 2011 Omnibus Incentive Plan, the 2007 Employee Incentive Plan and the 2010 Non-Employee Director Incentive Plan (the “CSC Equity Incentive Plans”) held by CSC employees and non-employee directors were converted into an adjusted award relating to DXC common shares subject to the same terms and conditions after the HPES Merger as the terms and conditions applicable to such awards prior to the HPES Merger.


40
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Under the terms of the CSC Equity Incentive Plans and the individual award agreements, all unvested equity incentive awards, including all stock options and CSC RSUs held by all participants under the plans, including its named executive officers and directors, are subject to accelerated vesting in whole or in part upon the occurrence of a change in control or upon the participant’s termination of employment on or after the occurrence of a change in control under certain circumstances ("CIC events"). As a result of CIC events triggered by the HPES Merger, approximately 3.6 million unvested awards became vested on April 1, 2017 and $ 26 million of incremental stock compensation expense was recognized. CSC options granted in fiscal 2017 vested 33% upon the HPES Merger; the remaining 67% were converted into DXC RSUs based on the accounting value of the options. These RSUs will vest on the second and third anniversaries of the original option grant date. For equity incentive awards granted by HPE under HPE equity incentive plans to HPES prior to the HPES Merger, outstanding options (vested and unvested) and unvested RSU awards were converted upon the HPES Merger into economically equivalent DXC option and RSU awards, with terms and conditions substantially the same as the terms of such awards prior to the HPES Merger.

In March 2017, prior to the HPES Merger, the board of directors and shareholders of HPES approved DXC’s 2017 Omnibus Incentive Plan (the “DXC Employee Equity Plan”), DXC’s 2017 Non-Employee Director Incentive Plan (the “DXC Director Equity Plan”) and DXC’s 2017 Share Purchase Plan (“DXC Share Purchase Plan”). The terms of the DXC Employee Equity Plan and DXC Director Equity Plans are substantially similar to the terms of the CSC Equity Incentive Plans. The former allows DXC to grant stock options (including incentive stock options), stock appreciation rights (“SARs”), restricted stock, RSUs (including PSUs), and cash awards intended to qualify for the performance-based compensation exemption to the $1 million deduction limit under Section 162(m) of the Internal Revenue Code (collectively the "Awards"). Awards are typically subject to vesting over the 3 -year period following the grant date. Vested stock options are generally exercisable for a term of 10 years from the grant date. All of DXC’s employees are eligible for awards under the plan. The Company issues authorized but previously unissued shares upon the granting of stock options and the settlement of RSUs and PSUs.

The Compensation Committee of the Board of Directors (the "Board") has broad authority to grant awards and otherwise administer the DXC Employee Equity Plan. The plan became effective March 30, 2017 and will continue in effect for a period of 10 years thereafter, unless earlier terminated by the Board. The Board has the authority to amend the plan in such respects as it deems desirable, subject to approval of DXC’s stockholders for material modifications.

RSUs represent the right to receive one share of DXC common stock upon a future settlement date, subject to vesting and other terms and conditions of the award, plus any dividend equivalents accrued during the award period. In general, if the employee’s status as a full-time employee is terminated prior to the vesting of the RSU grant in full, then the RSU grant is automatically canceled on the termination date and any unvested shares and dividend equivalents are forfeited. Certain executives were awarded service-based "career share" RSUs for which the shares are settled over the 10 anniversaries following the executive's separation from service as a full-time employee, provided the executive complies with certain non-competition covenants during that period.

The Company also grants PSUs, which generally vest over a period of 3 years. The number of PSUs that ultimately vest is dependent upon the Company’s achievement of certain specified financial performance criteria over a 3 -year period. If the specified performance criteria are met, awards are settled for shares of DXC common stock and dividend equivalents upon the filing with the SEC of the Annual Report on Form 10-K for the last fiscal year of the performance period. PSU awards include the potential for up to 25% of the shares granted to be earned after the first and second fiscal years if certain of the Company's performance targets are met early, subject to vesting based on the participant's continued employment through the end of the 3 -year performance period.

The terms of the DXC Director Equity Plan allow DXC to grant RSU awards to non-employee directors of DXC. Such RSU awards vest in full at the earlier of (i) the first anniversary of the grant date or (ii) the next annual meeting date, and are automatically redeemed for DXC common stock and dividend equivalents either at that time or, if an RSU deferral election form is submitted, upon the date or event elected by the director. Distributions made upon a director’s separation from the Board may occur in either a lump sum or in annual installments over periods of 5 , 10 , or 15 years, per the director’s election. In addition, RSUs vest in full upon a change in control of DXC.

The DXC Share Purchase Plan allows DXC’s employees located in the United Kingdom to purchase shares of DXC’s common stock at the fair market value of such shares on the applicable purchase date. There were 3,574 and 9,069 shares purchased under this plan during the three and nine months ended December 31, 2018 .


41
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


The Board has reserved for issuance shares of DXC common stock, par value $0.01 per share, under each of the plans as detailed below:
 
As of December 31, 2018
 
Reserved for issuance
 
Available for future grants
DXC Employee Equity Plan
34,200,000

 
21,905,425

DXC Director Equity Plan
230,000

 
104,310

DXC Share Purchase Plan
250,000

 
239,457

Total
34,680,000

 
22,249,192


Stock Options
 
 
Number
of Option Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic
Value
(in millions)
Outstanding as of March 31, 2018 (1)
 
2,933,501

 
$
32.54

 
5.24
 
$
185

Granted
 
—

 
$
—

 
 
 
 
Issued due to Separation modification
 
400,170

 
$
31.72

 
 
 
 
Exercised
 
(768,302
)
 
$
37.33

 
 
 
$
38

Canceled/Forfeited
 
(14,607
)
 
$
48.33

 
 
 
 
Expired
 
(10,335
)
 
$
30.62

 
 
 
 
Outstanding as of December 31, 2018
 
2,540,427

 
$
30.88

 
4.84
 
$
57

Vested and expected to vest in the future as of December 31, 2018
 
2,539,930

 
$
30.88

 
4.84
 
$
57

Exercisable as of December 31, 2018
 
2,535,068

 
$
30.83

 
4.84
 
$
57


        

(1) The amount of the weighted average exercise price per share has been revised to reflect the impact of the Separation.


Restricted Stock Units

 
Employee Equity Plan
 
Director Equity Plan
 
Number of
Shares
 
Weighted
Average
Grant Date
Fair Value
 
Number of
Shares
 
Weighted
Average
Grant Date
Fair Value
Outstanding as of March 31, 2018 (1)
3,985,616

 
$
47.25

 
66,386

 
$
37.26

Granted
951,118

 
$
79.48

 
19,200

 
$
87.88

Issued due to Separation modification

649,649

 
$
51.95

 
10,488

 
$
37.69

Settled
(2,163,890
)
 
$
33.22

 
(20,324
)
 
$
51.59

Canceled/Forfeited
(659,475
)
 
$
60.70

 
—

 
$
—

Outstanding as of December 31, 2018
2,763,018

 
$
67.24

 
75,750

 
$
46.31

        

(1) The amount of the weighted average fair value per share has been revised to reflect the impact of the Separation.


42
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Share-Based Compensation

 
 
Three Months Ended
 
Nine Months Ended
(in millions)
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
Total share-based compensation cost
 
$
16

 
$
19

 
$
57

 
$
76

Related income tax benefit
 
$
5

 
$
5

 
$
11

 
$
24

Total intrinsic value of options exercised
 
$
3

 
$
30

 
$
38

 
$
104

Tax benefits from exercised stock options and awards
 
$
13

 
$
9

 
$
32

 
$
62


As of December 31, 2018 , total unrecognized compensation expense related to unvested DXC stock options and unvested DXC RSUs, net of expected forfeitures was less than $ 1 million and $ 122 million , respectively. The unrecognized compensation expense for unvested RSUs is expected to be recognized over a weighted-average period of 1.94 years.

Note 18 - Cash Flows

Cash payments for interest on indebtedness and income taxes and other select non-cash activities are as follows:
 
 
Nine Months Ended
(in millions)
 
December 31, 2018
 
December 31, 2017
Cash paid for:
 
 
 
 
Interest
 
$
250

 
$
188

Taxes on income, net of refunds
 
$
120

 
$
235

 
 
 
 
 
Non-cash activities:
 
 
 
 
Investing:
 
 
 
 
Capital expenditures in accounts payable and accrued expenses
 
$
62

 
$
4

Capital expenditures through capital lease obligations
 
$
548

 
$
510

Deferred purchase price receivable
 
$
1,194

 
$
527

Assets acquired under long-term financing
 
$
160

 
$
284

Contingent consideration
 
$
41

 
$
—

Financing:
 
 
 
 
Dividends declared but not yet paid
 
$
52

 
$
52

Stock issued for the acquisition of HPES
 
$
—

 
$
9,850


43
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 19 - Segment Information

DXC has a matrix form of organization and is managed in several different and overlapping groupings including services, industry and geographic region. As a result and in accordance with accounting standards, operating segments are organized by the type of services provided. DXC's chief operating decision maker ("CODM"), the chief executive officer, obtains, reviews, and manages the Company’s financial performance based on these segments. The CODM uses these results, in part, to evaluate the performance of, and allocate resources to, each of the segments.

As a result of the Separation, USPS is no longer included as a reportable segment and its results have been reclassified to discontinued operations, net of taxes, for all periods presented. See Note 4 - " Divestitures ." DXC now operates in two reportable segments as described below:

Global Business Services

GBS provides innovative technology solutions that help its clients address key business challenges and accelerate digital transformations tailored to each client’s industry and specific objectives. GBS offerings include:

•
Enterprise, Cloud Applications and Consulting. GBS provides industry, business process systems integration and technical delivery experience to maximize value from enterprise application portfolios. GBS also helps clients accelerate their digital transformations and business results with industry, business, technology and complex integration services.
•
Application Services. GBS's comprehensive services helps clients modernize, develop, test and manage their applications.
•
Analytics. GBS's portfolio of analytics services and robust partner ecosystem helps clients gain rapid insights and accelerate their digital transformation journeys.
•
Business Process Services. GBS provides seamless digital integration and optimization of front and back office processes, including its Agile Process Automation approach.
•
Industry Software and Solutions. GBS's industry-specific solutions enable businesses to quickly integrate technology, transform their operations and develop new ways of doing business. GBS's vertical-specific IP includes insurance, healthcare and life sciences, travel and transportation, and banking and capital markets solutions.

Global Infrastructure Services

GIS provides a portfolio of offerings that deliver predictable outcomes and measurable results while reducing business risk and operational costs for clients. GIS offerings include:

•
Cloud and Platform Services. GIS helps clients maximize their private cloud, public cloud and legacy infrastructures, as well as securely manage their hybrid environments.
•
Workplace and Mobility . GIS's workplace, mobility and Internet of Things ("IoT") services provides a consumer-like experience with enterprise security and instant connectivity for its clients.
•
Security. GIS's security solutions help predict attacks, proactively respond to threats, ensure compliance and protect data, applications, infrastructure and endpoints.


44
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Segment Measures

The following table summarizes operating results regularly provided to the CODM by reportable segment and a reconciliation to the financial statements:
(in millions)
 
GBS
 
GIS
 
Total Reportable Segments
 
All Other
 
Totals
Three Months Ended December 31, 2018
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
2,169

 
$
3,009

 
$
5,178

 
$
—

 
$
5,178

Segment profit
 
$
395

 
$
528

 
$
923

 
$
(83
)
 
$
840

Depreciation and amortization (1)
 
$
23

 
$
324

 
$
347

 
$
27

 
$
374

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
2,315

 
$
3,145

 
$
5,460

 
$
—

 
$
5,460

Segment profit
 
$
423

 
$
450

 
$
873

 
$
(76
)
 
$
797

Depreciation and amortization (1)
 
$
16

 
$
265

 
$
281

 
$
25

 
$
306


45
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



(in millions)
 
GBS
 
GIS
 
Total Reportable Segments
 
All Other
 
Totals
Nine Months Ended December 31, 2018
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
6,493

 
$
8,980

 
$
15,473

 
$
—

 
$
15,473

Segment profit
 
$
1,198

 
$
1,475

 
$
2,673

 
$
(231
)
 
$
2,442

Depreciation and amortization (1)
 
$
59

 
$
910

 
$
969

 
$
93

 
$
1,062

 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
6,893

 
$
9,256

 
$
16,149

 
$
—

 
$
16,149

Segment profit
 
$
1,066

 
$
1,171

 
$
2,237

 
$
(130
)
 
$
2,107

Depreciation and amortization (1)
 
$
67

 
$
736

 
$
803

 
$
72

 
$
875

        
 
1) Depreciation and amortization as presented excludes amortization of acquired intangible assets of $134 million and $134 million for the three months ended December 31, 2018 and 2017, respectively, and $401 million and $389 million for the nine months ended December 31, 2018 and 2017, respectively.

Reconciliation of Reportable Segment Profit

The Company's management uses segment profit as the measure for assessing performance of its segments. Segment profit is defined as segment revenue less costs of services, segment selling, general and administrative, depreciation and amortization, and other income (excluding the movement in foreign currency exchange rates on DXC's foreign currency denominated assets and liabilities and the related economic hedges). The Company does not allocate to its segments certain operating expenses managed at the corporate level. These unallocated costs include certain corporate function costs, stock-based compensation expense, pension and OPEB actuarial and settlement gains and losses, restructuring costs, transaction, separation and integration-related costs and amortization of acquired intangible assets.

 
 
Three Months Ended
 
Nine Months Ended
(in millions)
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
Profit
 
 
 
 
 
 
 
 
Total profit for reportable segments
 
$
923

 
$
873

 
$
2,673

 
$
2,237

All other loss
 
(83
)
 
(76
)
 
(231
)
 
(130
)
Interest income
 
27

 
27

 
92

 
59

Interest expense
 
(81
)
 
(73
)
 
(249
)
 
(220
)
Restructuring costs
 
(76
)
 
(210
)
 
(418
)
 
(585
)
Transaction, separation and integration-related costs
 
(107
)
 
(83
)
 
(305
)
 
(273
)
Amortization of acquired intangible assets
 
(134
)
 
(134
)
 
(401
)
 
(389
)
Pension and OPEB actuarial and settlement gains
 
—

 
17

 
—

 
17

Income from continuing operations before income taxes
 
$
469

 
$
341

 
$
1,161

 
$
716

 
Management does not use total assets by segment to evaluate segment performance or allocate resources. As a result, assets are not tracked by segment and therefore, total assets by segment is not disclosed.

46
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 20 - Commitments and Contingencies

Commitments

The Company signed long-term purchase agreements with certain software, hardware, telecommunication, and other service providers to obtain favorable pricing and terms for services, and products that are necessary for the operations of business activities. Under the terms of these agreements, the Company is contractually committed to purchase specified minimums over periods ranging from 1 to 6 years. If the Company does not meet the specified minimums, the
Company would have an obligation to pay the service provider all, or a portion, of the shortfall. Minimum purchase commitments as of  December 31, 2018  were as follows:
Fiscal year
 
Minimum Purchase Commitment (1)
(in millions)
 
Remainder of 2019
 
$
717

2020
 
2,296

2021
 
777

2022
 
375

2023
 
333

Thereafter
 
242

     Total
 
$
4,740

        

(1) A significant portion of the minimum purchase commitments in fiscal 2019 and 2020 relate to the amounts committed under the HPE
preferred vendor agreements.

In the normal course of business, the Company may provide certain clients with financial performance guarantees, and at times performance letters of credit or surety bonds. In general, the Company would only be liable for the amounts of these guarantees in the event that non-performance by the Company permits termination of the related contract by the Company’s client. The Company believes it is in compliance with its performance obligations under all service contracts for which there is a financial performance guarantee, and the ultimate liability, if any, incurred in connection with these guarantees will not have a material adverse effect on its consolidated results of operations or financial position.

The Company also uses stand-by letters of credit, in lieu of cash, to support various risk management insurance policies. These letters of credit represent a contingent liability and the Company would only be liable if it defaults on its payment obligations on these policies. The following table summarizes the expiration of the Company’s financial guarantees and stand-by letters of credit outstanding as of December 31, 2018 :
(in millions)
 
 Fiscal 2019
 
Fiscal 2020
 
Fiscal 2021 and Thereafter
 
Totals
Surety bonds
 
$
20

 
$
334

 
$
101

 
$
455

Letters of credit
 
102

 
106

 
327

 
535

Stand-by letters of credit
 
23

 
45

 
94

 
162

Totals
 
$
145

 
$
485

 
$
522

 
$
1,152


The Company generally indemnifies licensees of its proprietary software products against claims brought by third parties alleging infringement of their intellectual property rights, including rights in patents (with or without geographic limitations), copyrights, trademarks, and trade secrets. DXC’s indemnification of its licensees relates to costs arising from court awards, negotiated settlements, and the related legal and internal costs of those licensees. The Company maintains the right, at its own cost, to modify or replace software in order to eliminate any infringement. The Company has not incurred any significant costs related to licensee software indemnification.

47
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Contingencies

Vincent Forcier v. Computer Sciences Corporation and The City of New York: On October 27, 2014, the United States Attorney’s Office for the Southern District of New York and the Attorney General for the State of New York filed complaints-in-intervention on behalf of the United States and the State of New York, respectively, against CSC and The City of New York. This action arose out of a qui tam complaint originally filed under seal in 2012 by Vincent Forcier, a former employee of CSC. The complaints allege that from 2008 to 2012 New York City and CSC, in its role as fiscal agent for New York City’s Early Intervention Program ("EIP"), a federal program that provides services for infants and toddlers with manifest or potential developmental delays, violated the federal and state False Claims Acts and various common law standards by allegedly orchestrating a billing fraud against Medicaid through the misapplication of default billing codes and the failure to exhaust private insurance coverage before submitting claims to Medicaid. The New York Attorney General’s complaint also alleges that New York City and CSC failed to reimburse Medicaid in certain instances where insurance had paid a portion of the claim. The lawsuits seek treble statutory damages, other civil penalties and attorneys’ fees and costs.

On January 26, 2015, CSC and the City of New York moved to dismiss Forcier’s amended qui tam complaint as well as the federal and state complaints-in-intervention. In June 2016, the Court dismissed Forcier’s amended complaint in its entirety. With regard to the complaints-in-intervention, the Court dismissed the federal claims alleging misuse of default diagnosis codes when the provider had entered an invalid code, and the state claims alleging failure to reimburse Medicaid when claims were subsequently paid by private insurance. The Court denied the motions to dismiss with respect to the federal and state claims relating to (i) submission of insurance claims with a code signifying that the patient’s policy ID was unknown, and (ii) submission of claims to Medicaid after the statutory deadline for payment by private insurance had passed, and state common law claims. In accordance with the ruling, the United States and the State of New York each filed amended complaints-in-intervention on September 6, 2016. In addition to reasserting the claims upheld by the Court, the amended complaints assert new claims alleging that the compensation provisions of CSC’s contract with New York City rendered it ineligible to serve as a billing agent under state law. 

On November 9, 2016, CSC filed motions to dismiss the amended complaints in their entirety. On August 10, 2017, the Court granted in part and denied in part the motions to dismiss, allowing the remaining causes of action to proceed. On January 9, 2018, the Company answered the complaints, and asserted a counterclaim against the State of New York on a theory of contribution and indemnification. On January 30, 2018, the State of New York filed a motion to dismiss the Company’s counterclaim. In a ruling dated September 20, 2018, the Court allowed the Company’s counterclaim for indemnification to proceed with respect to liability for claims not arising under the Federal False Claims Act. The Parties participated in a non-binding mediation on November 29, 2017, but no settlement has been reached to date. Discovery has now commenced. The Company believes that these claims are without merit and intends to continue to defend itself vigorously.

Strauch Fair Labor Standards Act Collective Action: On July 1, 2014, plaintiffs Joseph Strauch, Timothy Colby, Charles Turner, and Vernon Carre filed an action in the U.S. District Court for the District of Connecticut on behalf of themselves and a putative nationwide collective of CSC system administrators, alleging CSC’s failure to properly classify these employees as non-exempt under the federal Fair Labor Standards Act ("FLSA"). Plaintiffs allege similar state-law Rule 23 class claims pursuant to Connecticut and California statutes, including the Connecticut Minimum Wage Act, the California Unfair Competition Law, California Labor Code, California Wage Order No. 4-2001 and the California Private Attorneys General Act. Plaintiffs claim double overtime damages, liquidated damages, pre- and post-judgment interest, civil penalties, and other state-specific remedies.

In 2015 the Court entered an order granting conditional certification under the FLSA of the collective of over 4,000 system administrators, and notice of the right to participate in the FLSA collective action was mailed to the system administrators. Approximately 1,000 system administrators, prior to the announced deadline, filed consents with the Court to participate in the FLSA collective.

On June 30, 2017, the Court granted Rule 23 certification of a Connecticut state-law class and a California state-law class consisting of professional system administrators and associate professional system administrators. Senior professional system administrators were found not to qualify for Rule 23 certification under the state-law claims. On July 14, 2017, the

48
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Company petitioned the Second Circuit Court of Appeals for permission to file an appeal of the Rule 23 decision. That petition was denied on November 21, 2017.

As a result of the Court's findings in its Rule 23 certification order, the parties entered into a stipulation to decertify the senior professional system administrators from the FLSA collective. On August 2, 2017, the Court approved the stipulation, and the FLSA collective action is currently made up of approximately 700 individuals who held the title of associate professional or professional system administrator.

A jury trial commenced on December 11, 2017. On December 20, 2017, the jury returned a verdict in favor of plaintiffs, finding that the Company had misclassified the class of employees as exempt under federal and state laws, and finding that it had done so willfully. In a ruling dated September 21, 2018, the Court denied the Company’s motions for judgment as a matter of law, and for decertification. Further rulings on the scope of damages are pending . The Company disagrees with the verdict and intends to continue to defend itself vigorously, including by appealing the verdict and the final judgment of the Court.

Computer Sciences Corporation v. Eric Pulier, et al.: On May 12, 2015, CSC and its wholly owned subsidiary, ServiceMesh Inc. ("SMI"), filed a civil complaint in the Court of Chancery of the State of Delaware against Eric Pulier, the former CEO of SMI, which had been acquired by CSC on November 15, 2013. Following the acquisition, Mr. Pulier signed a retention agreement with SMI pursuant to which he received a grant of restricted stock units of CSC and agreed to be bound by CSC’s rules and policies, including CSC’s Code of Business Conduct. Mr. Pulier resigned from SMI on April 22, 2015 amid allegations that he had engaged in fraudulent transactions with two employees of the Commonwealth Bank of Australia Ltd. (“CBA”). The original complaint against Mr. Pulier asserted claims for fraud, breach of contract and breach of fiduciary duty. In an amended complaint, CSC named TechAdvisors, LLC and Shareholder Representative Services LLC ("SRS") as additional defendants. In ruling on a motion to dismiss filed by Mr. Pulier, the Court dismissed CSC’s claim for breach of the implied covenant of good faith, but allowed substantially all of the remaining claims to proceed. Mr. Pulier asserted counter-claims for breach of contract, fraud, negligent representation, rescission, and violations of the California Blue Sky securities law. With the exception of the claim for breach of his retention agreement, the Court dismissed in whole or in part each of Mr. Pulier’s counterclaims.

On December 17, 2015, CSC entered into a settlement agreement with the majority of the former equityholders of SMI, as well as with SRS acting in its capacity as the agent and attorney-in-fact for the settling equityholders. Pursuant to the settlement agreement, CSC received  $16.5 million , which amount was equal to the settling equityholders’ pro rata share of the funds remaining in escrow from the transaction, which was recorded as an offset to selling, general and administrative costs in CSC’s statements of operations for the fiscal year ended March 31, 2016. On February 20, 2017, CSC, SRS and the former equityholders of SMI who remain named defendants entered into a partial settlement agreement by which CSC received payment of some of the funds remaining in escrow.

On July 20, 2017, the Court granted a motion by the United States for a 90-day stay of discovery pending the completion of a criminal investigation. On September 27, 2017, a grand jury empaneled by the United States District Court for the Central District of California returned an indictment against Mr. Pulier, charging him with conspiracy, securities and wire fraud, obstruction of justice, and other violations of federal law (United States v. Eric Pulier, CR 17-599-AB). The Government sought an extension of the stay which the Delaware Chancery Court granted on November 3, 2017.

On December 18, 2018, the Government filed an application to dismiss the indictment against Mr. Pulier, and on December 20, 2018, the United States District Court for the Central District of California granted the application and dismissed the indictment with prejudice.

On December 21, 2018, CSC filed a motion to lift the stay in its civil lawsuit against Mr. Pulier in Delaware Chancery Court, and a motion for a temporary restraining order and preliminary injunction preventing Mr. Pulier from dissipating approximately $4.9 million previously seized by the Government in connection with its criminal investigation.

In addition, law enforcement officials in Australia have brought bribery-related charges against the two former CBA employees.  One of these has since pled guilty, and in 2016 received a sentence of imprisonment. In 2016, the United States Attorney’s Office for the Central District of California announced similar criminal charges against this same CBA employee for securities fraud and wire fraud. These criminal charges were dismissed on December 20, 2018. In April

49
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


2018 the other former CBA employee was committed to stand trial in the Australian criminal courts. The Company is cooperating with and assisting the Australian authorities in their investigation.

On February 17, 2016, Mr. Pulier filed a complaint in Delaware Chancery Court against CSC and its subsidiary - CSC Agility Platform, Inc., formerly known as SMI - seeking advancement of his legal fees and costs. On May 12, 2016, the Court ruled that CSC Agility Platform - as the successor to SMI - is liable for advancing  80%  of Mr. Pulier’s fees and costs in the underlying civil action. Mr. Pulier also filed a complaint for advancement of the legal fees and costs incurred in connection with his defense of criminal investigations by the U.S. Government and other entities. On August 7, 2017, the Court ruled substantially in Mr. Pulier's favor. On January 30, 2018, the Court reduced the Company’s advancement obligation to only 80% of the criminal defense fees and costs sought by Mr. Pulier. In undertakings previously provided to SMI, Mr. Pulier agreed to repay all amounts advanced to him if it should ultimately be determined that he is not entitled to indemnification.

Kemper Corporate Services, Inc. v. Computer Sciences Corporation: In October 2015, Kemper Corporate Services, Inc. (“Kemper”) filed a demand for arbitration against CSC with the American Arbitration Association (“AAA”), alleging that CSC breached the terms of a 2009 Master Software License and Services Agreement and related Work Orders (the “Agreement”) by failing to complete a software translation and implementation plan by certain contractual deadlines. Kemper claimed breach of contract, seeking approximately $100 million in damages measured in part by the amount of the fees paid under the contract, as well as pre-judgment interest, and in the alternative claimed rescission of the Agreement. CSC answered the demand for arbitration denying Kemper’s claims and asserting a counterclaim for unpaid invoices for services rendered by CSC.

A single arbitrator conducted an evidentiary hearing on the merits of the claims and counterclaims in April 2017. Oral argument took place on August 28, 2017. On October 2, 2017, the arbitrator issued a partial final award, finding for Kemper on its breach of contract theory, awarding Kemper $84.2 million in compensatory damages plus prejudgment interest, denying Kemper’s claim for rescission as moot, and denying CSC’s counterclaim. Kemper moved on October 10, 2017, in federal district court in Texas to confirm the award. On November 16, 2017, the arbitrator issued a Final Award which reiterated his findings of fact and law, calculated the amount of prejudgment interest, and awarded Kemper its costs of arbitration including reasonable attorneys’ fees and expenses. On December 6, 2017, the Company filed a motion to vacate the award in federal district court in New York. A week later, the New York court stayed the action in deference to the Texas court’s decision as to which venue was more appropriate to address the vacatur arguments. On January 12, 2018, the Company appeared in the Texas action seeking a stay of the confirmation proceedings or a transfer of venue to New York. On March 2, 2018, the Texas court denied the venue transfer motion. The pending vacatur motion was accordingly transferred to the Texas court, and a new memorandum of law in support of the motion was filed in that jurisdiction on March 30, 2018. On August 27, 2018, the Magistrate Judge issued its Report and Recommendation denying the vacatur motion. On September 10, 2018, the Company filed its objections to this report to the United States District Judge who reviews the decision de novo . On September 18, 2018, the District Court summarily accepted the Report and Recommendation without further briefing and entered a Final Judgment in the case. On September 27, 2018, the Company filed a notice of appeal to the Fifth Circuit Court of Appeals. The Company has also paid the portion of the judgment that is uncontested on appeal, and Kemper recorded this partial satisfaction of the judgment on September 26, 2018. On January 16, 2019, the Company filed its opening brief with the Fifth Circuit Court of Appeals. Kemper is expected to file its brief on March 1, 2019, and the Company will file its reply brief on March 29, 2019. No further dates have been set at this time.

The Company disagrees with the decision of the arbitrator and intends to continue to defend itself vigorously. The Company is also pursuing coverage for the full scope of the award, interest, and legal fees and expenses, under the Company's applicable insurance policies.  

Forsyth, et al. v. HP Inc. and Hewlett Packard Enterprise:   This purported class and collective action was filed on August 18, 2016 in the U.S. District Court for the Northern District of California, against HP and HPE alleging violations of the Federal Age Discrimination in Employment Act (“ADEA”), the California Fair Employment and Housing Act, California public policy and the California Business and Professions Code. Former business units of HPE now owned by the Company will be proportionately liable for any recovery by plaintiffs in this matter. Plaintiffs filed an amended complaint on December 19, 2016. Plaintiffs seek to certify a nationwide class action under the ADEA comprised of all U.S. residents employed by defendants who had their employment terminated pursuant to a work force reduction (“WFR”) plan on or

50
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


after December 9, 2014 (deferral states) and April 8, 2015 (non-deferral states), and who were 40 years of age or older at the time of termination. Plaintiffs also seek to represent a Rule 23 class under California law comprised of all persons 40 years or older employed by defendants in the state of California and terminated pursuant to a WFR plan on or after August 18, 2012. On January 30, 2017, defendants filed a partial motion to dismiss and a motion to compel arbitration of claims by certain named and opt-in plaintiffs who had signed releases as part of their WFR packages. On September 20, 2017, the Court denied the partial motion to dismiss without prejudice, but granted defendants’ motions to compel arbitration for those named and opt-in plaintiffs. Accordingly, the Court has stayed the entire action pending arbitration for these individuals, and administratively closed the case. Plaintiffs filed a motion for reconsideration as well as a notice of appeal to the Ninth Circuit (which has been denied as premature). The reconsideration motion was denied without oral argument. In that same decision, the Court held that a joint arbitration was permissible. The Company subsequently sought and obtained leave of Court to file a motion for reconsideration arguing that joint arbitration is not permitted under the relevant employee agreements. The Court denied the motion on April 17, 2018, ruling that interpretation of the employee agreements is an issue delegated to the arbitrator. The American Arbitration Association, which was designated to manage the arbitration process, has selected a single arbitrator to conduct the proceedings. An initial case management conference before the arbitrator was held on June 29, 2018. Pursuant to the release agreements, however, mediation is a precondition to arbitration. A mediation was held on October 4-5, 2018, and a settlement was reached with all 16 named and opt-in plaintiffs who were compelled to arbitrate. Seven of the plaintiffs were aligned to the Company.
A settlement agreement has been signed. The case will continue to proceed in Court, however, with respect to other putative class members. Former business units of the Company now owned by Perspecta will be proportionately liable for any recovery by plaintiffs in this matter.

Oracle America, Inc., et al. v. Hewlett Packard Enterprise Company: On March 22, 2016, Oracle filed a complaint against HPE in the Northern District of California, alleging copyright infringement, interference with contract, intentional interference with prospective economic relations, and unfair competition. The litigation relates in part to former business units of HPE that are now owned by the Company. The Company may be required to indemnify HPE for a portion of any recovery by Oracle in the litigation related to these business units.

Oracle’s claims arise primarily out of HPE’s prior relationship with a third-party maintenance provider named Terix Computer Company, Inc. (“Terix”). Oracle claims that Terix infringed its copyrights while acting as HPE’s subcontractor for certain customers of HPE’s multivendor support business. Oracle claims that HPE is liable for vicarious and contributory infringement arising from the alleged actions of Terix and for direct infringement arising from its own alleged conduct.

On June 14, 2018, the court heard oral argument on the parties’ cross-motions for summary judgment. On January 29, 2019, the court granted HPE’s motion for summary judgment and denied Oracle’s motion for summary judgment, resolving the matter in HPE’s favor. The court’s order is subject to appeal.

City of Warren Police and Fire Retirement System v. DXC Technology Company et al.: On December 27, 2018, a purported class action lawsuit was filed in the United States District Court for the Eastern District of Virginia against the Company and two of its current officers . The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and is premised on allegedly false and/or misleading statements, and alleged non-disclosure of material facts, regarding the Company’s business, operations, prospects and performance during the proposed class period of February 8, 2018 to November 6, 2018.

The Company believes the claims are without merit and intends to vigorously defend all claims asserted.

Voluntary Disclosure of Certain Possible Sanctions Law Violations: On February 2, 2017, CSC submitted an initial notification of voluntary disclosure to the U.S. Department of Treasury, Office of Foreign Assets Control ("OFAC") regarding certain possible violations of U.S. sanctions laws pertaining to insurance premium data and claims data processed by two partially-owned joint ventures of Xchanging, which CSC acquired during the first quarter of fiscal 2017. A copy of the disclosure was also provided to Her Majesty’s Treasury Office of Financial Sanctions Implementation in the United Kingdom. The Company has substantially completed its internal investigation and has requested a meeting with OFAC to report its findings.



51
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


In addition to the matters noted above, the Company is currently subject in the normal course of business to various claims and contingencies arising from, among other things, disputes with customers, vendors, employees, contract counterparties and other parties, as well as securities matters, environmental matters, matters concerning the licensing and use of intellectual property, and inquiries and investigations by regulatory authorities and government agencies. Some of these disputes involve or may involve litigation. The financial statements reflect the treatment of claims and contingencies based on management's view of the expected outcome. DXC consults with outside legal counsel on issues related to litigation and regulatory compliance and seeks input from other experts and advisors with respect to matters in the ordinary course of business. Although the outcome of these and other matters cannot be predicted with certainty, and the impact of the final resolution of these and other matters on the Company’s results of operations in a particular subsequent reporting period could be material and adverse, management does not believe based on information currently available to the Company, that the resolution of any of the matters currently pending against the Company will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due. Unless otherwise noted, the Company is unable to determine at this time a reasonable estimate of a possible loss or range of losses associated with the foregoing disclosed contingent matters.

Note 21 - Reconciliation of Previously Reported Amounts to Recast Financial Statements

As described in Note 2 - " Recent Accounting Pronouncements ," during the first quarter of fiscal 2019, the Company adopted ASU's 2017-07, 2016-18 and 2016-15. The adoption of these standards requires the Company to recast each prior period presented consistent with the new guidance. As described in Note 4 - " Divestitures ," on May 31, 2018, the Company completed the Separation of USPS. As a result, the results of operations and financial position of USPS are reflected in the accompanying statements of operations and balance sheets as discontinued operations and each prior period presented has been recast to present USPS as a discontinued operation.

A reconciliation of the amounts previously reported for the three and nine months ended December 31, 2017 in DXC's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2017 to those as adjusted within the accompanying financial statements is shown in the tables below for selected financial amounts:
Condensed Consolidated Statement of Operations
 
Three Months Ended December 31, 2017
(in millions)
 
As Previously Reported
 
Reclassification of Discontinued Operations
 
Retrospective Adoption of ASU 2017-07
 
As Adjusted
Costs of services (excludes depreciation and amortization and restructuring costs)
 
$
4,521

 
$
(544
)
 
$
74

 
$
4,051

Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)
 
$
475

 
$
(37
)
 
$
9

 
$
447

Other expense (income), net
 
$
8

 
$
—

 
$
(83
)
 
$
(75
)

Condensed Consolidated Statement of Operations
 
Nine Months Ended December 31, 2017
(in millions)
 
As Previously Reported
 
Reclassification of Discontinued Operations
 
Retrospective Adoption of ASU 2017-07
 
As Adjusted
Costs of services (excludes depreciation and amortization and restructuring costs)
 
$
13,621

 
$
(1,589
)
 
$
198

 
$
12,230

Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)
 
$
1,557

 
$
(94
)
 
$
21

 
$
1,484

Other income, net
 
$
(72
)
 
$
—

 
$
(219
)
 
$
(291
)



52
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Condensed Consolidated Statement of Cash Flows
 
Nine Months Ended December 31, 2017
(in millions)
 
As Previously Reported
 
Retrospective Adoption of ASU 2016-15
 
Retrospective Adoption of ASU 2016-18
 
As Adjusted
Decrease (increase) in assets
 
$
167

 
$
(531
)
 
$
(1
)
 
$
(365
)
Net cash provided by operating activities
 
$
2,542

 
$
(531
)
 
$
(1
)
 
$
2,010

Deferred purchase price receivable
 
$
—

 
$
531

 
$
—

 
$
531

Other investing activities, net
 
$
(6
)
 
$
—

 
$
26

 
$
20

Net cash provided by investing activities
 
$
213

 
$
531

 
$
26

 
$
770

Cash and cash equivalents at beginning of year
 
$
1,263

 
$
—

 
$
5

 
$
1,268

Cash and cash equivalents at end of period
 
$
2,926

 
$
—

 
$
30

 
$
2,956



53
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


During the third quarter of fiscal 2019, pursuant to its adoption of ASU 2016-15, the Company determined that it was necessary to change the unit of account used in determining the portions of transferred trade receivables pertaining to operating activities and investing activities from each month's transactional activity to each day’s transactional activity. A reconciliation of amounts previously reported to amounts adjusted for this change are shown in the following tables. See Note 2 - " Recent Accounting Pronouncements " for additional information.

Previously reported amounts in the tables below refer to the Company's Quarterly Reports on Form 10-Q for the three months ended June 30, 2018 filed with the SEC on August 8, 2018 and the six months ended September 30, 2018 filed with the SEC on November 8, 2018.
Condensed Consolidated Statement of Cash Flows
 
Three Months Ended June 30, 2018
(in millions)
 
As Previously Reported
 
Retrospective Adoption of ASU 2016-15
 
As Adjusted
Increase in assets
 
$
(196
)
 
$
(104
)
 
$
(300
)
Net cash provided by operating activities
 
$
473

 
$
(104
)
 
$
369

Deferred purchase price receivable
 
$
33

 
$
104

 
$
137

Net cash used in investing activities
 
$
(284
)
 
$
104

 
$
(180
)
Condensed Consolidated Statement of Cash Flows
 
Six Months Ended September 30, 2018
(in millions)
 
As Previously Reported
 
Retrospective Adoption of ASU 2016-15
 
As Adjusted
Increase in assets
 
$
(447
)
 
$
(36
)
 
$
(483
)
Net cash provided by operating activities
 
$
885

 
$
(36
)
 
$
849

Deferred purchase price receivable
 
$
409

 
$
36

 
$
445

Net cash used in investing activities
 
$
(84
)
 
$
36

 
$
(48
)

Previously reported amounts in the tables below refer to the Company's Quarterly Reports on Form 10-Q for the three months ended June 30, 2017 filed with the SEC on August 9, 2017 and the six months ended September 30, 2017 filed with the SEC on November 8, 2017.
Condensed Consolidated Statement of Cash Flows
 
Three Months Ended June 30, 2017
(in millions)
 
As Previously Reported
 
Retrospective Adoption of ASU 2016-15
 
As Adjusted
Increase in assets
 
$
(27
)
 
$
(155
)
 
$
(182
)
Net cash provided by operating activities
 
$
534

 
$
(155
)
 
$
379

Deferred purchase price receivable
 
$
—

 
$
155

 
$
155

Net cash provided by investing activities
 
$
859

 
$
155

 
$
1,014


54
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued


Condensed Consolidated Statement of Cash Flows
 
Six Months Ended September 30, 2017
(in millions)
 
As Previously Reported
 
Retrospective Adoption of ASU 2016-15
 
Retrospective Adoption of ASU 2016-18
 
As Adjusted
Decrease (increase) in assets
 
$
78

 
$
(339
)
 
$
—

 
$
(261
)
Net cash provided by operating activities
 
$
1,543

 
$
(339
)
 
$
—

 
$
1,204

Deferred purchase price receivable
 
$
—

 
$
339

 
$
—

 
$
339

Other investing activities, net
 
$
(20
)
 
$
—

 
$
26

 
$
6

Net cash provided by investing activities
 
$
437

 
$
339

 
$
26

 
$
802

Cash and cash equivalents at beginning of year
 
$
1,263

 
$
—

 
$
5

 
$
1,268

Cash and cash equivalents at end of period
 
$
2,671

 
$
—

 
$
31

 
$
2,702

 
 
 
 
 
 
 
 
 

Previously reported amounts in the tables below refer to Exhibit 99.1 of the Company's Current Report on Form 8-K filed with the SEC on August 16, 2018.
Unaudited Consolidated Statement of Cash Flows
 
Fiscal Year Ended March 31, 2018
(in millions)
 
As Previously Reported
 
Retrospective Adoption of ASU 2016-15
 
As Adjusted
Decrease (increase) in receivables
 
$
74

 
$
(538
)
 
$
(464
)
Net cash provided by operating activities
 
$
3,105

 
$
(538
)
 
$
2,567

Deferred purchase price receivable
 
$
147

 
$
538

 
$
685

Net cash provided by investing activities
 
$
181

 
$
538

 
$
719

Unaudited Consolidated Statement of Cash Flows
 
Fiscal Year Ended March 31, 2017
(in millions)
 
As Previously Reported
 
Retrospective Adoption of ASU 2016-15
 
As Adjusted
Decrease (increase) in receivables
 
$
193

 
$
(218
)
 
$
(25
)
Net cash provided by operating activities
 
$
837

 
$
(218
)
 
$
619

Deferred purchase price receivable
 
$
141

 
$
218

 
$
359

Net cash used in investing activities
 
$
(783
)
 
$
218

 
$
(565
)

The adoption of ASU 2016-15 did not impact the Company's statement of cash flows for the fiscal year ended April 1, 2016.

55
DXC TECHNOLOGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - continued



Note 22 - Subsequent Events

On January 7, 2019 DXC and Luxoft Holding, Inc ("Luxoft") announced a definitive agreement for DXC to acquire Luxoft, a global-scale digital innovator providing digital strategy consulting and engineering services for companies across North America, Europe and the Asia Pacific region. Pursuant to the agreement between DXC and Luxoft, all of the issued and outstanding Luxoft Class A and Class B ordinary shares will receive $59.00 per share in cash, representing a total equity value of approximately $2 billion . Closing of the transaction is anticipated by June 2019, subject to regulatory and other approvals.




56

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

All statements and assumptions contained in this Quarterly Report on Form 10-Q and in the documents incorporated by reference that do not directly and exclusively relate to historical facts constitute “forward-looking statements.” Forward-looking statements often include words such as “anticipates,” “believes,” “estimates,” “expects,” “forecast,” “goal,” “intends,” “objective,” “plans,” “projects,” “strategy,” “target,” and “will” and words and terms of similar substance in discussions of future operating or financial performance. These statements represent current expectations and beliefs, and no assurance can be given that the results described in such statements will be achieved.

Forward-looking statements include, among other things, statements with respect to our financial condition, results of operations, cash flows, business strategies, operating efficiencies or synergies, competitive position, growth opportunities, plans and objectives of management and other matters. Such statements are subject to numerous assumptions, risks, uncertainties and other factors that could cause actual results to differ materially from those described in such statements, many of which are outside of our control. Important factors that could cause actual results to differ materially from those described in forward-looking statements include, but are not limited to:

•
the integration of CSC's and HPES's businesses, operations, and culture and the ability to operate as effectively and efficiently as expected, and the combined company's ability to successfully manage and integrate acquisitions generally;
•
the ability to realize the synergies and benefits expected to result from the HPES Merger within the anticipated time frame or in the anticipated amounts;
•
other risks related to the HPES Merger including anticipated tax treatment, unforeseen liabilities, and future capital expenditures;
•
the USPS Separation and Mergers may result in disruptions to relationships with customers and other business partners or may not achieve the intended results;
•
the USPS Separation and Mergers could result in substantial tax liability to DXC and our stockholders;
•
changes in governmental regulations or the adoption of new laws or regulations that may make it more difficult or expensive to operate our business;
•
changes in senior management, the loss of key employees or the ability to retain and hire key personnel and maintain relationships with key business partners;
•
business interruptions in connection with our technology systems;
•
the competitive pressures faced by our business;
•
the effects of macroeconomic and geopolitical trends and events;
•
the need to manage third-party suppliers and the effective distribution and delivery of our products and services;
•
the protection of our intellectual property assets, including intellectual property licensed from third parties;
•
the risks associated with international operations;
•
the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends;
•
the execution and performance of contracts by us and our suppliers, customers, clients and partners;
•
the resolution of pending investigations, claims and disputes;
•
risks relating to the respective abilities of the parties to the Luxoft Acquisition to satisfy the conditions to, and to otherwise consummate, the Luxoft Acquisition and to achieve the expected results therefrom; and
•
the other factors described in Part I Item 1A "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2018 and in Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarterly periods ended June 30 and September 30, 2018 .

No assurance can be given that any goal or plan set forth in any forward-looking statement can or will be achieved, and readers are cautioned not to place undue reliance on such statements which speak only as of the date they are made. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events, except as required by law.


57

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The purpose of the MD&A is to present information that management believes is relevant to an assessment and understanding of DXC's results of operations and cash flows for the three and nine months ended December 31, 2018 . The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and accompanying notes. The use of "we," "our" and "us" refers to DXC and its consolidated subsidiaries.

The MD&A is organized into the following sections:
•
Background
•
Segments and Services
•
Results of Operations
•
Liquidity and Capital Resources
•
Off-Balance Sheet Arrangements
•
Contractual Obligations
•
Critical Accounting Policies and Estimates

Background

DXC is a world leading independent, end-to-end IT services company, serving nearly 6,000 private and public sector clients from a diverse array of industries across 70 countries. Our technology independence, global talent and extensive partner network deliver transformative digital offerings and solutions that help clients harness the power of innovation to thrive on change.

We generate revenue by offering a wide range of information technology services and solutions primarily in North America, Europe, Asia and Australia. We operate through two segments: GBS and GIS. We market and sell our services directly to clients through our direct sales force operating out of sales offices around the world. Our clients include commercial businesses of many sizes and in many industries and public sector enterprises.

Separation of USPS

On May 31, 2018, we completed the Separation of USPS, and combination with Vencore Holding Corp. and KeyPoint Government Solutions to form Perspecta, an independent public company. As a result of the Separation, the statements of operations, balances sheets, and related financial information reflect USPS's operations, assets and liabilities as discontinued operations for all periods presented. The cash flows of USPS have not been segregated and are included in the statements of cash flows for all periods presented.


58

Segments and Services

Our reportable segments are GBS and GIS. Segment information is included in Note 19 - " Segment Information " to our financial statements. For a discussion of risks associated with our foreign operations, see Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2018.

Global Business Services

GBS provides innovative technology solutions that help our clients address key business challenges and accelerate digital transformations tailored to each client’s industry and specific objectives. GBS offerings include:

•
Enterprise, Cloud Applications and Consulting. We provide industry, business process systems integration and technical delivery experience to maximize value from enterprise application portfolios. We also help clients accelerate their digital transformations and business results with industry, business, technology and complex integration services.
•
Application Services. Our comprehensive services help clients modernize, develop, test and manage their applications.
•
Analytics. Our portfolio of analytics services and robust partner ecosystem helps clients gain rapid insights and accelerate their digital transformation journeys.
•
Business Process Services. We provide seamless digital integration and optimization of front and back office processes, including our Agile Process Automation approach.
•
Industry Software and Solutions. Our industry-specific solutions enable businesses to quickly integrate technology, transform their operations and develop new ways of doing business. Our vertical-specific IP includes insurance, healthcare and life sciences, travel and transportation, and banking and capital markets solutions.

Global Infrastructure Services

GIS provides a portfolio of offerings that deliver predictable outcomes and measurable results, while reducing business risk and operational costs for clients. GIS offerings include:

•
Cloud and Platform Services. We help clients maximize their private cloud, public cloud and legacy infrastructures, as well as securely manage their hybrid environments.
•
Workplace and Mobility . Our workplace, mobility and Internet of Things ("IoT") services provide a consumer-like experience with enterprise security and instant connectivity for our clients.
•
Security. Our security solutions help predict attacks, proactively respond to threats, ensure compliance and protect data, applications, infrastructure and endpoints.



59

Results of Operations

The following table calculates the period-over-period changes in the statements of operations:
 
 
Three Months Ended
(In millions, except per-share amounts)
 
December 31, 2018
 
December 31, 2017
 
Change
 
Percentage Change
Revenues
 
$
5,178

 
$
5,460

 
$
(282
)
 
(5.2
)%
Total costs and expenses
 
4,709

 
5,119

 
(410
)
 
(8.0
)%
Income from continuing operations before income taxes
 
469

 
341

 
128

 
37.5
 %
Income tax expense (benefit)
 
3

 
(365
)
 
368

 
(100.8
)%
Income from continuing operations
 
466

 
706

 
(240
)
 
(34.0
)%
Income from discontinued operations, net of taxes
 
—

 
73

 
(73
)
 
(100.0
)%
Net income
 
$
466

 
$
779

 
$
(313
)
 
(40.2
)%
 
 
 
 
 
 
 
 
 
Diluted earnings per share from continuing operations
 
$
1.66

 
$
2.43

 
$
(0.77
)
 
(31.7
)%

 
 
Nine Months Ended
(In millions, except per-share amounts)
 
December 31, 2018
 
December 31, 2017
 
Change
 
Percentage Change
Revenues
 
$
15,473

 
$
16,149

 
$
(676
)
 
(4.2
)%
Total costs and expenses
 
14,312

 
15,433

 
(1,121
)
 
(7.3
)%
Income from continuing operations before income taxes
 
1,161

 
716

 
445

 
62.2
 %
Income tax expense (benefit)
 
205

 
(303
)
 
508

 
(167.7
)%
Income from continuing operations
 
956

 
1,019

 
(63
)
 
(6.2
)%
Income from discontinued operations, net of taxes
 
35

 
198

 
(163
)
 
(82.3
)%
Net income
 
$
991

 
$
1,217

 
$
(226
)
 
(18.6
)%
 
 
 
 
 
 
 
 
 
Diluted earnings per share from continuing operations
 
$
3.33

 
$
3.43

 
$
(0.10
)
 
(2.9
)%


Fiscal 2019 Highlights

Financial highlights for the third quarter and first nine months of fiscal 2019 include the following:

•
Revenues for the third quarter and first nine months of fiscal 2019 were $5.2 billion and $15.5 billion , respectively, a decrease of 5.2% and 4.2% , respectively, as compared to same periods of the prior fiscal year.
•
Income from continuing operations and diluted EPS from continuing operations for the third quarter of fiscal 2019 were $466 million and $1.66 , respectively, including the cumulative impact of certain items of $160 million , reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets and a tax adjustment related to U.S. tax reform. This compares with income from continuing operations and diluted EPS from continuing operations of $706 million and $2.43 , respectively, for the same period of the prior fiscal year.
•
Income from continuing operations and diluted EPS from continuing operations for the first nine months of fiscal 2019 were $956 million and $3.33 , respectively, including the cumulative impact of certain items of $807 million , reflecting restructuring costs, transaction, separation and integration-related costs, amortization of acquired intangible assets and a tax adjustment related to U.S. tax reform. This compares with income from continuing operations and diluted EPS from continuing operations of $1,019 million and $3.43 , respectively, for the same period of the prior fiscal year.
•
Our cash and cash equivalents decreased to $2.5 billion as of December 31, 2018 from $2.6 billion as of March 31, 2018.

60

•
Net cash provided by operating activities was $1,035 million during the first nine months of fiscal 2019, as compared to $2,010 million during the first nine months of fiscal 2018.
•
We returned $1,407 million to shareholders in the form of common stock dividends and share repurchases during the first nine months of fiscal 2019, as compared to $189 million during the first nine months of fiscal 2018.


61

Revenues

Our revenues for the third quarter and first nine months of fiscal 2019 and fiscal 2018 were as follows:
 
 
Three Months Ended
 
 
 
 
(in millions)
 
December 31, 2018
 
December 31, 2017
 
Change
 
Percentage Change
GBS
 
$
2,169

 
$
2,315

 
$
(146
)
 
(6.3
)%
GIS
 
3,009

 
3,145

 
(136
)
 
(4.3
)%
Total Revenues
 
$
5,178

 
$
5,460

 
$
(282
)
 
(5.2
)%

 
 
Nine Months Ended
 
 
 
 
(in millions)
 
December 31, 2018
 
December 31, 2017
 
Change
 
Percentage Change
GBS
 
$
6,493

 
$
6,893

 
$
(400
)
 
(5.8
)%
GIS
 
8,980

 
9,256

 
(276
)
 
(3.0
)%
Total Revenues
 
$
15,473

 
$
16,149

 
$
(676
)
 
(4.2
)%

During the third quarter and first nine months of fiscal 2019 and fiscal 2018, the distribution of our revenues across geographies was as follows:

CHART-AA3C43BFDB4F5601AE1A06.JPG


62

CHART-688E9387087F5EF3B2EA06.JPG
As a global company, approximately 63% of our revenues for the first nine months of fiscal 2019 were earned internationally. As a result, the comparison of revenues denominated in currencies other than the U.S. dollar from period to period is impacted, and we expect will continue to be impacted by fluctuations in foreign currency exchange rates. Constant currency revenues are a non-GAAP measure calculated by translating current period activity into U.S. dollars using the comparable prior period’s currency conversion rates. This information is consistent with how management views our revenues and evaluates our operating performance and trends. The table below summarizes our constant currency revenues:
 
 
Three Months Ended
 
 
 
 
(in millions)
 
Constant Currency December 31, 2018
 
December 31, 2017
 
Change
 
Percentage Change
GBS
 
$
2,222

 
$
2,315

 
$
(93
)
 
(4.0
)%
GIS
 
3,098

 
3,145

 
(47
)
 
(1.5
)%
Total
 
$
5,320

 
$
5,460

 
$
(140
)
 
(2.6
)%

 
 
Nine Months Ended
 
 
 
 
(in millions)
 
Constant Currency December 31, 2018
 
December 31, 2017
 
Change
 
Percentage Change
GBS
 
$
6,536

 
$
6,893

 
$
(357
)
 
(5.2
)%
GIS
 
9,038

 
9,256

 
(218
)
 
(2.4
)%
Total
 
$
15,574

 
$
16,149

 
$
(575
)
 
(3.6
)%

63



Our revenues were $5,178 million in the third quarter of fiscal 2019, a decrease of 5.2% compared to the third quarter of fiscal 2018. Revenues for the third quarter of fiscal 2019 included an unfavorable foreign currency exchange rate impact of 2.6% , primarily driven by the strengthening of the U.S. dollar in the majority of our international markets.

Our revenues were $15,473 million in the first nine months of fiscal 2019, a decrease of 4.2% compared to the first nine months of fiscal 2018. Revenues for the first nine months of fiscal 2019 included an unfavorable foreign currency exchange rate impact of 0.6% , primarily driven by the strengthening of the U.S. dollar against the Euro and British Pound.

Global Business Services

GBS revenue was  $2,169 million in the third quarter and $6,493 million  in the first nine months of fiscal 2019, a decrease of 6.3% and 5.8% , respectively, compared to the corresponding periods in fiscal 2018. GBS revenue in constant currency decreased 4.0% and 5.2% in the third quarter and first nine months of fiscal 2019, respectively, as compared to the corresponding periods in fiscal 2018. The decrease in GBS revenue in fiscal 2019 periods reflects a decline in the traditional application maintenance and management business. This was partially offset by growth in our enterprise and cloud applications business.

For the third quarter and first nine months of fiscal 2019, GBS contract awards were $2.3 billion and $6.5 billion , respectively, compared to $3.3 billion and $8.1 billion in the corresponding periods of fiscal 2018.

Global Infrastructure Services

GIS revenue was  $3,009 million in the third quarter and $8,980 million  in the first nine months of fiscal 2019, a decrease of 4.3% and 3.0% , respectively, compared to the corresponding periods in fiscal 2018. GIS revenue in constant currency decreased 1.5% and 2.4% in the third quarter and first nine months of fiscal 2019, respectively, as compared to the corresponding periods in fiscal 2018. The decrease in GIS revenue in fiscal 2019 periods reflects the completion of several large transformation projects and the ongoing decline in legacy infrastructure services.

For the third quarter and first nine months of fiscal 2019, GIS contract awards were $3.4 billion and $8.5 billion , respectively, compared to $2.2 billion and $8.8 billion in the corresponding periods of fiscal 2018.


64

Costs and Expenses

Our total costs and expenses are shown in the tables below:
 
 
Three Months Ended
 
 
 
 
Amount
Percentage of Revenues
 
Percentage of Revenue Change
(in millions)
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
 
Costs of services (excludes depreciation and amortization and restructuring costs)
 
$
3,725

 
$
4,051

 
71.8
 %
 
74.3
 %
 
(2.5
)%
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)
 
491

 
447

 
9.5

 
8.2

 
1.3

Depreciation and amortization
 
508

 
440

 
9.8

 
8.1

 
1.7

Restructuring costs
 
76

 
210

 
1.5

 
3.8

 
(2.3
)
Interest expense
 
81

 
73

 
1.6

 
1.3

 
0.3

Interest income
 
(27
)
 
(27
)
 
(0.5
)
 
(0.5
)
 
—

Other income, net
 
(145
)
 
(75
)
 
(2.8
)
 
(1.4
)
 
(1.4
)
Total costs and expenses
 
$
4,709

 
$
5,119

 
90.9
 %
 
93.8
 %
 
(2.9
)%

 
 
Nine Months Ended
 
 
 
 
Amount
Percentage of Revenues
 
Percentage of Revenue Change
(in millions)
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
 
Costs of services (excludes depreciation and amortization and restructuring costs)
 
$
11,110

 
$
12,230

 
71.8
 %
 
75.8
 %
 
(4.0
)%
Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)
 
1,500

 
1,484

 
9.7

 
9.2

 
0.5

Depreciation and amortization
 
1,463

 
1,264

 
9.5

 
7.8

 
1.7

Restructuring costs
 
418

 
585

 
2.7

 
3.6

 
(0.9
)
Interest expense
 
249

 
220

 
1.6

 
1.4

 
0.2

Interest income
 
(92
)
 
(59
)
 
(0.6
)
 
(0.4
)
 
(0.2
)
Other income, net
 
(336
)
 
(291
)
 
(2.2
)
 
(1.8
)
 
(0.4
)
Total costs and expenses
 
$
14,312

 
$
15,433

 
92.5
 %
 
95.6
 %
 
(3.1
)%

The 2.9% and 3.1% improvement in costs and expenses as a percentage of revenue for the third quarter and first nine months of fiscal 2019, respectively, reflects continued execution of our major synergy initiatives, including workforce optimization, supply chain efficiencies and rationalization of our real estate footprint.

Costs of Services

Cost of services, excluding depreciation and amortization and restructuring costs ("COS"), was $3.7 billion and $11.1 billion for the third quarter and first nine months of fiscal 2019, respectively. COS decreased $0.3 billion and $1.1 billion , or 2.5% and 4.0% as a percentage of revenue, during the third quarter and first nine months of fiscal 2019, respectively, as compared to the same periods of the prior fiscal year. These decreases were driven by headcount reduction and procurement efficiencies. Employee labor costs, as a percentage of revenue, decreased in both segments and across our geographic regions, year-over-year.


65

Selling, General, and Administrative

Selling, general, and administrative expense, excluding depreciation and amortization and restructuring costs ("SG&A"), was $491 million and $1,500 million for the third quarter and first nine months of fiscal 2019, respectively. The $44 million increase in SG&A in the third quarter reflects the increase in transaction, separation and integration-related costs and the impact of our fiscal 2019 acquisitions. SG&A expense as a percentage of revenue for the first nine months of fiscal 2019 was consistent on a year-over-year basis.

Transaction, separation and integration-related costs of $107 million and $305 million were included in SG&A for the third quarter and first nine months of fiscal 2019, respectively, as compared to $83 million and $273 million for the comparable periods of the prior fiscal year.

Depreciation and Amortization

Depreciation expense increased $43 million and amortization expense increased $25 million for the third quarter of fiscal 2019, compared to the third quarter fiscal 2018. For the first nine months of fiscal 2019, depreciation expense increased $78 million and amortization expense increased $121 million compared to the first nine months of fiscal 2018.

The increase in depreciation expense for the third quarter and first nine months of fiscal 2019 was due to an increase in depreciable assets as of December 31, 2018 as compared to the same period in the prior fiscal year.

The increase in amortization expense for the third quarter and first nine months of fiscal 2019 was primarily due to the acceleration of amortization related to transition and transformation contract costs and an increase in software as compared to the first nine months of fiscal 2019.

Restructuring Costs

During fiscal 2019, management approved global cost savings initiatives designed to better align our organizational structure with our strategic initiatives and continue the integration of HPES and other acquisitions. During the third quarter and the first nine months of fiscal 2019, restructuring costs, net of reversals, were $76 million and $418 million , respectively, as compared to $210 million and $585 million during the same periods of the prior fiscal year.

For an analysis of changes in our restructuring liabilities by restructuring plan, see Note 13 - " Restructuring Costs ."

Interest Expense and Interest Income

Interest expense in the third quarter and first nine months of fiscal 2019 increased  $8 million and $29 million , respectively, over the same periods in the prior fiscal year. The increase in interest expense was primarily due to our cross currency cash pool arrangements and is offset by interest income resulting from those arrangements.

Interest income in the third quarter and first nine months of fiscal 2019 increased $0 million and $33 million , respectively, over the same periods in the prior fiscal year. The year-over-year increase in interest income was due to an increase in cash balances in countries with higher interest rates.

Other Income, Net

Other income, net, which includes non-service cost components of net periodic pension income, movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, equity earnings of unconsolidated affiliates, gain on sale of non-operating assets and other miscellaneous gains and losses increased $70 million year-over-year for the third quarter of fiscal 2019. The increase was driven primarily by a gain on sale of non-operating assets.

The $45 million increase in other income, net for the first nine months of fiscal 2019, as compared to the same period of fiscal 2018, was due primarily to a gain on sale of non-operating assets. This gain was partially offset by a year-over-year unfavorable foreign currency impact of $101 million resulting primarily from the change in the functional currency of a European holding company during the first nine months of fiscal 2018, which was not present in the current fiscal year.


66

Taxes

Our income tax expense (benefit) was $3 million and $(365) million for the three months ended December 31, 2018 and December 31, 2017 , respectively, and $205 million and $(303) million for the nine months ended December 31, 2018 and December 31, 2017 , respectively. For the three months ended December 31, 2018 , the primary drivers of the ETR were the global mix of income, the net decrease in valuation allowances on certain foreign deferred tax assets, and the decrease in transition tax liability. For the nine months ended December 31, 2018 , the primary drivers of the ETR were the global mix of income, the net decrease in valuation allowances on certain foreign deferred tax assets, the decrease in transition tax liability, the filing of the October 31, 2017 U.S. federal tax return and the impact of U.S. proposed regulations on the ability to claim certain foreign tax credits. For the three and nine months ended December 31, 2017 , the primary drivers of the effective tax rate ("ETR") were the remeasurement of deferred tax assets and liabilities as a result of the Act, the remeasurement of a deferred tax liability relating to the outside basis difference of HPES foreign subsidiaries, the accrual of a one-time transition tax on estimated unremitted foreign earnings and India dividend distribution tax (DDT) accrual on historic earnings and taxes.
 
Income tax expense associated with discontinued operations was $0 million and $24 million for the three months ended December 31, 2018 and December 31, 2017 , respectively. Income tax expense associated with discontinued operations was $18 million and $96 million for the nine months ended December 31, 2018 and December 31, 2017 , respectively. The primary driver of the variance in the tax expense for these periods was the difference in income before tax for the respective periods.

Income from Discontinued Operations

Income from discontinued operations reflects the net income generated by USPS. As the Separation occurred on May 31, 2018, there are only two months of USPS results included in the first nine months of fiscal 2019.

Earnings per Share

Diluted EPS from continuing operations for the third quarter and first nine months of fiscal 2019 decreased $0.77 and $0.10 , respectively, from the same periods in the prior fiscal year. This decrease reflects a decrease of $240 million and $63 million in income from continuing operations for the third quarter and first nine months of fiscal 2019, respectively, over the same periods in the prior fiscal year.

Diluted EPS from continuing operations for the third quarter of fiscal 2019 includes  $0.21  per share of restructuring costs,  $0.29  per share of transaction, separation and integration-related costs,  $0.35  per share of amortization of acquired intangible assets and $(0.28) per share of tax adjustment related to U.S. tax reform.

Diluted EPS from continuing operations for the first nine months of fiscal 2019 includes $1.12 per share of restructuring costs,  $0.82  per share of transaction, separation and integration-related costs,  $1.05  per share of amortization of acquired intangible assets and $(0.15) per share of tax adjustment related to U.S. tax reform.


67

Non-GAAP Financial Measures

We present non-GAAP financial measures of performance which are derived from the statements of operations of DXC. These non-GAAP financial measures include earnings before interest and taxes ("EBIT"), adjusted EBIT, non-GAAP income before income taxes, non-GAAP net income and non-GAAP EPS, constant currency revenues and net debt-to-total capitalization.

We present these non-GAAP financial measures to provide investors with meaningful supplemental financial information, in addition to the financial information presented on a GAAP basis. Non-GAAP financial measures exclude certain items from GAAP results which DXC management believes are not indicative of core operating performance. DXC management believes these non-GAAP measures allow investors to better understand the financial performance of DXC exclusive of the impacts of corporate-wide strategic decisions. DXC management believes that adjusting for these items provides investors with additional measures to evaluate the financial performance of our core business operations on a comparable basis from period to period. DXC management believes the non-GAAP measures provided are also considered important measures by financial analysts covering DXC, as equity research analysts continue to publish estimates and research notes based on our non-GAAP commentary, including our guidance around non-GAAP EPS.

There are limitations to the use of the non-GAAP financial measures presented in this report. One of the limitations is that they do not reflect complete financial results. We compensate for this limitation by providing a reconciliation between our non-GAAP financial measures and the respective most directly comparable financial measure calculated and presented in accordance with GAAP. Additionally, other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes between companies.

Non-GAAP financial measures and the respective most directly comparable financial measures calculated and presented in accordance with GAAP include:
 
 
Three Months Ended
 
 
 
 
(in millions)
 
December 31, 2018
 
December 31, 2017
 
Change
 
Percentage Change
Income from continuing operations before income taxes
 
$
469

 
$
341

 
$
128

 
37.5
 %
Non-GAAP income from continuing operations before income taxes
 
$
786

 
$
751

 
$
35

 
4.7
 %
Net income

 
$
466

 
$
779

 
$
(313
)
 
(40.2
)%
Adjusted EBIT
 
$
840

 
$
797

 
$
43

 
5.4
 %

 
 
Nine Months Ended
 
 
 
 
(in millions)
 
December 31, 2018
 
December 31, 2017
 
Change
 
Percentage Change
Income from continuing operations before income taxes
 
$
1,161

 
$
716

 
$
445

 
62.2
 %
Non-GAAP income from continuing operations before income taxes
 
$
2,285

 
$
1,946

 
$
339

 
17.4
 %
Net income

 
$
991

 
$
1,217

 
$
(226
)
 
(18.6
)%
Adjusted EBIT
 
$
2,442

 
$
2,107

 
$
335

 
15.9
 %


Reconciliation of Non-GAAP Financial Measures

Our non-GAAP adjustments include:
•
Restructuring - reflects costs, net of reversals, related to workforce optimization and real estate charges.
•
Transaction, separation and integration-related costs - reflects costs related to integration planning, financing and advisory fees associated with the HPES Merger and other acquisitions and costs related to the separation of USPS.

68

•
Amortization of acquired intangible assets - reflects amortization of intangible assets acquired through business combinations.
•
Tax adjustment - reflects the estimated non-recurring benefit of the Tax Cuts and Jobs Act of 2017 for fiscal 2019,
and the application of an approximate 28% tax rate for fiscal 2018, which is within the targeted effective tax rate range for the prior year.

A reconciliation of reported results to non-GAAP results is as follows:
 
 
Three Months Ended December 31, 2018
(in millions, except per-share amounts)
 
As Reported
 
Restructuring Costs
 
Transaction, Separation and Integration-Related Costs
 
Amortization of Acquired Intangible Assets
 
Tax Adjustment
 
Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)
 
$
3,725

 
$
—

 
$
—

 
$
—

 
$
—

 
$
3,725

Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)
 
491

 
—

 
(107
)
 
—

 
—

 
384

Income from continuing operations before income taxes
 
469

 
76

 
107

 
134

 
—

 
786

Income tax expense
 
3

 
18

 
26

 
36

 
77

 
160

Income from continuing operations
 
466

 
58

 
81

 
98

 
(77
)
 
626

Income from discontinued operations, net of tax
 
—

 
—

 
—

 
—

 
—

 
—

Net income
 
466

 
58

 
81

 
98

 
(77
)
 
626

Less: net income attributable to non-controlling interest, net of tax
 
4

 
—

 
—

 
—

 
—

 
4

Net income attributable to DXC common stockholders
 
$
462

 
$
58

 
$
81

 
$
98

 
$
(77
)
 
$
622

 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
0.6
%
 
 
 
 
 
 
 
 
 
20.4
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS from continuing operations
 
$
1.68

 
$
0.21

 
$
0.29

 
$
0.36

 
$
(0.28
)
 
$
2.26

Diluted EPS from continuing operations
 
$
1.66

 
$
0.21

 
$
0.29

 
$
0.35

 
$
(0.28
)
 
$
2.23

 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS
 
275.66

 
275.66

 
275.66

 
275.66

 
275.66

 
275.66

Diluted EPS
 
278.99

 
278.99

 
278.99

 
278.99

 
278.99

 
278.99



69

 
 
Nine Months Ended December 31, 2018
(in millions, except per-share amounts)
 
As Reported
 
Restructuring Costs
 
Transaction, Separation and Integration-Related Costs
 
Amortization of Acquired Intangible Assets
 
Tax Adjustment
 
Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)
 
$
11,110

 
$
—

 
$
—

 
$
—

 
$
—

 
$
11,110

Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)
 
1,500

 
—

 
(305
)
 
—

 
—

 
$
1,195

Income from continuing operations before income taxes
 
1,161

 
418

 
305

 
401

 
—

 
2,285

Income tax expense
 
205

 
100

 
72

 
101

 
44

 
522

Income from continuing operations
 
956

 
318

 
233

 
300

 
(44
)
 
1,763

Income from discontinued operations, net of tax
 
35

 
—

 
—

 
—

 
—

 
35

Net income
 
991

 
318

 
233

 
300

 
(44
)
 
1,798

Less: net income attributable to non-controlling interest, net of tax
 
8

 
—

 
—

 
—

 
—

 
8

Net income attributable to DXC common stockholders
 
$
983

 
$
318

 
$
233

 
$
300

 
$
(44
)
 
$
1,790

 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
17.7
%
 
 
 
 
 
 
 
 
 
22.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS from continuing operations
 
$
3.38

 
$
1.13

 
$
0.83

 
$
1.07

 
$
(0.16
)
 
$
6.26

Diluted EPS from continuing operations
 
$
3.33

 
$
1.12

 
$
0.82

 
$
1.05

 
$
(0.15
)
 
$
6.16

 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS
 
280.47

 
280.47

 
280.47

 
280.47

 
280.47

 
280.47

Diluted EPS
 
284.70

 
284.70

 
284.70

 
284.70

 
284.70

 
284.70



70

 
 
Three Months Ended December 31, 2017
(in millions, except per-share amounts)
 
As Reported
 
Restructuring Costs
 
Transaction, Separation and Integration-Related Costs
 
Amortization of Acquired Intangible Assets
 
Pension and OPEB Actuarial and Settlement Gains
 
Tax Adjustment
 
Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)
 
$
4,051

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
4,051

Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)
 
447

 
—

 
(83
)
 
—

 
—

 
—

 
$
364

Income from continuing operations before income taxes
 
341

 
210

 
83

 
134

 
(17
)
 
—

 
751

Income tax (benefit) expense
 
(365
)
 
—

 
—

 
—

 
—

 
575

 
210

Income from continuing operations
 
706

 
210

 
83

 
134

 
(17
)
 
(575
)
 
541

Income from discontinued operations, net of tax
 
73

 
—

 
—

 
—

 
—

 
—

 
73

Net income
 
779

 
210

 
83

 
134

 
(17
)
 
(575
)
 
614

Less: net income attributable to non-controlling interest, net of tax
 
3

 
 
 
 
 
—

 
—

 
—

 
3

Net income attributable to DXC common stockholders
 
$
776

 
$
210

 
$
83

 
$
134

 
$
(17
)
 
$
(575
)
 
$
611

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
(107.0
)%
 
 
 
 
 
 
 
 
 
 
 
28.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS from continuing operations
 
$
2.46

 
$
0.74

 
$
0.29

 
$
0.47

 
$
(0.06
)
 
$
(2.01
)
 
$
1.89

Diluted EPS from continuing operations
 
$
2.43

 
$
0.72

 
$
0.29

 
$
0.46

 
$
(0.06
)
 
$
(1.98
)
 
$
1.86

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS
 
285.38

 
285.38

 
285.38

 
285.38

 
285.38

 
285.38

 
285.38

Diluted EPS
 
289.77

 
289.77

 
289.77

 
289.77

 
289.77

 
289.77

 
289.77



71

 
 
Nine Months Ended December 31, 2017
(in millions, except per-share amounts)
 
As Reported
 
Restructuring Costs
 
Transaction, Separation and Integration-Related Costs
 
Amortization of Acquired Intangible Assets
 
Pension and OPEB Actuarial and Settlement Gains
 
Tax Adjustment
 
Non-GAAP Results
Costs of services (excludes depreciation and amortization and restructuring costs)
 
$
12,230

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
12,230

Selling, general, and administrative (excludes depreciation and amortization and restructuring costs)
 
1,484

 
—

 
(273
)
 
—

 
—

 
—

 
1,211

Income from continuing operations before income taxes
 
716

 
585

 
273

 
389

 
(17
)
 
—

 
1,946

Income tax (benefit) expense
 
(303
)
 
—

 
—

 
—

 
—

 
847

 
544

Income from continuing operations
 
1,019

 
585

 
273

 
389

 
(17
)
 
(847
)
 
1,402

Income from discontinued operations, net of tax
 
198

 
—

 
—

 
—

 
—

 
—

 
198

Net income
 
1,217

 
585

 
273

 
389

 
(17
)
 
(847
)
 
1,600

Less: net income attributable to non-controlling interest, net of tax
 
26

 
—

 
—

 
—

 
—

 
—

 
26

Net income attributable to DXC common stockholders
 
$
1,191

 
$
585

 
$
273

 
$
389

 
$
(17
)
 
$
(847
)
 
$
1,574

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
(42.3
)%
 
 
 
 
 
 
 
 
 
 
 
28.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS from continuing operations
 
$
3.48

 
$
2.05

 
$
0.96

 
$
1.37

 
$
(0.06
)
 
$
(2.98
)
 
$
4.83

Diluted EPS from continuing operations
 
$
3.43

 
$
2.02

 
$
0.94

 
$
1.34

 
$
(0.06
)
 
$
(2.93
)
 
$
4.75

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding for:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic EPS
 
284.70

 
284.70

 
284.70

 
284.70

 
284.70

 
284.70

 
284.70

Diluted EPS
 
289.53

 
289.53

 
289.53

 
289.53

 
289.53

 
289.53

 
289.53




A reconciliation of net income to adjusted EBIT is as follows:
 
 
Three Months Ended
 
Nine Months Ended
(in millions)
 
December 31, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
Net income
 
$
466

 
$
779

 
$
991

 
$
1,217

Income from discontinued operations, net of taxes
 
—

 
(73
)
 
(35
)
 
(198
)
Income tax expense (benefit)
 
3

 
(365
)
 
205

 
(303
)
Interest income
 
(27
)
 
(27
)
 
(92
)
 
(59
)
Interest expense
 
81

 
73

 
249

 
220

EBIT
 
523

 
387

 
1,318

 
877

Restructuring costs
 
76

 
210

 
418

 
585

Transaction, separation and integration-related costs
 
107

 
83

 
305

 
273

Amortization of acquired intangible assets
 
134

 
134

 
401

 
389

Pension and OPEB actuarial and settlement gains
 
—

 
(17
)
 
—

 
(17
)
Adjusted EBIT
 
$
840

 
$
797

 
$
2,442

 
$
2,107



72

Liquidity and Capital Resources

Cash and Cash Equivalents and Cash Flows

As of December 31, 2018 , our cash and cash equivalents were $2.5 billion , of which $1.0 billion was held outside of the U.S. A substantial portion of funds can be returned to the U.S. from funds advanced previously to finance our foreign acquisition initiatives. As a result of the Tax Cuts and Jobs Act of 2017, and after the mandatory one-time income inclusion (deemed repatriation) of the historically untaxed earnings of our foreign subsidiaries, we expect a significant portion of the cash and cash equivalents held by our foreign subsidiaries will no longer be subject to U.S. federal income tax consequences upon subsequent repatriation to the United States. However, a portion of this cash may still be subject to foreign income tax consequences upon future remittance. Therefore, if additional funds held outside the U.S. are needed for our operations in the U.S., we plan to repatriate these funds.

Cash and cash equivalents ("cash") decreased to $2.5 billion as of December 31, 2018 from $2.6 billion as of March 31, 2018. The cash flows of USPS have not been segregated and are included in the statements of cash flows for all periods presented. The following table summarizes our cash flow activity:
 
 
Nine Months Ended
 
 
(in millions)
 
December 31, 2018
 
December 31, 2017
 
Change
Net cash provided by operating activities
 
$
1,035

 
$
2,010

 
$
(975
)
Net cash (used in) provided by investing activities
 
(40
)
 
770

 
(810
)
Net cash used in financing activities
 
(1,183
)
 
(1,136
)
 
(47
)
Effect of exchange rate changes on cash and cash equivalents
 
(66
)
 
44

 
(110
)
Net (decrease) increase in cash and cash equivalents
 
$
(254
)
 
$
1,688

 
$
(1,942
)
Cash and cash equivalents at beginning-of-year
 
2,729

 
1,268

 
 
Cash and cash equivalents at the end-of-period
 
$
2,475

 
$
2,956

 
 

Net cash provided by operating activities during the first nine months of fiscal 2019 was $1,035 million as compared to $2,010 million during the comparable period of the prior fiscal year. The year-over-year decrease of $975 million was due to a decrease in working capital movements of $600 million , an increase of $137 million in gain on dispositions, a decrease in other non-cash items of $63 million and the increase in unrealized foreign currency gain of $76 million over the prior fiscal year. These decreases were partially offset by an increase in net income of $226 million and an increase in depreciation and amortization expense of $127 million .

Net cash used in investing activities during the first nine months of fiscal 2019 was $40 million , as compared to net cash provided by investing activities of  $770 million  during the comparable period of the prior fiscal year. The decrease of $810 million was primarily due to a reduction in cash received from the HPES Merger of $974 million , offset by a reduction in cash paid for acquisitions of $139 million , a reduction in capital expenditures of $105 million , and a net cash outflow from business dispositions of $65 million over the prior fiscal year. These decreases were partially offset by an increase in proceeds on sale of property and equipment of $254 million and an increase in cash collections of $230 million associated with the deferred purchase price receivable generated from the sale of our trade receivables and presented within investing activities pursuant to ASU 2016-15 as discussed in Note 2 - " Recent Accounting Pronouncements ."

Net cash used in financing activities during the first nine months of fiscal 2019 was $1,183 million , as compared to $1,136 million during the comparable period of the prior fiscal year. The $47 million increase in cash used in financing activities was primarily due to an increase in payments on long-term debt obligations of $1,328 million , an increase in payments on capitalized lease obligations and borrowings for asset financing of $22 million , an increase in repurchases of common stock of  $1,187 million and an increase in dividend payments of $36 million . These cash outflows were offset by borrowings related to the Separation of USPS of $1,114 million and a reduction of payments on borrowings under lines of credit of  $335 million .


73


Capital Resources

The following table summarizes our total debt:
 
 
As of
(in millions)
 
December 31, 2018
 
March 31, 2018
Short-term debt and current maturities of long-term debt
 
$
1,580

 
$
1,918

Long-term debt, net of current maturities
 
5,980

 
6,092

Total debt
 
$
7,560

 
$
8,010


The $0.5 billion decrease in total debt during the nine months of fiscal 2019 was primarily attributed to the repayment of $899 million principal amount of the USD term loan due 2022. This debt repayment was financed from the cash payment received from Perspecta in connection with the Separation. During the second quarter of fiscal 2019, we completed a senior notes offering in an aggregate principal of €650 million due 2026, the proceeds of which were used to repay the outstanding EUR term facilities and the outstanding USD term facility.

During the third quarter of fiscal 2019, we entered into a term loan credit agreement maturing on January 15, 2022, in an aggregate principal amount of £450 million , the proceeds of which were used to repay the £185 million term loan due January 15, 2019 and $150 million of the Senior Notes due 2021. Also, during the third quarter of fiscal 2019, we entered into a senior unsecured AUD 800 million term loan agreement maturing in fiscal 2021, the proceeds of which were used to repay an existing AUD term loan due 2022. Finally, we amended our commercial paper program to issue short-term commercial paper notes up to a maximum aggregate amount outstanding at any time of €1 billion or its equivalent in US currency.

We were in compliance with all financial covenants associated with our borrowings as of December 31, 2018 and December 31, 2017 .

The maturity chart below, as of December 31, 2018, summarizes the future maturities of long-term debt principal for the remainder of fiscal 2019 and subsequent fiscal years and excludes maturities of borrowings for assets acquired under long-term financing and capitalized lease liabilities. For more information on our debt, see Note 11 - " Debt " to the financial statements.


74

CHART-C7F3DEB13B27543F825A06.JPG



The following table summarizes our capitalization ratios:
 
 
As of
(in millions)
 
December 31, 2018
 
March 31, 2018
Total debt
 
$
7,560

 
$
8,010

Cash and cash equivalents
 
2,475

 
2,593

Net debt (1)
 
$
5,085

 
$
5,417

 
 
 
 
 
Total debt
 
$
7,560

 
$
8,010

Equity
 
11,356

 
13,837

Total capitalization
 
$
18,916

 
$
21,847

 
 
 
 
 
Debt-to-total capitalization
 
40.0
%
 
36.7
%
Net debt-to-total capitalization (1)
 
26.9
%
 
24.8
%
        

(1) Net debt and Net debt-to-total capitalization are non-GAAP measures used by management to assess our ability to service our debts using only our cash and cash equivalents. We present these non-GAAP measures to assist investors in analyzing our capital structure in a more comprehensive way compared to gross debt based ratios alone. See "Non-GAAP Financial Measures" for more information.

The increase in debt-to-total capitalization and net debt-to-total capitalization as of December 31, 2018 as compared to March 31, 2018 is due to the decrease in total capitalization as a result of the decrease in equity.


75

As of December 31, 2018 , our credit ratings were as follows:
Rating Agency
 
Rating
 
Outlook
 
Short Term Ratings
Fitch
 
BBB+
 
Stable
 
F-2
Moody's
 
Baa2
 
Stable
 
P-2
S&P
 
BBB
 
Stable
 
-

Subsequent to the January 7, 2019, announcement by DXC and Luxoft Holding, Inc ("Luxoft") of a definitive agreement for DXC to acquire Luxoft, Moody's and S&P affirmed their ratings and outlook for DXC on January 8, 2019, and Fitch affirmed its ratings and outlook for DXC on January 9, 2019,

See Note 20 - " Commitments and Contingencies " for a discussion of the general purpose of guarantees and commitments. The anticipated sources of funds to fulfill such commitments are listed below.

Liquidity

We expect our existing cash and cash equivalents, together with cash generated from operations, will be sufficient to meet our normal operating requirements for the next 12 months. We expect to continue to use cash generated by operations as a primary source of liquidity, however, should we require funds greater than that generated from our operations to fund discretionary investment activities, such as business acquisitions, we have the ability to draw on our multi-currency revolving credit facility or raise capital through the issuance of capital market debt instruments such as commercial paper, term loans, and bonds. In addition, we also currently utilize and will further utilize our cross currency cash pool for liquidity needs. However, there is no guarantee that we will be able to obtain debt financing, if required, on terms and conditions acceptable to us, if at all, in the future.

Our exposure to operational liquidity risk is primarily from long-term contracts which require significant investment of cash during the initial phases of the contracts. The recovery of these investments is over the life of the contract and is dependent upon our performance as well as customer acceptance.

The following table summarizes our total liquidity:
 
 
As of
(in millions)
 
December 31, 2018
Cash and cash equivalents
 
$
2,475

Available borrowings under our revolving credit facility
 
4,000

Total liquidity  
 
$
6,475


Share Repurchases

During the first quarter of fiscal 2018, our Board of Directors authorized the repurchase of up to  $2.0 billion  of our common stock. On November 8, 2018, DXC announced that its board of directors approved an incremental $2.0 billion share repurchase authorization. An expiration date has not been established for this repurchase plan. During the nine months ended December 31, 2018 , we repurchased 17,680,437 shares of our common stock at an aggregate cost of  $1.2 billion .

Dividends

During the nine months ended December 31, 2018 , our Board of Directors declared aggregate cash dividends to our stockholders of $0.57 per share, or approximately $161 million . Future dividends are subject to customary board review and approval prior to declaration.

Off-Balance Sheet Arrangements


76

In the normal course of business, we are party to arrangements that include guarantees, receivables securitization facility and financial instruments with off-balance sheet risk, such as letters of credit and surety bonds. We also use performance letters of credit to support various risk management insurance policies. No liabilities related to these arrangements are reflected in our condensed consolidated balance sheets. There have been no material changes to our off-balance-sheet arrangements reported under Item 7, included in Exhibit 99.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 16, 2018, other than as disclosed in Note  6  - " Sale of Receivables " and Note 20 - " Commitments and Contingencies " to the financial statements in this Quarterly Report on Form 10-Q.

Contractual Obligations

With the exception of the changes discussed under the subheading "Capital Resources," there have been no material changes, outside the ordinary course of business, to our contractual obligations since March 31, 2018. For further information see "Contractual Obligations" in Item 7, included in Exhibit 99.1 to our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 16, 2018.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. These estimates may change in the future if underlying assumptions or factors change. Accordingly, actual results could differ materially from our estimates under different assumptions, judgments or conditions. We consider the following policies to be critical because of their complexity and the high degree of judgment involved in implementing them: revenue recognition, income taxes, business combinations, defined benefit plans and valuation of assets. We have discussed the selection of our critical accounting policies and the effect of estimates with the audit committee of our board of directors. During the third quarter and first nine months of fiscal 2019, there were no changes to our accounting estimates from those described in our fiscal 2018 Annual Report on Form 10-K except as mentioned below.

Revenue Recognition

Most of our revenues are recognized based on objective criteria and do not require significant estimates that may change over time. However, some arrangements may require significant estimates, including contracts which include multiple-element deliverables.

Multiple-element arrangements

Many of our contracts require us to provide a range of services or elements to our customers, which may include a combination of services, products or both. As a result, significant judgment may be required to determine the appropriate accounting, including whether the elements specified in a multiple-element arrangement should be treated as separate performance obligations for revenue recognition purposes, and, when considered appropriate, how the total transaction price should be allocated among the performance obligations and the timing of revenue recognition for each performance obligation. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation based on the relative standalone selling price of each distinct good or service in the contract. Other than software sales involving multiple performance obligations, the primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service. Certain of our arrangements involve the sale of DXC proprietary software, post contract customer support and other software-related services. The standalone selling price generally is determined for each performance obligation using an adjusted market assessment approach based on the price charged where each deliverable is sold separately. In certain limited cases (typically for software licenses) when the historical selling price is highly variable, the residual approach is used. This approach allocates revenue to the performance obligation equal to the difference between the total transaction price and the observable standalone selling prices for the other performance obligations. These methods involve significant judgments and estimates that we assess periodically by considering market and entity-specific factors, such as type of customer, features of the products or services and market conditions.


77

Once the total revenues have been allocated to the various contract elements, revenues for each element are recognized based on the relevant revenue recognition method for the services performed or elements delivered if the revenue recognition criteria have been met. Estimates of total revenues at contract inception often differ materially from actual revenues due to volume differences, changes in technology or other factors which may not be foreseen at inception.

Costs to obtain contracts with customers

Accounting for the costs to obtain contracts with customers requires significant judgments and estimates with regards to the determination of sales commission payments that qualify for deferral of costs and the related amortization period. Most of our sales commission plans are quota-based and payments are made by achieving targets related to a large number of new and renewed contracts. Certain sales commissions earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. We defer and amortize these costs on a straight-line basis over an average period of benefit of five years, which is determined and regularly assessed by considering the length of our customer contracts, our technology and other factors. Significant changes in these estimates or impairment may result if material contracts terminate earlier than the expected benefit period, or if there are material changes in the average contract period.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For quantitative and qualitative disclosures about market risk affecting DXC, see "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended March 31, 2018. Our exposure to market risk has not changed materially since March 31, 2018.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2018.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


78

PART II


ITEM 1. LEGAL PROCEEDINGS

See Note 20 - " Commitments and Contingencies " to the financial statements under the caption “Contingencies” for information regarding legal proceedings in which we are involved.

Item 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, which may materially and adversely affect our business, financial condition, and results of operations, and the actual outcome of matters as to which forward-looking statements are made in this Quarterly Report on Form 10-Q. In such case, the trading price for DXC common stock could decline, and you could lose all or part of your investment. Past performance may not be a reliable indicator of future financial performance and historical trends should not be used to anticipate results or trends in future periods. Future performance and historical trends may be adversely affected by the aforementioned risks and other variables and risks and uncertainties not currently known or that are currently expected to be immaterial may also materially and adversely affect our business, financial condition, and results of operations or the price of our common stock in the future. Other than as described below, t here have been no material changes in the three months ended December 31, 2018 to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2018 and in Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarterly periods ended June 30 and September 30, 2018.

Risks Related to the Proposed Luxoft Acquisition

The proposed Luxoft Acquisition is contingent upon the satisfaction of a number of conditions, and the Luxoft Acquisition may not be consummated on the terms or timeline currently contemplated.

On January 7, 2019, we announced that we had entered into a definitive agreement to acquire Luxoft Holding, Inc. (“Luxoft” and such acquisition, the “Luxoft Acquisition”). We currently expect that the Luxoft Acquisition, if completed, will occur by June 2019.

The terms and conditions of the Luxoft Acquisition are as set forth in a Merger Agreement dated as of January 6, 2019 by and among DXC, Luxoft and Luna Equities, Inc. (the “Luxoft Merger Agreement”). Luxoft and DXC have made customary representations and warranties and agreed to customary covenants in the Luxoft Merger Agreement. The parties to the Luxoft Merger Agreement have also agreed to use their respective reasonable best efforts to obtain any approvals from governmental authorities for the Luxoft Acquisition, including antitrust approvals, subject to certain exceptions. Luxoft may not engage in any discussions regarding a potential acquisition of Luxoft with any party other than DXC or its affiliates or otherwise enter into any agreement with respect to, or solicit, initiate, propose or knowingly encourage any proposal regarding, an alternative transaction. The Luxoft Merger Agreement contains certain customary termination rights for both Luxoft and DXC.

The consummation of the Luxoft Acquisition is subject to certain conditions, including (i) the receipt of antitrust clearances, (ii) the absence of any law, order or other governmental action preventing or restraining the consummation of the Luxoft Acquisition, (iii) the accuracy of the representations and warranties of each party in the Luxoft Merger Agreement, (iv) compliance in all material respects by each party with its covenants under the Luxoft Merger Agreement, and (v) the absence of a material adverse effect on Luxoft. For these and other reasons, the Luxoft Acquisition may not be completed by the end of June 2019 or otherwise on the terms or timeline contemplated, if at all.

The proposed Luxoft Acquisition may result in disruptions to relationships with customers and other business partners.

If we complete the proposed Luxoft Acquisition, the proposed transaction could cause disruptions in our business and the Luxoft business, including by disrupting operations or causing customers to delay or to defer decisions or to end their relationships, or otherwise limiting the ability to compete for or perform certain

79

contracts or services. If we and Luxoft face difficulties in integrating our businesses, or the Luxoft business faces difficulties in its business generally, the Luxoft Acquisition, if completed, may not achieve the intended results.

Further, it is possible that current or prospective employees of our business and the Luxoft business could experience uncertainty about their future roles with the combined company, which could harm our ability to attract and retain key personnel. Any of the foregoing could adversely affect our business, financial condition and results of operations and prospects.

The actions required to implement the Luxoft Acquisition will take management time and attention and may require us to incur additional costs.

The Luxoft Acquisition will require management's time and resources, which will be in addition to and may divert management's time and attention from the operation of our remaining businesses and the execution of our other strategic initiatives. Additionally, we may incur additional costs in connection with the Luxoft Acquisition beyond those that are currently anticipated. Some of these costs must be paid regardless of whether the Luxoft Acquisition is consummated.



80


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities
    
None during the period covered by this report.

Use of Proceeds

Not applicable.

Issuer Purchases of Equity Securities

The following table provides information on a monthly basis for the quarter ended December 31, 2018 , with respect to the Company’s purchase of equity securities:

Period
 
Total Number
of Shares
Purchased
 
Average Price
Paid Per Share
 
Total Number
of Shares
Purchased as
Part of Publicly
Announced Plans or Programs
 
Approximate
Dollar Value
of Shares that
May Yet be Purchased
Under the Plans or Programs
October 1, 2018 to October 31, 2018
 
1,204,590

 
$89.34
 
1,204,590
 
$3,304,130,695
November 1, 2018 to November 30, 2018
 
8,913,551

 
$61.29
 
8,913,551
 
$2,757,775,497
December 1, 2018 to December 31, 2018
 
2,334,373

 
$61.03
 
2,334,373
 
$2,615,303,972
Total:
 
12,452,514

 
$63.96
 
12,452,514
 
 
    
On April 3, 2017, DXC announced the establishment of a share repurchase plan approved by the Board of Directors with an initial authorization of $2.0 billion for future repurchases of outstanding shares of DXC common stock. On November 8, 2018, DXC's Board of Directors approved an incremental $2.0 billion share repurchase authorization. An expiration date has not been established for this repurchase plan. Share repurchases may be made from time to time through various means, including in open market purchases, 10b5-1 plans, privately-negotiated transactions, accelerated stock repurchases, block trades and other transactions, in compliance with Rule 10b-18 under the Exchange Act as well as, to the extent applicable, other federal and state securities laws and other legal requirements. The timing, volume, and nature of share repurchases pursuant to the share repurchase plan are at the discretion of management and may be suspended or discontinued at any time.


ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.


ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.


81


ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are filed with this report.
Exhibit
Number
Description of Exhibit
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
2.13
2.14

82

2.15
2.16
2.17
2.18
2.19
2.20
2.21
2.22
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11

83

4.12
4.13
4.14
4.15

4.16
10.1



10.2
10.3
10.4

10.5
31.1
31.2
32.1
32.2
101.INS
XBRL Instance
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation
101.LAB
XBRL Taxonomy Extension Labels
101.PRE
XBRL Taxonomy Extension Presentation

    

84


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
 
 
DXC TECHNOLOGY COMPANY
 
 
 
 
Dated:
February 8, 2019
By:
/s/ Neil A. Manna
 
 
Name:
Neil A. Manna
 
 
Title:
Senior Vice President, Corporate Controller Principal Accounting Officer
 


85

Exhibit 10.4
EXHIBIT104AMENDMENTDE_IMAGE3.JPG
 
EXECUTION VERSION
Amendment Deed No. 1
DXC Technology Australia Pty Limited
ACN 008 476 944
DXC Technology Company
Mizuho Bank, Ltd.
MUFG Bank, Ltd.
and
Others









5 December 2018
 








 
 
 
 
 
CONTENTS
 
 
 
 
 
CLAUSE
 
 
PAGE
 
 
 
 
 
1.
INTERPRETATION
2
 
 
1.1
Definitions
2
 
 
1.2
Terms defined in the Facility Agreement
2
 
 
1.3
Rules for interpreting this document
3
2.
CONSIDERATION
3
3.
ACCESSION OF NEW FACILITY A LENDER
3
4.
AMENDMENT OF FACILITY AGREEMENT
3
 
 
4.1
Amendment to Facility Agreement
3
 
 
4.2
Effect of amendment         
3
 
 
4.3
Effective Date
3
5.
DRAWDOWN ON PAYMENT DATE
4
6.
ACKNOWLEDGEMENTS AND CONSENTS
5
7.
REPRESENTATIONS AND WARRANTIES
5
 
 
7.1
Representations and warranties of each Obligor
5
 
 
7.2
Reliance on representations and warranties
6
8.
EXISTING LOANS
6
9.
NOTICES
6
10.
GENERAL
6
 
 
10.1
Governing law
6
 
 
10.2
Giving effect to this document
6
 
 
10.3
Amendment
6
 
 
10.4
Counterparts
6





THIS DEED is made on the date set out on the front cover
BETWEEN:
(1)
DXC Technology Australia Pty Limited ACN 008 476 944 (the Company );
(2)
DXC Technology Company (the Original Guarantor );
(3)
Mizuho Bank, Ltd. and MUFG Bank, Ltd. as mandated lead arrangers and bookrunners (the MLABs );
(4)
Mizuho Bank, Ltd., Sydney Branch (the Existing Facility A Lender );
(5)
MUFG Bank, Ltd. (the New Facility A Lender ); and
(6)
Mizuho Bank, Ltd., New York Branch (the Agent ).
RECITALS
The parties to this document (other than MUFG Bank, Ltd.) are parties to the Facility Agreement.
MUFG Bank, Ltd. wishes to accede to the Facility Agreement in the manner set out in this document.
The parties also wish to amend the Facility Agreement in the manner set out in this document.
THE PARTIES AGREE AS FOLLOWS:




1.
INTERPRETATION
1.1
Definitions
The following definitions apply in this document.
Amended Facility Agreement means the Facility Agreement, as amended in accordance with this document.
Effective Date has the meaning set out in clause 4.3 ( Effective Date ).
Existing Loans means each Loan (as defined in the Facility Agreement) which is outstanding immediately prior to the Effective Date.
Facility Agreement means the Syndicated Facility Agreement dated 27 November 2018 between the Company, the Original Guarantor, the MLAB named therein, the lenders named therein and the Agent.
Lenders means the Existing Facility A Lender and the New Facility A Lender.
New Loan means the Loan contemplated in clause 5(a) ( Drawdown on Payment Date ).
Payment Date means 6 December 2018, or such later date as agreed by the parties.
1.2
Terms defined in the Facility Agreement
A term (other than a term defined in clause 1.1) that is defined in the Amended Facility Agreement has the same meaning when used in this document.
1.3
Rules for interpreting this document
Clauses 1.2 ( Construction ) of the Facility Agreement applies as if set out in full in this document, with any necessary changes.
2.
CONSIDERATION
Each party acknowledges that it has received valuable consideration for entering into this document.
3.
ACCESSION OF NEW FACILITY A LENDER
With effect on and from the Effective Date:
(a)
the New Facility A Lender shall become a party to the Amended Facility Agreement and shall assume the obligations and acquire the rights of a Facility A Lender and MLAB under the Amended Facility Agreement;
(a)
each other party to the Amended Facility Agreement shall acquire corresponding rights against and assume corresponding obligations towards the New Facility A Lender; and
(b)
the New Facility A Lender agrees to be bound by the provisions of the Amended Facility Agreement in its capacity as a Facility A Lender and MLAB.
4.
AMENDMENT OF FACILITY AGREEMENT
4.1
Amendment to Facility Agreement
(a)
The Facility Agreement is amended with effect on and from the Effective Date to read as set out in Annexure A.
(b)
Paragraph (a) does not affect any right or obligation of any party that arises before the Effective Date.




4.2
Effect of amendment
(a)
Except as expressly amended by this document, no changes to the Facility Agreement are to be inferred or implied, and in all other respects the Facility Agreement is confirmed and remains in full force and effect.
(b)
With effect on and from the Effective Date, references in the Finance Documents to the Facility Agreement will be read and construed as references to the Facility Agreement as amended by this document.
4.3
Effective Date
The Effective Date ( Effective Date ) is the date specified as such in writing by or on behalf of the Agent to the Company once the Agent (acting on the instructions of each of the Existing Facility A Lender and New Facility A Lender) has received the following, in form and substance satisfactory to it:
(a)
Original Obligors
(i)
A verification certificate given by 2 directors or authorized officers of each Original Obligor substantially in the form as set out in Part III of the Amended Facility Agreement or otherwise reasonably acceptable to the Agent, with the attachments referred to in that form.
(ii)
All documents and other evidence reasonably requested by the Agent or a Lender (through the Agent) in order for the Agent or a Lender to carry out all necessary "know your customer" or other similar checks in relation to each Obligor and each of its authorised signatories under all applicable laws and regulations where such information is not already available to the recipient.
(b)
Finance Documents
(i)
This document executed by each party to it.
(c)
Legal opinions
(i)
A legal opinion of Ashurst Australia, legal advisers to the MLABs and the Agent in Australia, substantially in the form distributed to the Agent prior to signing this document.
(ii)
A due execution legal opinion of the legal advisers to the Original Guarantor in the United States (which may be an in-house opinion), substantially in the form distributed to the Agent prior to signing this document.
(d)
Other documents and evidence
(i)
Evidence that any process agent referred to in Clause ‎47.2 (Service of process) of the Amended Facility Agreement, if not an Original Obligor, has accepted its appointment.
(ii)
A copy of any other Authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Company accordingly) in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document.
(iii)
The Original Financial Statements.
(iv)
Evidence that the Original Obligors have insurance in place which satisfies Clause ‎20.10 (Insurance).
(v)
Evidence that the fees, costs and expenses then due from the Company pursuant to Clause ‎13 (Fees) and Clause ‎18 (Costs and expenses) of the Amended Facility Agreement (including pursuant to the Arranger Fee Letter) have been paid or, in the case of any fees payable pursuant to the Arranger Fee Letter, will be paid on the Payment Date.




5.
DRAWDOWN ON PAYMENT DATE
(a)
On the date falling one Business Day before the Payment Date, the Company will be taken to have issued a Utilisation Request for a Loan under Facility A for an aggregate amount of A$400,000,000, to be disbursed to the Company pursuant to the terms of Clause 4.4 of the Amended Facility Agreement.
(b)
On the Business Day before the Payment Date, the New Facility A Lender will deliver a SWIFT notice (or any other evidence or similar confirmation) to the Agent confirming to the Agent's satisfaction that the payment to be made by the New Facility A Lender in accordance with clause ‎5(c)(i) below will be received by the Agent on the Payment Date.
(c)
On the Payment Date:
(i)
the New Facility A Lender will make a payment to the Agent for an amount equal to the New Loan;
(ii)
promptly after it has received (or is satisfied that it will receive) funds for the full amount of the New Loan from the New Facility A Lender, the Agent shall:
(A)
make such payments as between the Agent and the Lenders so as to ensure that, on and from the Payment Date, each Lender's participation in each Loan reflects the proportion which that Lender's Commitment bears to the Total Commitments; and
(B)
disburse to the Company an amount equal to the New Loan in accordance with clause ‎5(a).
(d)
On the first date on which interest is payable on the Existing Loan which falls after the Payment Date, the Agent will make such adjustments to the amounts payable to each Lender so as to reflect the dates on which each Lender became a Lender under the Facility Agreement.
6.
ACKNOWLEDGEMENTS AND CONSENTS
(a)
Each party:
(i)
consents to the accession and amendments contemplated by this document;
(ii)
agrees and acknowledges that this document is a "Finance Document" for the purposes of the Facility Agreement; and
(iii)
confirms the Facility Agreement (as amended by this document) and each other Finance Document to which it is a party, and agrees that each such document will continue in full force and effect.
(b)
The Company and the Original Guarantor each confirm that any guarantee and security given or to be given by it in connection with the Facility Agreement secures all present and future obligations of each Borrower under the Amended Facility Agreement and in accordance with the terms of that guarantee or security.
(c)
Unless expressly stated otherwise, nothing in this document:
(i)
prejudices or adversely affects any right, power or remedy arising under; or
(ii)
discharges, releases or otherwise affects any liability or obligation arising under,
the Finance Documents.
7.
REPRESENTATIONS AND WARRANTIES
7.1
Representations and warranties of each Obligor




(a)
Each Obligor confirms the Repeating Representations are true and correct in all material respects (except those representations and warranties qualified by materiality, which shall be true and correct) as of the Effective Date, as though made on and as of such date, except to the extent that any such representation or warranty expressly relates only to an earlier date, in which case it was correct in all material respects (except those representations and warranties qualified by materiality, which were true and correct) as of such earlier date.
(b)
Each Obligor represents and warrants on the date of this document that the documents, certificates and written materials furnished to the Agent or any Lender by or on behalf of it for use in connection with the transactions contemplated in the Facility Agreement, taken as a whole with other documents, certificates and written materials furnished contemporaneously therewith, do not contain any untrue statement of fact or omit to state a material fact (known to it (as the case may be) in the case of any documents, certificates or written statements not furnished by it) necessary in order to make the statements contained therein not misleading in light of the circumstances under which the same were made.
7.2
Reliance on representations and warranties
Each Obligor acknowledges that each Finance Party has executed this document in reliance on the representations and warranties that are made in clause ‎7.1 ( Representations and warranties of each Obligor ).
8.
EXISTING LOANS
Nothing in this document constitutes or effects a termination or a repayment and readvance of any Existing Loans outstanding on the date of this document, the Effective Date or the Payment Date and all of those Existing Loans continue under the Facility Agreement as amended by this document.
9.
NOTICES
Clause 34 ( Notices ) of the Facility Agreement applies as if set out in full in this document, with any necessary changes.
10.
GENERAL
10.1
Governing law
Clauses 46 ( Governing Law ) and 47 ( Enforcement ) of the Facility Agreement apply as if set out in full in this document, with any necessary changes.
10.2
Giving effect to this document
Each party must do anything (including execute any document), and must ensure that its employees and agents do anything (including execute any document), that the other party may reasonably require to give full effect to this document.
10.3
Amendment
This document can only be amended or replaced by another document signed by the parties.
10.4
Counterparts
This document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this document.












EXECUTED as a deed.
COMPANY AND ORIGINAL BORROWER
EXECUTED  by DXC TECHNOLOGY AUSTRALIA PTY LIMITED ACN 008 476 944
 
 




MAPC/JORE/1000 034 192    
    




ORIGINAL GUARANTOR
SIGNED, SEALED AND DELIVERED  by DXC TECHNOLOGY COMPANY  
 




    



MLAB AND EXISTING FACILITY A LENDER
SIGNED, SEALED AND DELIVERED  by MIZUHO BANK, LTD.  
 



    




MLAB AND NEW FACILITY A LENDER

SIGNED, SEALED AND DELIVERED  by MUFG BANK, LTD.  
 





    




AGENT
SIGNED, SEALED AND DELIVERED  by MIZUHO BANK, LTD., NEW YORK BRANCH  
 


    




ANNEXURE A

AMENDED FACILITY AGREEMENT



    





AMENDED VERSION


EXHIBIT104AMENDMENTDE_IMAGE2.GIF
(Australian Branch)
SYNDICATED FACILITY AGREEMENT    
dated 27 November 2018, as most recently amended by Amendment Deed No. 1
for
DXC TECHNOLOGY AUSTRALIA PTY LIMITED
as Original Borrower
with
DXC TECHNOLOGY COMPANY
as Original Guarantor
arranged by
MIZUHO BANK, LTD. and MUFG BANK, LTD.
with
MIZUHO BANK, LTD., NEW YORK BRANCH
acting as Agent
EXHIBIT104AMENDMENTDE_IMAGE3.JPG


    




CONTENTS
 
Clause
Page
 
1.
 
Definitions and Interpretation
3
 
2.
 
The Facilities
27
 
3.
 
Purpose
29
 
4.
 
Conditions of Utilisation
30
 
5.
 
Utilisation - Loans
32
 
8.
 
Repayment
33
 
9.
 
Prepayment and Cancellation
33
 
10.
 
Interest
37
 
11.
 
Interest Periods
39
 
12.
 
Changes to the Calculation of Interest
40
 
13.
 
Fees
42
 
14.
 
Tax Gross Up and Indemnities
43
 
15.
 
Increased Costs
48
 
16.
 
Other Indemnities
50
 
17.
 
Mitigation by the Finance Parties
52
 
18.
 
Costs and Expenses
53
 
19.
 
Guarantee
54
 
20.
 
Representations
58
 
21.
 
Information Undertakings
62
 
22.
 
Financial Covenants
66
 
23.
 
General Undertakings
66
 
24.
 
Events of Default
70
 
25.
 
Changes to the Lenders
74
 
26.
 
Changes to the Obligors
79
 
27.
 
Restriction on Debt Purchase Transactions
81
 
28.
 
Role of the Agent, the MLABS and the Reference Banks
83
 
29.
 
Conduct of Business by the Finance Parties
94
 
30.
 
Sharing among the Finance Parties
95
 
31.
 
PUBLIC OFFER
97
 
32.
 
Payment Mechanics
99
 
33.
 
Set-Off
104
 
34.
 
Notices
104
 
35.
 
Calculations and Certificates
110
 
36.
 
Partial Invalidity
110
 
37.
 
Remedies and Waivers
110
 
38.
 
Amendments and Waivers
111
 
39.
 
Instructions and Decisions
112
 
40.
 
Confidentiality
115
 

 
145
 
AUSTRALIA\JORE\254087310.03

    



41.
 
PPSA Provisions
119
 
42.
 
Confidentiality of Funding Rates and Reference Bank Quotations
120
 
43.
 
Counterparts
122
 
44.
 
Indemnities and Reimbursement
122
 
45.
 
Acknowledgement
122
 
46.
 
Governing Law
123
 
47.
 
Enforcement
123
 
48.
 
Contractual recognition of bail-in
123
 
 
 
 
 
 
Schedule 1 THE ORIGINAL PARTIES
125
 
 
 
Part I The Original Obligors
125
 
 
 
Part II The Original Facility A Lenders
126
 
 
 
 
 
 
Schedule 2 CONDITIONS PRECEDENT
127
 
 
 
Part I Conditions Precedent To Initial Utilisation
127
 
 
 
Part II Conditions Precedent Required To Be Delivered By An Additional Obligor
129
 
 
 
Part III Form of Verification Certificate
130
 
 
 
 
 
 
Schedule 3 Requests
132
 
 
 
Part I Utilisation Request
132
 
 
 
Part II 133
 
 
 
 
Selection Notice
133
 
Schedule 4 FORM OF TRANSFER CERTIFICATE
134
 
Schedule 5 FORM OF ACCESSION LETTER
141
 
Schedule 6 FORM OF RESIGNATION LETTER
142
 
Schedule 7 FORM OF COMPLIANCE CERTIFICATE
143
 
Schedule 8 FORM OF CONFIDENTIALITY UNDERTAKING
145
 
Schedule 9 TIMETABLES
147
 
Schedule 10 LITIGATION AND INVESTIGATIONS
148
 
Schedule 11 FORM OF EXTENSION REQUEST
154
 

 
145
 
AUSTRALIA\JORE\254087310.03

    





THIS SYNDICATED FACILITY AGREEMENT (this " Agreement ") is dated the date set out on the front cover and made between:
(1)
DXC TECHNOLOGY AUSTRALIA PTY LIMITED ACN 008 476 944 (the " Company ");
(2)
EACH ENTITY named as an Original Borrower in Part I of Schedule 1 (the “ Original Borrowers ”);
(3)
DXC TECHNOLOGY COMPANY (the " Original Guarantor ");
(4)
MIZUHO BANK, LTD. and MUFG BANK, LTD. as mandated lead arrangers and bookrunners (the " MLABs ");
(5)
EACH ENTITY listed in Part II of Schedule 1 as a lender (the " Original Facility A Lenders "); and
(6)
MIZUHO BANK, LTD., NEW YORK BRANCH as agent (in such capacity, the " Agent ").
IT IS AGREED as follows:
SECTION 1
INTERPRETATION
1.
DEFINITIONS AND INTERPRETATION
1.1
Definitions
In this Agreement:
" Accession Letter " means a document substantially in the form set out in Schedule 5 ( Form of Accession Letter) .
" Additional Borrower " means a company which becomes an Additional Borrower in accordance with Clause 26 ( Changes to the Obligors ).
" Additional Guarantor " means a company which becomes an Additional Guarantor in accordance with Clause 26 ( Changes to the Obligors ).
" Additional Obligor " means an Additional Borrower or an Additional Guarantor.
" Affiliate " means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or executive officer (as such term is used in Regulation S-K promulgated under the Securities Act of 1933, as amended) of such Person.
" Agency and Arranger Fee Letter " means the fee letter dated as of 27 November 2018 between Mizuho Bank, Ltd., as a MLAB and Agent, and the Original Guarantor.
" Amendment Deed No. 1 " means Amendment Deed No. 1 dated 5 December 2018 between the Original Borrower, the Original Guarantor, the Lenders party thereto, the MLABs and the Agent.
" Anti-Corruption Laws " means all laws, rules, and regulations of any jurisdiction applicable to the Company or its Subsidiaries from time to time concerning or relating to bribery or corruption.
" Arranger Fee Letter " means the fee letter dated on or before Effective Date No. 1 between MUFG Bank, Ltd., as a MLAB, and the Original Guarantor.

 
145
 
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" Assignment Agreement " means an agreement in the form agreed between the Agent and the relevant assignor and assignee.
" Associate " has the meaning given to it in Section 128F(9) of the Tax Act.
" Australian Withholding Tax " means any Australian Tax required to be withheld or deducted from any interest or other payment under Division 11A of Part III of the Tax Act or Subdivision 12-F of Schedule 1 to the Taxation Administration Act 1953 (Cth).
" Authorisation " means:
(a)
an authorisation, consent, approval, resolution, licence, exemption, filing or registration; or
(b)
in relation to anything which will be fully or partly prohibited or restricted by law if a Governmental Agency intervenes or acts in any way within a specified period after lodgement, filing, registration or notification, the expiry of that period without intervention or action.
" Availability Period " means:
(a)
with respect to Loans drawn before the Effective Date No. 1, the period from and including the date of Financial Close to and including the date that is three months after the date of Financial Close; and
(b)
with respect to Loans drawn on or after the Effective Date No, 1, the period from and including Effective Date No. 1 to and including the date that is three months after Effective Date No. 1.
" Available Commitment " means, in relation to a Facility, a Lender's Commitment under that Facility minus:
(a)
the amount of its participation in any outstanding Utilisations under that Facility; and
(b)
in relation to any proposed Utilisation, the amount of its participation in any Utilisations that are due to be made under that Facility on or before the proposed Utilisation Date.
" Available Facility " means, in relation to a Facility, the aggregate at any time of each Lender's Available Commitment in respect of that Facility.
"BBSY Bid" means in relation to any Loan:
(a)
the applicable Screen Rate as of the Specified Time for Australian dollars and for a period equal in length to the Interest Period of that Loan plus or minus 5 Business Days; or
(b)
as otherwise determined pursuant to Clause 12.1 ( Unavailability of Screen Rate ),
and if, in either case, that rate is less than zero, BBSY Bid shall be deemed to be zero.
" Borrower " means an Original Borrower or an Additional Borrower unless it has ceased to be a Borrower in accordance with Clause 26 ( Changes to the Obligors ).
" Borrower Affiliate " means the Borrower, any Affiliates of the Borrower, any trust of which it or any of its Affiliates is a trustee, any partnership of which it or any of its Affiliates is a partner and any trust, fund or other entity which is managed by, or is under the control of, it or any of its Affiliates.

 
145
 
AUSTRALIA\JORE\254087310.03

    



" Break Costs " means the amount (if any) by which:
(a)
the interest which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;
exceeds:
(b)
the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Market or acquiring a bill of exchange accepted by a leading bank for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.
It is an amount payable in lieu of interest which would otherwise have been paid.
" Business Day " means a day (other than a Saturday or Sunday) on which banks are open for general business in Melbourne, Sydney and New York City, New York.
" Capital Lease " means with respect to any Person, any lease of any property by that Person as lessee which would, in conformity with GAAP, be required to be accounted for as a capital lease on the balance sheet of that Person; provided that whether a lease constitutes a capital lease or an operating lease shall be determined based on GAAP as in effect on the date hereof, notwithstanding any modification or interpretative change thereto after the date hereof.
" Code " means the US Internal Revenue Code of 1986, as amended.
" Commitment " means a Facility A Commitment.
" Compliance Certificate " means a certificate substantially in the form set out in Schedule 7 ( Form of Compliance Certificate ).
" Confidential Information " means all information relating to the Company, any Obligor, the Group, the Finance Documents or a Facility of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or a Facility from either:
(a)
any member of the Group or any of its advisers; or
(b)
another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any member of the Group or any of its advisers,
in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes:
(i)
information that:
(A)
is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 40 ( Confidentiality ); or
(B)
is identified in writing at the time of delivery as non-confidential by any member of the Group or any of its advisers; or

 
145
 
AUSTRALIA\JORE\254087310.03

    



(C)
is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with the Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality; and
(ii)
any Funding Rate or Reference Bank Quotation.
" Confidentiality Undertaking " means a confidentiality undertaking substantially in a form as set out in Schedule 8 ( Form of Confidentiality Undertaking ) or in any other form agreed between the Company and the Agent.
" Consenting Lender " has the meaning given to that term in Clause 2.3 ( Extension of Termination Date ).
" Consolidated EBITDA " means, in respect of the Original Guarantor, for any period, the sum of:
(a)
net income; and
(b)
to the extent (except in the case of clause (b)(xvii) below) deducted in determining net income for such period, the sum of:
(i)
provisions for income taxes; and
(ii)
consolidated interest expense and preferred dividends; and
(iii)
depreciation and amortization (including, but not limited to, deferred financing costs, organization costs, goodwill, comprehensive income and non-compete amortization); and
(iv)
extraordinary, unusual and non-recurring losses and charges; and
(v)
other non-cash charges; and
(vi)
fees, costs and expenses (including amounts in respect of settlements or judgments) related to, and any reserves established in respect of, the litigation and investigations identified on Schedule 10 ( Litigation and Investigation ); and
(vii)
debt extinguishment charges and expenses; and
(viii)
foreign currency translation losses; and
(ix)
losses on investments; and
(x)
mark-to-market and foreign currency conversion losses on hedging transactions and intercompany accounts; and
(xi)
non-compete expenses; and
(xii)
losses on sales of fixed assets not in the ordinary course of business, after giving effect to any related charges for, reduction of or provisions for taxes thereon; and
(xiii)
minority interests; and

 
145
 
AUSTRALIA\JORE\254087310.03

    



(xiv)
charges and expenses arising from any changes in accounting with respect to pensions; and
(xv)
charges and expense arising from any revaluation, lump-sum settlement, annuitization of pension assets and liabilities or contractual termination benefits; and
(xvi)
fees, costs and expenses incurred in connection with (x) this Agreement or (y) any proposed or consummated acquisition permitted hereunder; and
(xvii)
cost savings, operating expense reductions and synergies resulting from, or related to, mergers and other business combinations, acquisitions, divestitures, restructurings, cost savings initiatives and other similar initiatives and actions that are projected by the Original Guarantor in good faith to be realized within 12 months from the fiscal quarter ended immediately after a merger or other business combination, acquisition or divestiture is consummated or any other restructuring, cost savings initiative or other initiative or action (calculated on a pro forma basis as though such cost savings, operating expense reductions and synergies had been realized on the first day of such period and as if such cost savings, operating expense reductions and synergies were realized during the entirety of such period), net of the amount of actual benefits realized during such period from such actions; provided that the aggregate amount of cost savings, operating expense reductions and synergies included pursuant to this clause (xvii), other than any cost savings, operating expense reductions and synergies of the type that would be permitted to be included in pro forma financial statements prepared in accordance with Regulation S-X under the Securities Act of 1933, as amended, shall not exceed $250,000,000 ; provided further that no cost savings, operating expense reductions and synergies shall be added back pursuant to this clause (xvii) to the extent duplicative of any expenses or charges otherwise added back to Consolidated EBITDA, whether through a pro forma adjustment or otherwise, for such period,
but excluding the following:
(a)
to the extent included in the calculation of net income for such period, the sum of:
(i)
extraordinary, unusual or non-recurring gains; and
(ii)
debt extinguishment gains; and
(iii)
foreign currency translation gains; and
(iv)
gains on investments; and
(v)
mark-to-market and foreign currency conversion gains on hedging transactions and intercompany accounts; and
(vi)
gains on sales of fixed assets not in the ordinary course of business, after giving effect to any related charges for, reduction of or provisions for, taxes thereon; and
(vii)
other income (including other income attributable to minority interests).
For the purpose of calculating Consolidated EBITDA for any Person for any period, if during such period such Person or any Subsidiary of such Person shall have made a Material Acquisition or Material Disposition, Consolidated EBITDA for such period shall be calculated after giving pro forma effect

 
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to such Material Acquisition or Material Disposition as if such Material Acquisition or Material Disposition occurred on the first day of such period.
" Consolidated Interest Expense " means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalised interest) of the Original Guarantor and its Subsidiaries on a consolidated basis with respect to all outstanding Debt of the Original Guarantor and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, net costs under Interest Rate Agreements and amounts referred to in clause 13 ( Fees ) payable to the Agent and the Lenders that are considered interest expense in accordance with GAAP, but excluding, however, net interest and charges in connection with cash pooling and multi-currency notional pooling programs).
" Consolidated Total Debt " means, as of any date of determination, all Debt (excluding Equity-linked Debt and "advances" and "overdrafts" in respect of cash pooling and multi-currency notional pooling programs) of the Original Guarantor and its Subsidiaries on a consolidated basis.
" Contamination " means the presence in, on or under land of a substance (whether a solid, liquid or gas) at a concentration above the concentration at which the substance is normally present in, on or under (respectively) land in the same locality, being a presence that presents a risk of harm to human health or to any other aspect of the Environment. For the purpose of this definition a substance may present a risk of harm either on its own or by reason of the presence of or interaction with another substance or Environmental Aspect, structure or other matter.
" Credit Agency " means each of S&P and Moody's, as applicable.
" Current Anniversary Date " has the meaning given to that term in Clause 2.3 ( Extension of Termination Date ).
" Customary Permitted Security " means, with respect to any Person, any of the following Securities:
(a)
Securities with respect to the payment of taxes, assessments or governmental charges in each case that are not yet due or that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by GAAP;
(b)
Securities of landlords arising by statute or lease contracts entered into in the ordinary course, inchoate, statutory or construction liens, and liens of suppliers, mechanics, carriers, materialmen, warehousemen, producers, operators or workmen and other liens imposed by law created in the ordinary course of business for amounts not yet due or that are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained to the extent required by GAAP;
(c)
liens, pledges or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other types of social security benefits, taxes, assessments, statutory obligations or other similar charges or to secure the performance of bids, tenders, sales, leases, contracts (other than for the repayment of borrowed money) or in connection with surety, appeal, customs or performance bonds or other similar instruments;
(d)
encumbrances arising by reason of zoning restrictions, easements, licenses, reservations, covenants, rights-of-way, utility easements, building restrictions and other similar encumbrances on the use of real property not materially detracting from the value of such

 
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real property and not materially interfering with the ordinary conduct of the business conducted at such real property;
(e)
encumbrances arising under leases or subleases of real property that do not, individually or in the aggregate, materially detract from the value of such real property or materially interfere with the ordinary conduct of the business conducted at such real property;
(f)
encumbrances arising under licenses or sublicenses of intellectual property granted in the ordinary course of such Person’s business;
(g)
financing statements with respect to a lessor’s rights in and to personal property leased to such Person in the ordinary course of such Person’s business; and
(h)
liens, pledges or deposits made in the ordinary course of banking arrangements in connection with any netting or set-off arrangements for the purpose of netting debit and credit balances.
" Debt " means, with respect to any Person:
(a)
indebtedness of such Person for borrowed money;
(b)
obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; and
(c)
obligations of such Person as lessee under Capital Leases,
provided that "Debt" shall not include borrowings against the cash surrender value of life insurance policies covering employees of the Company or its Affiliates and owned by the Company so long as:
(i)
recourse for such borrowings is limited to such policies and the proceeds thereof; and
(ii)
any value assigned to such policies on the consolidated financial statements of the Company and its Subsidiaries,
is net of the amount of such borrowings.
" Debt Purchase Transaction " means, in relation to a person, a transaction where such person:
(a)
acquires by way of assignment, novation or transfer;
(b)
enters into any sub-participation in respect of; or
(c)
enters into any other agreement or arrangement having an economic effect substantially similar to a sub-participation in respect of, or allowing it to control the exercise of rights relating to,
any Commitment or amount outstanding under this Agreement.
" Default " means an Event of Default or a Potential Event of Default.
" Defaulting Finance Party " means any Finance Party (other than a Lender which is a Borrower Affiliate):
(a)
which (in any capacity) has failed to make a payment when due under this Agreement or has notified a Party that it will not make such a payment, except where:
(i)
its failure to pay is caused by:

 
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(A)
administrative or technical error; or
(B)
a Disruption Event; and
payment is made within five Business Days of its due date; or
(ii)
the Finance Party is disputing in good faith whether it is contractually obliged to make the payment in question;
(b)
which (in any capacity) has otherwise rescinded or repudiated a Finance Document; or
(c)
which:
(i)
is or is adjudicated to be insolvent;
(ii)
applies or resolves to be wound up, given protection against creditors or placed in bankruptcy or any analogous process; or
(iii)
is subject to the appointment of a liquidator, administrator, manager, trustee in bankruptcy or any analogous process.
" Determination Date " has the meaning given to that term in Clause 2.3 ( Extension of Termination Date ).
" Disruption Event " means either or both of:
(a)
a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with a Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or
(b)
the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:
(i)
from performing its payment obligations under the Finance Documents; or
(ii)
from communicating with other Parties in accordance with the terms of the Finance Documents,
and which (in either such case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.
" Effective Date No. 1 " means the "Effective Date" as defined in Amendment Deed No. 1.
" Eligible Lenders " has the meaning given to that term in Clause 2.3 ( Extension of Termination Date ).
" Employee Benefit Plan " means any "employee benefit plan" as defined in Section 3(3) of ERISA which is or was maintained or contributed to by the Original Guarantor, its Subsidiaries or any of its ERISA Affiliate.
" Environment " means all components of the earth, including:
(a)
land, air, water, sound, odour, taste and climate;

 
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(b)
any layer of the atmosphere;
(c)
any organic or inorganic matter;
(d)
any living organism; and
(e)
natural or human made or modified features or structures,
and includes ecosystems and all elements of the biosphere.
" Environmental Aspect " means in respect of any land:
(a)
each interaction of any activity on that land or of that land itself with the Environment;
(b)
each of the following aspects of that land:
(i)
heritage items on the land or heritage values or significance of the land or anything on it (including, without limitation, Aboriginal heritage);
(ii)
Contamination of or from the land or from activities on the land;
(iii)
Pollution of or from the land or from activities on it;
(iv)
the flora and fauna on or in the vicinity of the land including threatened species, populations or ecological communities or their habitats on or in the vicinity of the land;
(v)
critical habitat on or in the vicinity of the land;
(vi)
the propensity of the land to be affected by natural disasters such as bushfires, flooding or geotechnical instability or earthquakes;
(vii)
the physical, chemical or geotechnical characteristics of the land or any structures on it; and
(viii)
the zoning or permissible uses of the land.
" Environmental Law " means any legislation which regulates or has as its purpose, objective or effect the regulation, protection or enhancement of any Environmental Aspect and includes:
(a)
Commonwealth, State or local government legislation including regulations, by laws and instruments;
(b)
common law to the extent that it relates to the use of land, or the carrying out of activities on land;
(c)
requirements, consents and concurrences (including conditions) of any Authorisation; and
(d)
guidelines, specifications or prescriptions of any Governmental Agency with which a person is legally required to comply.
" Equity-linked Debt " means Debt that is required to be converted at, or prior to, maturity into equity securities of the Company.
" ERISA " means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder.

 
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" ERISA Affiliate " means any Person who for purposes of Title IV of ERISA is a member of the Original Guarantor's controlled group, or under common control with the Original Guarantor, within the meaning of Section 414 of the Code and the regulations promulgated and rulings issued thereunder. Any former ERISA Affiliate of the Original Guarantor or its Subsidiaries shall continue to be considered an ERISA Affiliate within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of the Original Guarantor or its Subsidiaries and with respect to liabilities arising after such period for which the Original Guarantor or its Subsidiaries could be liable under the Code or ERISA.
" ERISA Event " means:
(a)
the occurrence of a reportable event, within the meaning of Section 4043 of ERISA, unless the 30-day notice requirement with respect thereto has been waived by the PBGC;
(b)
the provision by the administrator of any Pension Plan of a notice of intent to terminate such Pension Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA);
(c)
the cessation of operations at a facility in the circumstances described in Section 4062(e) of ERISA;
(d)
the withdrawal by the Original Guarantor or an ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA;
(e)
the failure by the Original Guarantor or any ERISA Affiliate to make a payment to a Pension Plan required under Section 303(k) of ERISA, which Section imposes a lien for failure to make required payments;
(f)
the institution by the PBGC of proceedings to terminate a Pension Plan, pursuant to Section 4042 of ERISA, or the occurrence of any event or condition which, in the reasonable judgment of the Company, might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, a Pension Plan;
(g)
the withdrawal by the Original Guarantor or any ERISA Affiliate from any Multiemployer Plan or the termination of such Multiemployer Plan resulting in liability pursuant to Title IV of ERISA; or
(h)
a determination that any Pension Plan is, or is expected to be, in “at-risk” status (within the meaning of Section 303(i)(4)(A) of ERISA or Section 430(i)(4)(A) of the Code).
" Event of Default " means any event or circumstance specified as such in Clause 24 ( Events of Default ) (save for Clause 24.12 ( Acceleration )).
“ Exchange Act Report ” means collectively, the Annual Reports of the Original Guarantor, if any on Form 10-K, from time to time, the Quarterly Reports on Form 10-Q, from time to time, and Reports on Form 8-K of Original Guarantor, if any filed with or furnished to the SEC from time to time.
" Extension Request " has the meaning given to that term in Clause 2.3 ( Extension of Termination Date ).
" Facility " means Facility A.

 
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" Facility A " means the term loan facility made available under this Agreement as described in Clause 2 ( The Facilities ).
" Facility A Commitment " means:
(a)
in relation to an Original Facility A Lender, the amount in Australian dollars set opposite its name under the heading "Facility A Commitment" in Part II of Schedule 1 ( The Original Parties ) and the amount of any other Facility A Commitment transferred to it under this Agreement; and
(b)
in relation to any other Lender, the amount in Australian dollars of any Facility A Commitment transferred to it under this Agreement,
to the extent not cancelled, reduced or transferred by it under this Agreement.
" Facility A Lender " means, at any time any Lender with a Commitment for Facility A.
" Facility Office " means the office or offices in Australia notified by a Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days' written notice) as the office or offices through which it will perform its obligations under this Agreement.
" FATCA " means:
(a)
sections 1471 to 1474 of the Code or any associated regulations or other official guidance;
(b)
any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an intergovernmental agreement between the US and any other jurisdiction, which (in either case) facilitates the implementation of paragraph (a) above; or
(c)
any agreement pursuant to the implementation of paragraphs (a) or (b) above with the US Internal Revenue Service, the US government or any governmental or taxation authority in any other jurisdiction.
" FATCA Application Date " means:
(a)
in relation to a "withholdable payment" described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the US), 1 July 2014;
(b)
in relation to a "withholdable payment" described in section 1473(1)(A)(ii) of the Code (which relates to "gross proceeds" from the disposition of property of a type that can produce interest from sources within the US), 1 January 2019; or
(c)
in relation to a "passthru payment" described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2019,
or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of Financial Close.
" FATCA Deduction " means a deduction or withholding from a payment under a Finance Document required by FATCA.
" FATCA Exempt Party " means a party that is entitled to receive payments free from any FATCA Deduction.

 
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" Fee Letter " means:
(a)
the Agency and Arranger Fee Letter; and
(b)
the Arranger Fee Letter.
" Finance Document " means:
(a)
this Agreement;
(b)
Amendment Deed No. 1;
(c)
each Fee Letter;
(d)
any Accession Letter;
(e)
any Resignation Letter; and
(f)
any other document designated as such by the Agent and the Company.
" Finance Party " means the Agent, a MLAB or a Lender.
" Financial Close " means the time at which the Agent has received all of the documents and other evidence listed in Part I of Schedule 2 ( Conditions precedent ) in form and substance reasonably satisfactory to the Agent acting on the instructions of all Lenders, being 28 November 2018.
"Funding Rate" means any individual rate notified by a Lender to the Agent pursuant to Clause 12.4 (a)(ii) ( Cost of funds ).
" GAAP " means:
(a)
with respect to financial statements provided by the Company, generally accepted accounting principles, standards and practices in Australia; and
(b)
with respect to financial statements prepared by the Original Guarantor, generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
"Governmental Agency" means any government or any governmental, semi-governmental or judicial entity or authority. It also includes any self regulatory organisation established under statute or any stock exchange.
" Group " means the Company and its Subsidiaries at any time.
" Guarantee " means the guarantee, undertaking and indemnity given under Clause 19 ( Guarantee ).
" Guarantor " means the Original Guarantor or an Additional Guarantor, unless it has ceased to be a Guarantor in accordance with Clause 26 ( Changes to the Obligors ).
"Indirect Tax" means any goods and services tax, consumption tax, value added tax or any tax of a similar nature.

 
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" Interest Period " means, in relation to a Loan, each period determined in accordance with Clause 11 ( Interest Periods ) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 10.4 ( Default interest ) .
" Interest Rate Agreement " means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement to which the Company or any of its Subsidiaries is a party.
" Interpolated Screen Rate " means, in relation to any Loan, the rate which results from interpolating on a linear basis between:
(a)
the applicable Screen Rate for the longest period (for which that Screen Rate is available) which is less than the Interest Period of that Loan; and
(b)
the applicable Screen Rate for the shortest period (for which that Screen Rate is available) which exceeds the Interest Period of that Loan,
each as of the Specified Time for the currency of that Loan.
" Ipso Facto Event " means a Borrower is the subject of:
(a)
an announcement, application, compromise, arrangement, managing controller, or administration as described in section 415D(1), 434J(1) or 451E(1) of the Corporations Act; or
(b)
any process which under law with a similar purpose may give rise to a stay on, or prevent of, the exercise of contractual rights.
" Lender " means:
(a)
any Original Lender; and
(b)
any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 25 ( Changes to the Lenders ),
which in each case has not ceased to be a Party in accordance with the terms of this Agreement.
" Loans " means a loan made or to be made under a Facility or the principal amount outstanding at any time under that loan.
" Majority Lenders " means a Lender or Lenders whose Commitments aggregate at least 66 2 / 3 % of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated at least 66 2 / 3 % of the Total Commitments immediately prior to the reduction). Where a Lender's Commitment has been reduced to zero, but it has an outstanding participation in any outstanding Utilisations, then for this purpose its Commitment will be taken to be the aggregate amount of its participation.
" Margin " means 0.80 per cent. per annum, subject to adjustment in accordance with Clause 10.2 ( Margin adjustment ).
" Material Acquisition " means any acquisition or series of related acquisitions that involves consideration (including non-cash consideration) with a fair market value, as of the date of the closing thereof, in excess of US$100,000,000 (or its equivalent in any other currency or currencies), provided that the Original Guarantor may, in its sole discretion, treat an acquisition or series of related acquisitions

 
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that involve consideration of less than US$100,000,000 (or its equivalent in any other currency or currencies) as a Material Acquisition.
" Material Disposition " means any disposition of property or series of related dispositions of property that involves consideration (including non-cash consideration) with a fair market value, as of the date of the closing thereof, in excess of US$100,000,000 (or its equivalent in any other currency or currencies), provided that the Original Guarantor may, in its sole discretion, treat a disposition or series of related dispositions that involves consideration of less than US$100,000,000 (or its equivalent in any other currency or currencies) as a Material Disposition.
" Month " means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:
(a)
(subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;
(b)
if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and
(c)
if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.
The above rules will only apply to the last Month of any period.
" Moody's " means Moody's Investors Service, Inc. and its successors.
" Multiemployer Plan " means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate of the Company is making, or is obligated to make, contributions or has within any of the preceding six plan years been obligated to make or accrue contributions.
" Multiple Employer Plan " means a Single Employer Plan, as defined in Section 4001(a)(15) of ERISA, which
(a)
is maintained for employees of the Company or an ERISA Affiliate and at least one Person other than the Company and its ERISA Affiliates; or
(b)
was so maintained and in respect of which the Company or an ERISA Affiliate could have liability under Section 4063, 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.
" New Lender " has the meaning given to that term in Clause 25 ( Changes to the Lenders ).
" Non-Extending Lender " has the meaning given to that term in Clause 2.3 ( Extension of Termination Date ).
" Obligor " means a Borrower or a Guarantor.
"Offshore Associate" means an Associate:

 
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(a)
which is a non-resident of Australia and does not become a Lender or receive a payment in carrying on a business in Australia at or through a permanent establishment of the Associate in Australia; or
(b)
which is a resident of Australia and which becomes a Lender or receives a payment in carrying on a business in a country outside Australia at or through a permanent establishment of the Associate in that country; and
which does not become a Lender and receive payment in the capacity of a clearing house, custodian, funds manager or responsible entity of a registered scheme.
" Original Financial Statements " means in relation to the Original Guarantor, its audited financial statements for its fiscal year ended 31 March 2018.
" Original Lenders " means each Original Facility A Lender.
" Original Obligor " means an Original Borrower or an Original Guarantor.
" Party " means a party to this Agreement.
" PBGC " means the U.S. Pension Benefit Guaranty Corporation.
" Pension Plan " means a Single Employer Plan or a Multiple Employer Plan or both.
" Person " means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.
" Pollution " means the release, emission or discharge into the Environment of a substance which directly or indirectly causes or has the potential to cause damage or harm to any aspect of the Environment, and includes:
(a)
pollution of air;
(b)
pollution of water;
(c)
noise; and
(d)
pollution of land.

 
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" Potential Event of Default " means a condition or event which, after notice or lapse of time or both, would constitute an Event of Default if that condition or event were not cured or removed within any applicable grace or cure period.
" PPSA " means the Personal Property Securities Act 2009 (Cth).
" Prime Bank " means a bank determined by ASX Benchmarks Pty Limited ACN 616 075 417 (or any other person which takes over the administration of the Screen Rate for Australian dollars) as being a Prime Bank or an acceptor or issuer of bills of exchange or negotiable certificates of deposit for the purposes of calculating that Screen Rate. If ASX Benchmarks Pty Limited ACN 616 075 417 or such other person ceases to make such determination, the Prime Banks shall be the Prime Banks last so appointed.
" Quotation Day " means, in relation to any period for which an interest rate is to be determined, the day immediately preceding the commencement of such period.
"Reference Bank Quotation" means any quotation supplied to the Agent by a Reference Bank.
" Reference Bank Rate " means the sum of:
(a)
the following rates:
(i)
the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request by the Reference Banks as the mid discount rate (expressed as a yield percent to maturity) observed by the relevant Reference Bank for marketable parcels of Australian dollar denominated bank accepted bills and negotiable certificates of deposit accepted or issued by Prime Banks, and which mature on the last day of the relevant period (plus or minus 5 Business Days); or
(ii)
(if there is no observable market rate for marketable parcels of Prime Bank Australian dollar securities referred to in paragraph (i) above), the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request by the Reference Banks as the rate at which the relevant Reference Bank could borrow funds in Australian dollars in the Australian interbank market and for the relevant period were it to do so by asking for and then accepting interbank offers for deposits in reasonable market sizes and for that period; and
(b)
0.05% per annum.
" Reference Banks " means the principal office in Melbourne of National Australia Bank Limited, Westpac Banking Corporation, Australia and New Zealand Banking Group Limited and Commonwealth Bank of Australia.
" Related Fund " in relation to a fund (the " first fund "), means a fund which is managed or advised by the same investment manager or investment adviser as the first fund or, if it is managed by a different investment manager or investment adviser, a fund whose investment manager or investment adviser is an Affiliate of the investment manager or investment adviser of the first fund.
" Relevant Market " means the Australian interbank market for bank accepted bills and negotiable certificates of deposits.

 
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" Repeating Representations " means each of the representations set out in Clause 20, other than Clause 20.9 ( Disclosure ).
" Representative " means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.
" Resignation Letter " means a letter substantially in the form set out in Schedule 6 ( Form of Resignation Letter ).
" S&P " means Standard & Poor's Financial Services LLC, a subsidiary of S&P Global Inc., and its successors.
" Sanctioned Country " means, at any time, a country or territory which is the subject or target of any comprehensive territorial Sanctions.
" Sanctioned Person " means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, or by the United Nations Security Council, the European Union, Her Majesty's Treasury of the United Kingdom, or Australia, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person controlled by any such Person.
" Sanctions " means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by:
(a)
the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State; or
(b)
the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom or Australia.
" Screen Rate " means:
(a)
the Australian Bank Bill Swap Reference Rate (Bid) administered by ASX Benchmarks Pty Limited ACN 616 075 417 (or any other person which takes over the administration of that rate) for the relevant period displayed on page BBSY of the Thomson Reuters Screen or page ASX29 of the Bloomberg screen (or any replacement Thomson Reuters page or Bloomberg page which displays that rate). If such page or service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Company; and
(b)
if the rate described in sub-paragraph (a) above is not available, the sum of:
(i)
the Australian Bank Bill Swap Reference Rate administered by ASX Benchmarks Pty Limited ACN 616 075 417 (or any other person which takes over the administration of that rate) for the relevant period displayed on page BBSW of the Thomson Reuters Screen or page ASX29 of the Bloomberg screen (or any replacement Thomson Reuters page or Bloomberg page which displays that rate). If such page or service ceases to be available, the Agent may specify another page or service displaying the relevant rate after consultation with the Company; and
(ii)
0.05% per annum.
" SEC " means the Securities and Exchange Commission and any successor agency.

 
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" Security " means a mortgage, charge, pledge, lien, encumbrance or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect, including any "security interest" as defined in sections 12(1) or (2) of the PPSA.
" Selection Notice " means a notice substantially in the form set out in Part II of Schedule 3 ( Requests ) given in accordance with Clause 11 ( Interest Periods ) in relation to a Facility.
" Significant Subsidiary " means, at any time, each Borrower and any Subsidiary of the Original Guarantor which accounts for more than 5% of consolidated total assets or 5% of consolidated revenue of the Original Guarantor determined in accordance with GAAP.
" Single Employer Plan " means a single employer plan, as defined in Section 4001(a)(15) of ERISA, which:
(a)
is maintained for employees of the Company or any ERISA Affiliate and no Person other than the Company and its ERISA Affiliates; or
(b)
was so maintained and in respect of which the Company or an ERISA Affiliate could have liability under Section 4062 or 4069 of ERISA in the event such plan has been or were to be terminated.
" Specified Time " means a time determined in accordance with Schedule 9 ( Timetables ).
“ Subsidiary ” of any Person means any corporation, association, partnership or other business entity of which at least 50% of the total voting power of shares of stock or other securities entitled to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof. Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Original Guarantor.
" Tax " means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).
" Tax Act " means the Income Tax Assessment Act 1936.
" Tax Consolidated Group " means a Consolidated Group or an MEC Group as defined in the Income Tax Assessment Act 1997.
" Tax Deduction " means a deduction or withholding for or on account of Tax from a payment under a Finance Document, other than a FATCA Deduction.
" Termination Date " means 27 November 2020 or such later date as may be extended from time to time pursuant to Clause 2.3.
" Total Commitments " means the aggregate of the Total Facility A Commitments, being A$800,000,000 at Effective Date No. 1.
" Total Facility A Commitments " means the aggregate of the Facility A Commitments being A$800,000,000 at Effective Date No. 1.
" Transfer Certificate " means a certificate substantially in the form set out in Schedule 4 ( Form of Transfer Certificate ) or any other form agreed between the Agent and the Company.

 
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" Transfer Date " means, in relation to an assignment or a transfer, the later of:
(a)
the proposed Transfer Date specified in the relevant Assignment Agreement or Transfer Certificate; and
(b)
the date on which the Agent executes the relevant Assignment Agreement or Transfer Certificate.
" Unpaid Sum " means any sum due and payable but unpaid by an Obligor under the Finance Documents.
" US " means the United States of America.
" US Tax Obligor " means:
(a)
a Borrower which is resident for tax purposes in the US; or
(b)
an Obligor some or all of whose payments under the Finance Documents are from sources within the US for US federal income tax purposes.
" Utilisation " means a utilisation of a Facility.
" Utilisation Date " means the date of a Utilisation, being the date on which the relevant Loan is to be made.
" Utilisation Request " means a notice substantially in the form set out in Part I of Schedule 3 ( Requests ).
" Withdrawal Liability " has the meaning given to it under Part I of Subtitle E of Title IV of ERISA.
1.2
Construction
(a)
Unless a contrary indication appears, any reference in this Agreement to:
(i)
the " Agent ", any " MLAB ", any " Finance Party ", any " Lender ", any " Obligor " or any " Party " shall be construed so as to include its executors, administrators, successors, substitutes (including by novation) and assigns to, or of, its rights and/or obligations under the Finance Documents;
(ii)
" assets " includes present and future properties, revenues and rights of every description;
(iii)
a " Finance Document " or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented, extended or restated;
(iv)
a " group of Lenders " includes all the Lenders;
(v)
" indebtedness " includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;
(vi)
a " person " or "entity" includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium or partnership or other entity (whether or not having separate legal personality) or two or more of them and any reference to a particular person or entity (as so defined) includes a reference to that person's or entity's executors, administrators, successors, substitutes (including by novation) and assigns;

 
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(vii)
a " regulation " includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or of any regulatory, self-regulatory or other authority or organisation and if not having the force of law, with which responsible entities in the position of the relevant Party would normally comply;
(viii)
a provision of law or a regulation is a reference to that provision as amended or re-enacted;
(ix)
a time of day is a reference to Melbourne time; and
(x)
the words "including" , "for example" or "such as" when introducing an example do not limit the meaning of the words to which the example relates to that example or examples of a similar kind.
(b)
The determination of the extent to which a rate is "for a period equal in length" to an Interest Period shall disregard any inconsistency arising from the last day of that Interest Period being determined pursuant to the terms of this Agreement.
(c)
Section, Clause and Schedule headings are for ease of reference only.
(d)
Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.
(e)
A Default (other than an Event of Default) is " continuing " if it has not been remedied to the satisfaction of the Agent (acting on the instructions of the Majority Lenders) or waived and an Event of Default is " continuing " if it has not been remedied to the satisfaction of the Agent (acting on the instructions of the Majority Lenders) or waived.
1.3
Currency symbols and definitions
"US" , "USD" and "US dollars" denote the lawful currency of the United States of America and "A$" , "AUD" and "Australian dollars" denote the lawful currency of Australia.
1.4
Obligors’ Agent
(a)
All communications and notices under the Finance Documents to and from the Obligors may be given to or by the Company and each Obligor irrevocably authorises each Finance Party to give those communications to the Company.
(b)
Each Obligor (other than the Company) irrevocably appoints the Company to act on its behalf as its agent in connection with the Finance Documents and irrevocably authorises the Company on its behalf to:
(i)
supply all information relating to itself as contemplated by any Finance Document to any Finance Party;
(ii)
give and receive all communications and notices (including any Utilisation Request) and instructions under the Finance Documents; and
(iii)
agree and sign all documents under or in connection with the Finance Documents (including any amendment, novation, supplement, extension or restatement of or to any Finance Document) without further reference to, or the consent of, that Obligor.

 
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(c)
An Obligor shall be bound by any act of the Company under this Clause 1.4 ( Obligors' agent ) irrespective of whether the Obligor knew about it or whether it occurred before the Obligor became an Obligor under any Finance Document.
(d)
To the extent that there is any conflict between any communication or notice by the Company on behalf of an Obligor and any other Obligor, those of the Company shall prevail.

 
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SECTION 2
THE FACILITIES
2.
THE FACILITIES
2.1
The Facilities
Subject to the terms of this Agreement, the Facility A Lenders make available to the Borrowers an Australian dollar term loan facility in an aggregate amount equal to the Total Facility A Commitments, it being understood and agreed that the Loans corresponding to the Facility A Commitment provided by Mizuho Bank, Ltd., Sydney Branch, as set forth on Part II of Schedule 1 were drawn prior to Effective Date No. 1 and no new Loans will be advanced by Mizuho Bank, Ltd., Sydney Branch, with respect to such Facility A Commitment on or after Effective Date No. 1.
2.2
[Reserved]

2.3
Extension of Termination Date
(a)
The Company may, not later than 30 days, and not earlier than 60 days, prior to each applicable anniversary of the original date of this Agreement during the term of this Agreement (as may be extended from time to time pursuant to this Clause 2.3) (the “ Current Anniversary Date ”), and not more than once in any calendar year, from time to time request that the Termination Date for all Eligible Lenders (as defined below) of a Facility be extended for a period of one year by delivering to the Agent a copy of an extension request signed by the Company (an “ Extension Request ”) in substantially the form of Schedule 11 hereto.
(b)
The Company may only deliver an Extension Request if, as of the date of any such extension of such Termination Date:,
(i)
the representations and warranties of the Company contained in Clause 20 ( Representations ) are correct in all material respects (except those representations and warranties qualified by materiality, which shall be true and correct) on and as of such date, as though made on and as of such date, except to the extent that any such representation or warranty expressly relates only to an earlier date, in which case they were correct in all material respects (except those representations and warranties qualified by materiality, which shall be true and correct) as of such earlier date; and
(ii)
no Event of Default or Potential Event of Default has occurred and is continuing.
(c)
The Agent shall promptly notify each Eligible Lender of its receipt of such Extension Request.
(d)
On or prior to the fifteenth day (the “ Determination Date ”) prior to the Current Anniversary Date, each Eligible Lender shall notify the Agent and the Company of its willingness or unwillingness to extend its Termination Date hereunder from the Termination Date in effect prior to such extension. Any Eligible Lender that shall fail to so notify the Agent and the Company, on or prior to the Determination Date, shall be deemed to have declined to so extend.
(e)
In the event that, on or prior to the Determination Date, Eligible Lenders representing more than 50% of the aggregate amount of the Commitments of all Eligible Lenders then in effect shall consent to such extension, the Agent shall so advise the Eligible Lenders and the Company and the Termination Date of each such consenting Eligible Lender (each a

 
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“ Consenting Lender ”) shall be extended to the date indicated in the Extension Request. Thereafter:
(i)
for each Consenting Lender, the term “Termination Date” as used herein with respect to the applicable Facility shall at all times refer to such date indicated in the Extension Request, unless it is later extended pursuant to this Clause 2.3; and
(ii)
for each Lender that is not an Eligible Lender or a Consenting Lender (each such Lender, a “ Non-Extending Lender ”) the term “Termination Date” with respect to the applicable Facility shall at all times refer to the date which was the Termination Date of such Lender then in effect prior to the delivery to the Agent of such Extension Request; provided that any Non-Extending Lender (including any direct or indirect assignee of any Non-Extending Lender) may, with the written consent of the Company, elect at any time prior to the Termination Date then applicable to its Commitments to consent to the Company’s prior Extension Request by delivering a written notice to such effect to the Company and the Agent, and upon the receipt by the Company and the Agent of such notice, the Termination Date of each such Non-Extending Lender with respect to the applicable Facility shall be extended to the date indicated in the applicable Extension Request and such Non-Extending Lender shall be deemed to be a Consenting Lender for all purposes hereunder.
(f)
In the event that, as of the Determination Date, the Consenting Lenders represent 50% or less of the aggregate amount of the Commitments of all Eligible Lenders then in effect, the Agent shall so advise the Eligible Lenders and the Company, and none of the Eligible Lenders’ Termination Dates shall be extended to the date indicated in the Extension Request and each Lender’s Termination Date with respect to the applicable Facility shall continue to be the date which was the Termination Date of such Lender immediately prior to the delivery to the Agent of such Extension Request.
(g)
For purposes of this Clause 2.3, the term “ Eligible Lenders ” means, with respect to any Extension Request and a Facility:
(i)
all Lenders with Loans under such Facility if no Lender’s Termination Date with respect to the applicable Facility had been extended pursuant to this Clause 2.3 prior to the delivery to the Agent of such Extension Request; and
(ii)
in all other cases, those Lenders with Loans under such Facility which had extended their Termination Date in the most recent extension of any Termination Date with respect to the applicable Facility effected pursuant to this Clause 2.3.
2.4
Finance Parties' rights and obligations
(a)
The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.
(b)
The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor is a separate and independent debt in respect of which a Finance Party shall be entitled to enforce its rights in accordance with paragraph (c) below. The rights

 
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of each Finance Party include any debt owing to that Finance Party under the Finance Documents and for the avoidance of doubt:
(i)
any part of a Loan; or
(ii)
any other amount owed by an Obligor which relates to a Finance Party's participation in a Facility or its role under a Finance Document (including any such amount payable to the Agent on its behalf)
is a debt owing to that Finance Party by that Obligor.
(c)
A Finance Party may, except as specifically provided in the Finance Documents, separately enforce its rights under or in connection with the Finance Documents.
SECTION 3
PURPOSE

3.
PURPOSE
3.1
Purpose
The Borrowers shall apply all amounts borrowed under Facility A towards refinancing certain existing indebtedness, working capital and other general corporate funding purposes.
3.2
Monitoring
No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.


 
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SECTION 4
CONDITIONS OF UTILISATION
4.
CONDITIONS OF UTILISATION
4.1
Initial conditions precedent
No Borrower may deliver a Utilisation Request unless the Agent has received all of the documents and other evidence listed in Part I of Schedule 2 ( Conditions precedent ) in form and substance reasonably satisfactory to the Agent. The Agent shall notify the Company and the Lenders promptly upon being so satisfied.
4.2
Further conditions precedent
The Lenders will only be obliged to comply with Clause 5.4 ( Lenders' participation ) if on the proposed Utilisation Date:
(a)
no Default is continuing or would result from the proposed Utilisation; and
(b)
the Repeating Representations to be made by each Obligor are true in all material respects (except those representations and warranties qualified by materiality, which shall be true and correct) on and as of such date, as though made on and as of such date, except to the extent that any such representation or warranty expressly relates only to an earlier date, in which case it was correct in all material respects (except those representations and warranties qualified by materiality, which shall be true and correct) as of such earlier date.
4.3
Maximum number of Utilisations
(a)
A Borrower may not deliver a Utilisation Request if as a result of the proposed Utilisation, eight or more Loans would be outstanding.
(b)
A Borrower may not request that a Loan be divided if, as a result of the proposed division, eight or more Loans would be outstanding.
4.4
Payment of Loan proceeds by the Agent
The proceeds of each Loan (other than, for the avoidance of doubt, the Loans corresponding to the Facility A Commitment of Mizuho Bank, Ltd., Sydney Branch set forth on Part II of Schedule 1, which were drawn prior to the Effective Date No. 1) shall be credited to:
Currency
Name on Account
Bank Name
IBAN
SWIFT Code
AUD
CSC Australia Pty, Limited
Bank of America, N.A.
2 King Edward Street,
London, EC1A 1HQ UK
GB07 BOFA 1650 5057 5250 19
BOFAAGB22
Cover at:
Bank of America, N.A.
MLC Centre
19-29 Martin Place 2000 Australia
 
 
BOFAAUSX

 
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or to such other account in the Company’s name as it may notify the Agent (by not less than five Business Days' notice) held with a bank in the principal financial centre of the country of the relevant currency.

 
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SECTION 5
UTILISATION - LOANS
5.
UTILISATION - LOANS
5.1
Delivery of a Utilisation Request for Loans
A Borrower may utilise a Facility by delivery to the Agent of a duly completed Utilisation Request not later than the Specified Time.
5.2
Completion of a Utilisation Request for Loans
(a)
Each Utilisation Request for a Loan is irrevocable and will not be regarded as having been duly completed unless:
(i)
it identified the Facility to be utilized;
(ii)
the proposed Utilisation Date is a Business Day within the Availability Period applicable to that Facility;
(iii)
the currency and amount of the Utilisation comply with Clause 5.3 ( Amount ); and
(iv)
the proposed Interest Period complies with Clause 11 ( Interest Periods ).
(b)
Only one Loan may be requested in each Utilisation Request.
5.3
Amount
The amount of the proposed Loan must be a minimum of A$10,000,000 or, if less, the Available Facility.
5.4
Lenders' participation
(a)
If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Loan available by the Utilisation Date through its Facility Office.
(b)
The amount of each Lender's participation in each Loan will be equal to the proportion borne by its Available Commitment to the Available Facility immediately prior to making the Loan.
5.5
Cancellation of Commitment
(a)
The Facility A Commitments which, at that time, are unutilised shall be immediately cancelled at the end of the Availability Period for Facility A.


 
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SECTION 6
[RESERVED]
SECTION 7
[RESERVED]
SECTION 8
REPAYMENT, PREPAYMENT AND CANCELLATION
1.
REPAYMENT
1.1
Repayment of Loans
(a)
Each Borrower which has drawn a Loan shall repay it on the applicable Termination Date.
(b)
No Borrower may reborrow any part of a Facility which is repaid.
SECTION 9
PREPAYMENT AND CANCELLATION
2.
PREPAYMENT AND CANCELLATION
2.1
Illegality
If, in any applicable jurisdiction, it becomes unlawful (or impossible as a result of a change in law or regulation) for any Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Utilisation or it becomes unlawful or impossible as a result of a change in law or regulation for any Affiliate of a Lender to do so:
(a)
that Lender shall promptly notify the Agent upon becoming aware of that event;
(b)
upon the Agent notifying the Company, each Available Commitment of that Lender will be immediately cancelled; and
(c)
to the extent that the Lender's participation has not been transferred pursuant to paragraph (d) of Clause 9.6 ( Right of replacement or repayment and cancellation in relation to a single Lender ), the Borrower shall repay that Lender's participation in the Utilisations made to that Borrower on the last day of the Interest Period for each Utilisation occurring after the Agent has notified the Company or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law) and that Lender's corresponding Commitment(s) shall be cancelled in the amount of the participations repaid.
2.2
[Reserved]
2.3
Voluntary cancellation
The Company may, if it gives the Agent not less than five Business Days' (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being a minimum amount of A$10,000,000) of an Available Facility. Any cancellation under this

 
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Clause 9.3 shall reduce the Commitments of the Lenders rateably under the applicable Facility.
2.4
Voluntary prepayment of Loans
A Borrower to which a Loan has been made may, if it gives the Agent not less than five Business Days' (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of that Loan (but, if in part, being an amount that reduces the Loan by a minimum amount of A$10,000,000).
2.5
[Reserved]
2.6
Right of replacement or repayment and cancellation in relation to a single Lender
(a)
If:
(i)
an additional amount is payable to any Lender by an Obligor under Clause 14.2(c) ( Tax gross-up ); or
(ii)
any Lender claims any sum from the Company under Clause 14.3 ( Tax indemnity ) or Clause 15.1 ( Increased costs ),
the Company may, whilst the circumstance giving rise to the requirement for that increase or claim continues, give the Agent notice of cancellation of the Commitment of that Lender and its intention to procure the repayment of that Lender's participation in the Utilisations or give the Agent notice of its intention to replace that Lender in accordance with paragraph (d) below; or
(b)
On receipt of a notice of cancellation referred to in paragraph (a) above in relation to a Lender, the Commitment of that Lender shall immediately be reduced to zero.
(c)
On the last day of each Interest Period which ends after the Company has given notice of cancellation under paragraph (a) above (or, if earlier, the date specified by the Company in that notice), the Borrower to which a Utilisation is outstanding shall repay that Lender's participation in that Utilisation.
(d)
If:
(i)
any of the circumstances set out in paragraph (a) above apply to a Lender; or
(ii)
an Obligor becomes obliged to pay any amount in accordance with Clause 9.1 ( Illegality ) to any Lender,
the Company may, on three Business Days' prior notice to the Agent and that Lender, replace that Lender by requiring that Lender to (and, to the extent permitted by law, that Lender shall) transfer pursuant to Clause 25 ( Changes to the Lenders ) all (and not part only) of its rights and obligations under this Agreement to a Lender or another bank, financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (including credit derivatives)

 
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in any such case selected by the Company which confirms its willingness to assume and does assume all the obligations of the transferring Lender in accordance with Clause 25 ( Changes to the Lenders ) for a purchase price in cash payable at the time of the transfer in an amount equal to the outstanding principal amount of such Lender's participation in the outstanding Utilisations and all accrued interest, Break Costs and other amounts payable in relation thereto under the Finance Documents.
(e)
The replacement of a Lender pursuant to paragraph (d) above shall be subject to the following conditions:
(i)
the Company shall have no right to replace the Agent;
(ii)
neither the Agent nor any Lender shall have any obligation to find a replacement Lender;
(iii)
in no event shall the Lender replaced under paragraph (d) above be required to pay or surrender any of the fees received by such Lender pursuant to the Finance Documents; and
(iv)
the Lender shall only be obliged to transfer its rights and obligations pursuant to paragraph (d) above once it is satisfied that it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to that transfer.
(f)
A Lender shall perform the checks described in paragraph (e)(iv) above as soon as reasonably practicable following delivery of a notice referred to in paragraph (d) above and shall notify the Agent and the Company when it is satisfied that it has complied with those checks.
2.7
Right of cancellation in relation to a Defaulting Finance Party
(a)
The Company may give the Agent five Business Days' notice of cancellation of each Available Commitment of a Lender that is, and continues to be, a Defaulting Finance Party.
(b)
On the notice becoming effective, each Available Commitment of the Defaulting Finance Party will reduce to zero.
(c)
The Agent shall notify all the Lenders as soon as practicable after receiving the notice.
2.8
Restrictions
(a)
Any notice of cancellation or prepayment given by any Party under this Clause 9 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.
(b)
Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

 
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(c)
No Borrower may reborrow any part of a Facility which is prepaid.
(d)
The Borrowers shall not repay or prepay all or any part of the Utilisations or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.
(e)
No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.
(f)
If the Agent receives a notice under this Clause 9 it shall promptly forward a copy of that notice to either the Company or the affected Lender, as appropriate.
(g)
If all or part of any Lender's participation in a Utilisation under a Facility is repaid or prepaid and is not available for redrawing (other than by operation of Clause 4.2 ( Further conditions precedent )), an amount of the Lender's Commitment (equal to the amount of the participation which is repaid or prepaid) in respect of such Facility will be deemed to be cancelled on the date of repayment or prepayment.
2.9
Application of prepayments
Any prepayment of a Utilisation pursuant to Clause 9.4 ( Voluntary prepayment of Loans ) shall be applied pro rata to each Lender's participation in that Utilisation.


 
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SECTION 10
COSTS OF UTILISATION
3.
INTEREST
3.1
Calculation of interest
The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of:
(a)
the applicable Margin; and
(b)
BBSY Bid.
3.2
Margin adjustment
(a)
Subject to this clause 10.2, the Margin applicable to each Loan shall be the rate per annum specified in the definition of Margin set out in Clause 1.1 ( Definitions ) adjusted by reference to the credit rating of the Original Guarantor provided by the Credit Agencies set out in the following table:
Credit Rating
Margin
(per annum)
S&P
Moody’s
≥ A+
≥ A1
0.60%
A
A2
0.65%
A-
A3
0.70%
BBB+
Baa1
0.75%
BBB
Baa2
0.80%
≤ BBB-
≤ Baa3
0.95%

(b)
If at any time:
(i)
the credit rating issued by one Credit Agency is not consistent with the corresponding credit rating issued by the other Credit Agency, the Margin shall be the rate corresponding to the higher of the two credit ratings, unless there is a split in such credit ratings of more than one level, in which case the level that is one level higher than the level of the lower credit rating shall apply;
(ii)
a credit rating is not available from one Credit Agency, the Margin shall be the rate corresponding to the credit rating issued by the other Credit Agency;
(iii)
no credit rating is available from either Credit Agency for any reason other than such agencies cease providing public debt ratings generally for any day, the Margin shall be 0.95%; and

 
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(iv)
either Credit Agency change the basis on which its ratings are established and or described, each reference in this Agreement to a credit rating announced by the applicable Credit Agency shall be deemed to refer to the then equivalent rating established by the other Credit Agency.
(c)
Any adjustment to the Margin under this Clause 10.2 shall take effect on the date on which such adjustment is publicly announced by the applicable Credit Agency.
3.3
Payment of interest
The Borrower to which a Loan has been made shall pay accrued interest on that Loan on the last day of each Interest Period (and, if the Interest Period is longer than three Months, on the dates falling at three-monthly intervals after the first day of the Interest Period).
3.4
Default interest
(a)
If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is the sum of 2 per cent per annum and the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 10.4 shall be immediately payable by the Obligor on demand by the Agent.
(b)
If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:
(i)
the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and
(ii)
the rate of interest applying to the overdue amount during that first Interest Period shall be the sum of 2 per cent per annum and the rate which would have applied if the overdue amount had not become due.
(c)
Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.
3.5
Notification of rates of interest
(a)
The Agent shall promptly notify the relevant Lenders and the relevant Borrower of the determination of a rate of interest under this Agreement.
(b)
The Agent shall promptly notify the relevant Borrower of each Funding Rate relating to a Loan.
SECTION 11
INTEREST PERIODS

 
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4.
INTEREST PERIODS
4.1
Selection of Interest Periods
(a)
A Borrower (or the Company on behalf of a Borrower) may select an Interest Period for a Loan in the Utilisation Request for that Loan or (if the Loan has already been borrowed) in a Selection Notice.
(b)
Each Selection Notice for a Loan is irrevocable and must be delivered to the Agent by the Borrower (or the Company on behalf of a Borrower) to which that Loan was made not later than the Specified Time.
(c)
If a Borrower (or the Company) fails to deliver a Selection Notice to the Agent in accordance with paragraph (b) above, the relevant Interest Period will be one Month.
Subject to this Clause 11, a Borrower (or the Company) may select an Interest Period of one, two, three or six Months or any other period agreed between the Company and the Agent (acting on the instructions of the Majority Lenders).
(d)
An Interest Period for a Loan shall not extend beyond the applicable Termination Date.
(e)
Each Interest Period for a Loan shall start on the Utilisation Date or (if already made) on the last day of its preceding Interest Period.
4.2
Non-Business Days
If an Interest Period would otherwise end on a day which is not a Business Day, that Interest Period will instead end on the next Business Day in that calendar month (if there is one) or the preceding Business Day (if there is not).
4.3
Consolidation and division of Loans
If two or more Interest Periods relate to Loans made to the same Borrower and end on the same date, those Loans will, unless that Borrower (or the Company on its behalf) specifies to the contrary in the Selection Notice for the next Interest Period, be consolidated into, and treated as, a single Loan on the last day of the Interest Period.

SECTION 12
CHANGES TO THE CALCULATION OF INTEREST
5.
CHANGES TO THE CALCULATION OF INTEREST
5.1
Unavailability of Screen Rate
(a)
Interpolated Screen Rate : If no Screen Rate is available for BBSY Bid for the Interest Period of a Loan, the applicable BBSY Bid shall be the Interpolated Screen Rate for a period equal in length to the Interest Period of that Loan.
(b)
Reference Bank Rate : If no Screen Rate is available for BBSY Bid for:
(i)
the currency of a Loan; or

 
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(ii)
the Interest Period of a Loan and it is not possible to calculate the Interpolated Screen Rate,
the applicable BBSY Bid shall be the Reference Bank Rate as of the Specified Time for the currency of that Loan and for a period equal in length to the Interest Period of that Loan.
(c)
Cost of Funds : If paragraph (b) above applies but no Reference Bank Rate is available for the relevant currency and Interest Period there shall be no BBSY Bid for that Loan and Clause 12.4 (C ost of funds ) shall apply to that Loan for that Interest Period.
5.2
Calculation of Reference Bank Rate
(a)
Subject to paragraph (b) below, if BBSY Bid is to be determined on the basis of a Reference Bank Rate but a Reference Bank does not supply a quotation by the Specified Time, the Reference Bank Rate shall be calculated on the basis of the quotations of the remaining Reference Banks.
(b)
If at or about noon on the Quotation Day, none or only one of the Reference Banks supplies a quotation, there shall be no Reference Bank Rate for that Interest Period.
5.3
Market disruption
If before 5:00 pm on the Business Day after the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in a Loan exceed 40 per cent. of that Loan) that as a result of market circumstances not limited to it (whether or not those circumstances, or their effect on the Lender’s cost of funds, subsist on the date it becomes a Lender), the cost to it of funding its participation in that Loan (from whatever source it may reasonably select) would be in excess of BBSY Bid (in which case an " Affected Lender " will be a Lender which gives such a notification), then Clause 12.4 ( Cost of funds ) shall apply to the participation in the Loan of each Affected Lender for the relevant Interest Period.
5.4
Cost of funds
(a)
If this Clause 12.4 applies, the rate of interest on each relevant Lender's share of the relevant Loan for the relevant Interest Period shall be the percentage rate per annum which is the sum of:
(i)
the Margin; and
(ii)     
(A)
in the circumstances described in Clause 12.3 ( Market disruption ), the rate notified to the Agent by the relevant Affected Lender; and
(B)
in the circumstances described in Clause 12.1 ( Unavailability of Screen Rate ), the rate of interest notified to the Agent by the Lender,
to be that which expresses as a percentage rate per annum, the cost to the Lender of funding its participation in that Loan from whatever source it may reasonably

 
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select. That rate is to be notified as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period.
(b)
If this Clause 12.4 applies and the Agent or the Company so requires, the Agent and the Company shall enter into negotiations (for a period of not more than 30 days) with a view to agreeing a substitute basis for determining the rate of interest.
(c)
Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of all the Lenders and the Company, be binding on all Parties.
5.5
Agent's role and confidentiality
(a)
The Agent shall promptly notify the Company if there is a market disruption event under Clause 12.3 ( Market disruption ) and of the identity of any Lender or Lenders giving a notice under that Clause.
(b)
A Lender who gives a notification under Clause 12.3 ( Market disruption ) at any time before 5:00 pm on the Business Day after the relevant Quotation Day may in that notification request the Agent to notify each other Lender that it has received a notification under Clause 12.3 ( Market disruption ) (without giving details) and the Agent shall promptly comply with the request.
5.6
Break Costs
(a)
A Borrower shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.
(b)
Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.
SECTION 13
FEES
6.
FEES
6.1
Arrangement and agency fees
The Company shall pay or cause to be paid (i) to the MLABs an arrangement fee in the amount and at the times agreed in the applicable Fee Letter and (ii) the Agent (for its own account) an agency fee in the amount and at the times agreed in the Agency and Arranger Fee Letter.

 
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SECTION 14
ADDITIONAL PAYMENT OBLIGATIONS
7.
TAX GROSS UP AND INDEMNITIES
7.1
Definitions
(a)
In this Clause 14:
" Protected Party " means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.
"Tax Credit" means a credit against, relief or remission for, or repayment of any Tax.
"Tax Payment" means either the payment of an additional amount by an Obligor to a Finance Party under Clause 14.2 ( Tax gross-up ) or a payment under Clause 14.3 ( Tax indemnity ).
7.2
Tax Gross-up
(a)
Each Obligor shall make all payments to be made by it under the Finance Documents without any Tax Deduction unless such Tax Deduction is required by law.
(b)
The Company or a Finance Party shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. If the Agent receives such notification from a Lender it shall notify the Company and that Obligor.
(c)
If a Tax Deduction is required by law to be made by an Obligor except in relation to a Tax described in Clause 14.3(b)(i) or 14.3(b)(ii) ( Tax indemnity ), the Obligor shall pay an additional amount together with the payment so that, after making any Tax Deduction, the Finance Party receives an amount equal to the payment which would have been due if no Tax Deduction had been required.
(d)
If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.
(e)
Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment evidence satisfactory to that Finance Party, acting reasonably, that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.
7.3
Tax indemnity

 
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(a)
The Company shall (within ten Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document or a transaction or payment under it.
(b)
Paragraph (a) shall not apply:
(i)
with respect to any Tax assessed on a Finance Party if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party:
(A)
under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or
(B)
under the law of the jurisdiction in which that Finance Party's Facility Office is located in respect of amounts received or receivable in that jurisdiction; or
(ii)
with respect to Australian Withholding Tax in respect of any interest paid to an Offshore Associate of the relevant Obligor; or
(iii)
to the extent the relevant loss, liability or cost:
(A)
is compensated for by an increased payment under Clause 14.2 ( Tax gross-up ); or
(B)
relates to a FATCA Deduction required to be made by a Party.
(c)
A Protected Party making or intending to make a claim pursuant to paragraph (a) above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the Company.
(d)
A Protected Party shall, on receiving a payment from an Obligor under this Clause 14.3, notify the Agent.
7.4
Tax Credit
If an Obligor makes a Tax Payment and the relevant Finance Party determines in its absolute discretion that:
(a)
a Tax Credit is attributable to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was required; and
(b)
that Finance Party has obtained, utilised and retained that Tax Credit,

 
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subject to Clause 29 ( Conduct of business by the Finance Parties ), the Finance Party shall pay an amount to the Obligor which that Finance Party determines in its absolute discretion will leave it (after that payment) in the same after-Tax position as it would have been in had the circumstances not arisen which caused the Tax Payment to be required to be made by the Obligor.
7.5
Stamp duties and Taxes
The Company shall:
(a)
pay; and
(b)
within three Business Days of demand, indemnify each Finance Party against any cost, expense, loss or liability that Finance Party incurs in relation to,
all stamp duty, registration or other similar Tax payable in respect of any Finance Document except Transfer Certificates.
7.6
Indirect Tax
(a)
All payments to be made by an Obligor under or in connection with any Finance Document have been calculated without regard to Indirect Tax. If all or part of any such payment is the consideration for a taxable supply or chargeable with Indirect Tax then, when the Obligor makes the payment:
(i)
it must pay to the Finance Party an additional amount equal to that payment (or part) multiplied by the appropriate rate of Indirect Tax; and
(ii)
the Finance Party will promptly provide to the Obligor a tax invoice complying with the relevant law relating to that Indirect Tax.
(b)
Where a Finance Document requires an Obligor to reimburse or indemnify a Finance Party for any costs or expenses, that Obligor shall also at the same time pay and indemnify that Finance Party against all Indirect Tax incurred by that Finance Party in respect of the costs or expenses save to the extent that that Finance Party is entitled to repayment or credit in respect of the Indirect Tax. The Finance Party will promptly provide to the Obligor a tax invoice complying with the relevant law relating to that Indirect Tax.
7.7
FATCA Information
(a)
Subject to paragraph (c) below, each Party shall, within ten Business Days of a reasonable request by another Party:
(i)
confirm to that other Party whether it is:
(A)
a FATCA Exempt Party; or
(B)
not a FATCA Exempt Party;
(ii)
supply to that other Party such forms, documentation and other information relating to its status under FATCA as that other Party reasonably requests for the purposes of that other Party's compliance with FATCA;

 
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(iii)
supply to that other Party such forms, documentation and other information relating to its status as that other Party reasonably requests for the purposes of that other Party's compliance with any other law, regulation, or exchange of information regime.
(b)
If a Party confirms to another Party pursuant to paragraph (a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.
(c)
Paragraph (a) above shall not oblige any Finance Party to do anything, and paragraph (a)(iii) above shall not oblige any other Party to do anything, which would or might in its reasonable opinion constitute a breach of:
(i)
any law or regulation;
(ii)
any fiduciary duty; or
(iii)
any duty of confidentiality.
(d)
If a Party fails to confirm whether or not it is a FATCA Exempt Party or to supply forms, documentation or other information requested in accordance with paragraph (a)(i) or (ii) above (including, for the avoidance of doubt, where paragraph (c) above applies), then such Party shall be treated for the purposes of the Finance Documents (and payments under them) as if it is not a FATCA Exempt Party until such time as the Party in question provides the requested confirmation, forms, documentation or other information.
(e)
If a Borrower is a US Tax Obligor or the Agent reasonably believes that its obligations under FATCA or any other applicable law or regulation require it, each Lender shall, within ten Business Days of:
(i)
where an Original Borrower is a US Tax Obligor and the relevant Lender is an Original Lender, the original date of this Agreement;
(ii)
where a Borrower is a US Tax Obligor on a Transfer Date and the relevant Lender is a New Lender, the relevant Transfer Date;
(iii)
the date a new US Tax Obligor accedes as a Borrower; or
(iv)
where a Borrower is not a US Tax Obligor, the date of a request from the Agent,
supply to the Agent:
(A)
a withholding certificate on Form W-8, Form W-9 or any other relevant form; or

 
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(B)
any withholding statement or other document, authorisation or waiver as the Agent may require to certify or establish the status of such Lender under FATCA or that other law or regulation.
(f)
The Agent shall provide any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) above to the relevant Borrower.
(g)
If any withholding certificate, withholding statement, document, authorisation or waiver provided to the Agent by a Lender pursuant to paragraph (e) above is or becomes materially inaccurate or incomplete, that Lender shall promptly update it and provide such updated withholding certificate, withholding statement, document, authorisation or waiver to the Agent unless it is unlawful for the Lender to do so (in which case the Lender shall promptly notify the Agent). The Agent shall provide any such updated withholding certificate, withholding statement, document, authorisation or waiver to the relevant Borrower.
(h)
The Agent may rely on any withholding certificate, withholding statement, document, authorisation or waiver it receives from a Lender pursuant to paragraph (e) or (g) above without further verification. The Agent shall not be liable for any action taken by it under or in connection with paragraphs (e), (f) or (g) above.
7.8
FATCA Deduction
(a)
Each Party may make any FATCA Deduction it is required to make by FATCA, and any payment required in connection with that FATCA Deduction, and no Party shall be required to increase any payment in respect of which it makes such a FATCA Deduction or otherwise compensate the recipient of the payment for that FATCA Deduction.
(b)
Each Party shall promptly, upon becoming aware that it must make a FATCA Deduction (or that there is any change in the rate or the basis of such FATCA Deduction), notify the Party to whom it is making the payment and, in addition, shall notify the Company and the Agent and the Agent shall notify the other Finance Parties.

 
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SECTION 15
INCREASED COSTS
8.
INCREASED COSTS
8.1
Increased costs
(a)
Subject to Clause 15.3 ( Exceptions ) the Company shall, within three Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of:
(i)
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation;
(ii)
compliance with any law or regulation,
made after the original date of this Agreement. This includes any law or regulation with regard to capital adequacy, prudential limits, liquidity, reserve assets or Tax.
(b)
In this Agreement " Increased Costs " means:
(i)
a reduction in the rate of return from a Facility or on a Finance Party's (or its Affiliate's) overall capital (including as a result of any reduction in the rate of return on capital as more capital is required to be allocated);
(ii)
an additional or increased cost; or
(iii)
a reduction of any amount due and payable under any Finance Document,
which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document.
8.2
Increased cost claims
(a)
A Finance Party intending to make a claim pursuant to Clause 15.1 ( Increased costs ) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the Company.
(b)
Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.
8.3
Exceptions
(a)
Clause 15.1 ( Increased costs ) does not apply to the extent any Increased Cost is:
(i)
attributable to a Tax Deduction required by law to be made by an Obligor;
(ii)
attributable to a FATCA Deduction required to be made by a Party;
(iii)
compensated for by Clause 14.3 ( Tax indemnity ) (or would have been compensated for under Clause 14.3 ( Tax indemnity ) but was not so

 
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compensated solely because any of the exclusions in paragraph (b) of Clause 14.3 ( Tax indemnity ) applied); or
(iv)
attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.

 
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SECTION 16
OTHER INDEMNITIES
9.
OTHER INDEMNITIES
9.1
Currency indemnity
(a)
If any sum due from an Obligor under the Finance Documents (a " Sum "), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the " First Currency ") in which that Sum is payable into another currency (the " Second Currency ") for the purpose of:
(i)
making or filing a claim or proof against that Obligor;
(ii)
obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,
that Obligor shall as an independent obligation, within three Business Days of demand, indemnify each Finance Party to whom that Sum is due against any cost, expense, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.
(b)
Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.
9.2
Other indemnities
The Company shall (or shall procure that an Obligor will), within three Business Days of demand, indemnify each Finance Party against any cost, expense, loss or liability (including legal fees) incurred by that Finance Party as a result of:
(a)
the occurrence of any Event of Default;
(b)
any information produced or approved by the Company under or in connection with the Finance Documents or the transactions they contemplate being or being alleged to be misleading or deceptive in any respect;
(c)
any enquiry, investigation, subpoena (or similar order) or litigation with respect to any Obligor or with respect to the transactions contemplated or financed under this Agreement;
(d)
a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, expense, loss or liability arising as a result of Clause 30 ( Sharing among the Finance Parties );
(e)
funding, or making arrangements to fund, its participation in a Utilisation requested by a Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone);

 
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(f)
a Utilisation (or part of a Utilisation) not being prepaid in accordance with a notice of prepayment given by a Borrower or the Company; or
(g)
an amount being paid or payable by that Finance Party to the Agent or another Finance Party under Clause 28.11 ( Lenders' indemnity to the Agent ); or
(h)
security being provided by that Finance Party to the Agent under Clause 28.7(j) ( Rights and discretions ) or Clause 28.11(d) ( Lenders' indemnity to the Agent ) including costs and expenses in providing that security and, if the security is cash, the Company shall pay interest on the amount provided from the date of provision in the manner provided in Clause 10.4 ( Default interest ).
9.3
Indemnity to the Agent
The Company shall promptly indemnify the Agent against any cost, expense, loss or liability incurred by the Agent (acting reasonably) as a result of:
(a)
investigating any event which it reasonably believes is a Default;
(b)
acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised; or
(c)
instructing lawyers, accountants, tax advisers, surveyors or other experts or professional advisers as permitted under this Agreement.

 
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SECTION 17
MITIGATION BY THE FINANCE PARTIES
10.
MITIGATION BY THE FINANCE PARTIES
10.1
Mitigation
(a)
Each Finance Party shall negotiate in good faith with a view to finding a way to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or its Commitment being cancelled pursuant to, any of Clause 9.1 ( Illegality ), Clause 14 ( Tax gross-up and indemnities ) (other than Clause 14.6 ( Indirect Tax )) or Clause 15 ( Increased costs ) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.
(b)
Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents.
10.2
Limitation of liability
(a)
The Company shall promptly indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 17.1 ( Mitigation ).
(b)
A Finance Party is not obliged to take any steps under Clause 17.1 ( Mitigation ) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.

 
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SECTION 18
COSTS AND EXPENSES
11.
COSTS AND EXPENSES
11.1
Transaction expenses
The Company shall promptly on demand pay the Agent and the MLABs the amount of all costs and expenses (including legal fees) reasonably incurred by any of them in connection with the negotiation, preparation, printing, execution, registration and syndication of:
(a)
this Agreement and any other documents referred to in this Agreement; and
(b)
any other Finance Documents executed after the original date of this Agreement.
11.2
Amendment and other costs
If:
(a)
an Obligor requests an amendment, waiver or consent or makes or initiates a request or demand under the PPSA; or
(b)
an amendment is required pursuant to Clause 32.10 ( Change of currency ),
the Company shall, within ten Business Days of demand, reimburse the Agent and each other Finance Party for the amount of all costs and expenses (including legal fees) reasonably incurred by the Agent or the Finance Party in responding to, evaluating, negotiating or complying with that request or requirement.
11.3
Enforcement costs
The Company shall, within three Business Days of demand, pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by that Finance Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

 
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SECTION 19
GUARANTEE
12.
GUARANTEE
12.1
Guarantee
Each Guarantor irrevocably and unconditionally jointly and severally:
(a)
guarantees to each Finance Party punctual performance by each Obligor of all that Obligor's obligations under the Finance Documents;
(b)
undertakes with each Finance Party that:
(i)
whenever an Obligor does not pay any amount when due under or in connection with any Finance Document (or anything which would have been due if the Finance Document or the amount was enforceable, valid and not illegal), within ten Business Days of demand by the Finance Party, that Guarantor shall pay that amount as if it was the principal obligor; and
(ii)
if an Ipso Facto Event is continuing, then within ten Business Days of demand by the Agent, that Guarantor shall pay all Loans, accrued interest and other amounts referred to in Clause 24.12(b) ( Acceleration ) as if it was the principal obligor; and
(c)
agrees with each Finance Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify that Finance Party within ten Business Days of demand against any cost, expense, loss or liability it incurs as a result of an Obligor not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document on the date when it would have been due. The amount of the cost, expense, loss or liability shall be equal to the amount which that Finance Party would otherwise have been entitled to recover.
Each of paragraphs (a), (b)(i), (b)(ii) and (c) is a separate obligation. None is limited by reference to the other.
12.2
Continuing guarantee
This Guarantee is a continuing obligation and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.
12.3
Reinstatement
If any payment to or any discharge, release or arrangement given or entered into by a Finance Party (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is avoided or reduced for any reason (including as a result of insolvency, breach of fiduciary or statutory duties or any similar event) in whole or in part, then the liability of each Guarantor under this Clause 19 will continue or be reinstated as if the discharge, release or arrangement had not occurred and any relevant security shall be reinstated.

 
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12.4
Waiver of defences
The obligations of each Guarantor under this Clause 19 will not be affected by an act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 19 (without limitation and whether or not known to it or any Finance Party) including:
(a)
any time, waiver or other concession or consent granted to, or composition with, any Obligor or other person;
(b)
the release or resignation of any other Obligor or any other person;
(c)
any composition or arrangement with any creditor of any Obligor or other person;
(d)
the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, execute, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
(e)
any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;
(f)
any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of any Finance Document or any other document or security including any change in the purpose of, any extension of or any increase in any facility or the addition of any new facility under any Finance Document or other document or security;
(g)
any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security;
(h)
any set off, combination of accounts or counterclaim;
(i)
any insolvency or similar proceedings; or
(j)
this Agreement or any other Finance Document not being executed by or binding against any other Obligor or any other party.
References in Clause 19.1 to obligations of an Obligor or amounts due will include what would have been obligations or amounts due but for any of the above, as well as obligations and amounts due which result from any of the above.
12.5
Immediate recourse
Each Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 19. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.
12.6
Appropriations

 
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Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:
(a)
refrain from applying or enforcing any other moneys, security or rights held or received or recovered (by set off or otherwise) by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and
(b)
without limiting paragraph (a), refrain from applying any moneys received or recovered (by set off or otherwise) from any Guarantor or on account of any Guarantor's liability under this Clause 19 in discharge of that liability or any other liability of an Obligor and claim or prove against anyone in respect of the full amount owing by the Obligors.
12.7
Deferral of Guarantors' rights
Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents or by reason of any amount being payable, or liability arising, under this Clause 19:
(a)
to be indemnified by an Obligor;
(b)
to claim any contribution from any other guarantor of or provider of security for any Obligor's obligations under the Finance Documents;
(c)
to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party;
(d)
to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which any Guarantor has given a Guarantee under Clause 19.1 ( Guarantee );
(e)
to exercise any right of set-off against any Obligor;
(f)
to claim or prove as a creditor of any Obligor in competition with any Finance Party; and/or
(g)
in any form of administration of an Obligor (including liquidation, winding up, bankruptcy, voluntary administration, dissolution or receivership or any analogous process) prove for or claim, or exercise any vote or other rights in respect of, any indebtedness of any nature owed to it by the Obligor.
If a Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts

 
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which may be or become payable to the Finance Parties by the Obligors under or in connection with the Finance Documents to be repaid in full on trust for the Finance Parties and shall promptly pay or transfer the same to the Agent or as the Agent may direct for application in accordance with Clause 32 ( Payment mechanics ).
12.8
Release of Guarantors' right of contribution
If any Guarantor (a " Retiring Guarantor ") ceases to be a Guarantor in accordance with the terms of the Finance Documents for the purpose of any sale or other disposal of that Retiring Guarantor then on the date such Retiring Guarantor ceases to be a Guarantor:
(a)
that Retiring Guarantor is released by each other Guarantor from any liability (whether past, present or future and whether actual or contingent) to make a contribution to any other Guarantor arising by reason of the performance by any other Guarantor of its obligations under the Finance Documents; and
(b)
each other Guarantor waives any rights it may have by reason of the performance of its obligations under the Finance Documents to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under any Finance Document or of any other security taken pursuant to, or in connection with, any Finance Document where such rights or security are granted by or in relation to the assets of the Retiring Guarantor.
12.9
Additional security
This Guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Finance Party.

 
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SECTION 20
REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT
13.
REPRESENTATIONS
The Original Guarantor represents and warrants and, with respect to Clauses 20.1(a), 20.2, 20.3, 20.4, 20.13 and 20.14 to the extent such Clauses relate to a Borrower, that Borrower represents and warrants, on the original date of this Agreement as follows:
13.1
Due organisation
(a)
It is a corporation duly organized or incorporated, validly existing and in good standing under the laws of its jurisdiction of organisation or incorporation.
(b)
It is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions which require such qualification, except to the extent that failure to so qualify would not have a material adverse effect on the business, financial condition or operations of the Original Guarantor and its Subsidiaries, taken as a whole.
(c)
Each Significant Subsidiary is duly organized and validly existing under the laws of the jurisdiction of its incorporation or formation.
(d)
Each such Subsidiary is duly qualified to do business in all other jurisdictions which require such qualification, except to the extent that failure to so qualify would not have a material adverse effect on the business, financial condition or operations of the Original Guarantor and its Subsidiaries, taken as a whole.
13.2
Due authorisation
The execution, delivery and performance by it of this Agreement are within its corporate powers, have been duly authorized by all necessary corporate action, and do not contravene:
(a)
its certificate of incorporation or bylaws or other constitutive documents; or
(b)
law or any material contractual restriction binding on or affecting it, as the case may be.
13.3
Government consent
No authorisation or approval or other action by, and no notice to or filing with, any Governmental Agency or regulatory body is required for the due execution, delivery and performance by it of this Agreement except for those which have been obtained prior to Financial Close and remain in full force and effect.
13.4
Validity
This Agreement is a valid and binding obligation of it enforceable against it in accordance with its terms, subject to the effect of applicable bankruptcy, insolvency, arrangement, moratorium and other similar laws affecting creditors’ rights generally, concepts of reasonableness and to the application of general principles of equity.
13.5
Condition of the Original Guarantor

 
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The consolidated balance sheet of the Original Guarantor as at 31 March 2018, and the related consolidated statements of income and stockholders’ equity of the Original Guarantor for the fiscal year then ended, copies of which have been furnished to the Agent, fairly present the consolidated financial condition of the Original Guarantor as at such date and the consolidated results of the operations of the Original Guarantor for the fiscal year ended on such date, all in accordance with GAAP consistently applied. There has been no material adverse change in the business, financial condition or operations of the Original Guarantor and its Subsidiaries, taken as a whole, since 31 March 2018.
13.6
Litigation
There is no pending or (to the knowledge of the Original Guarantor) threatened investigation, action or proceeding against the Original Guarantor or any of its Subsidiaries before any court, governmental agency or arbitrator which:
(a)
except as disclosed in the Exchange Act Reports filed prior to Financial Close, would, if adversely determined, reasonably be expected to have a material adverse effect on the business, financial condition or operations of the Original Guarantor and the Subsidiaries, taken as a whole; or
(b)
purports to affect the legality, validity or enforceability of this Agreement.
13.7
Payment of Taxes
Except as disclosed in the Exchange Act Reports filed prior to Financial Close, the Original Guarantor and each of its Significant Subsidiaries have filed or caused to be filed all Tax returns (federal, state, local and foreign) required to be filed and paid all amounts of Taxes shown thereon to be due, including interest and penalties, except:
(a)
for such Taxes as are being contested in good faith and by proper proceedings and with respect to which appropriate reserves are being maintained by the Original Guarantor or any such Subsidiary, as the case may be; and
(b)
to the extent that the failure to file such returns or pay such Taxes would not reasonably be expected to have a material adverse effect on the business, financial condition or operations of the Original Guarantor and its Subsidiaries, taken as a whole.
13.8
ERISA
Except as disclosed in the Exchange Act Reports filed prior to Financial Close:
(a)
no ERISA Event has occurred or is reasonably expected to occur (other than for premiums payable under Title IV of ERISA), that would reasonably be expected to result in a liability to the Original Guarantor or its ERISA Affiliates of more than US$250,000,000 (or its equivalent in any other currency or currencies) over the amount previously reflected for any such liabilities, in accordance with GAAP, on the financial statements delivered pursuant to Clause 20.5 ( Condition of the Original Guarantor );

 
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(b)
Schedule B (Actuarial Information) to the most recently completed annual report (Form 5500 Series) for each Pension Plan, copies of which have been filed with the Internal Revenue Service, is complete and, to the best knowledge of the Original Guarantor, accurate, and since the date of such Schedule B there has been no change in the funding status of any such Pension Plan except any change that would not reasonably be expected to have a material adverse effect on the business, financial condition or operations of the Original Guarantor and its Subsidiaries, taken as a whole;
(c)
as of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability to the Original Guarantor or any of its ERISA Affiliates for a complete withdrawal from such Multiemployer Plan, when aggregated with such potential liability for a complete withdrawal for all Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA, does not exceed US$250,000,000 (or its equivalent in any other currency or currencies);
(d)
the Original Guarantor and each of its ERISA Affiliates are in compliance with all applicable provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their obligations under each Employee Benefit Plan except for any such failure to perform or comply that would not reasonably be expected to have a material adverse effect on the business, financial condition or operations of the Original Guarantor and its Subsidiaries, taken as a whole;
(e)
each Employee Benefit Plan that is intended to qualify under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service that the Employee Benefit Plan is so qualified (or a timely application for such a determination letter is pending), and to the best of the Original Guarantor's knowledge, the Employee Benefit Plan has not been operated in any way that would result in the Employee Benefit Plan no longer being so qualified except as would not reasonably be expected to have a material adverse effect on the business, financial condition or operations of the Original Guarantor and the Subsidiaries, taken as a whole; and
(f)
neither the Original Guarantor nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is insolvent, in reorganization or has been terminated or has been determined to be in "endangered" or "critical" status, within the meaning of Title IV of ERISA, and, to the best knowledge of the Original Guarantor, no Multiemployer Plan is reasonably expected to be insolvent, in reorganization or to be terminated or to be determined to be in "endangered" or "critical" status within the meaning of Title IV of ERISA, in each case, resulting in a liability to the Original Guarantor or its ERISA Affiliates of more than US$250,000,000 (or its equivalent in any other currency or currencies).
13.9
Disclosure

 
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The documents, certificates and written materials furnished to the Agent or any Lender by or on behalf of it for use in connection with the transactions contemplated in this Agreement, taken as a whole with other documents, certificates and written materials furnished contemporaneously therewith, do not contain any untrue statement of fact or omit to state a material fact (known to it (as the case may be) in the case of any documents, certificates or written statements not furnished by it) necessary in order to make the statements contained therein not misleading in light of the circumstances under which the same were made.
13.10
Insurance
The Original Guarantor and its Subsidiaries shall:
(a)
maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as are usually insured by companies engaged in similar businesses; or
(b)
maintain a plan or plans of self-insurance to such extent and covering such risks as is usual for companies of comparable size engaged in the same or similar business, which plans shall include, among other things, adequate reserves for the risks that are self-insured.
13.11
Environmental matters
The Original Guarantor and each of its Subsidiaries is in compliance with all Environmental Laws except to the extent any non-compliance would not reasonably be expected to have a material adverse effect on the business, financial condition or operations of the Original Guarantor and each of its Subsidiaries, taken as a whole.
13.12
Anti-Corruption Laws and sanctions
(a)
The Original Guarantor has implemented and maintains in effect policies and procedures designed to promote and achieve compliance by the Original Guarantor, each of its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Original Guarantor, each of its Subsidiaries and to the knowledge of the Original Guarantor its directors, officers, employees and Agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.
(b)
None of:
(i)
the Original Guarantor, any Subsidiary or to the knowledge of the Original Guarantor any of the directors or officers of the Original Guarantor;
(ii)
to the knowledge of the Original Guarantor or such Subsidiary, any director or officer of any Subsidiary of the Original Guarantor; or
(iii)
to the knowledge of the Original Guarantor, any employee or agent of the Original Guarantor or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby,
is a Sanctioned Person.

 
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13.13
Pari passu ranking
Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.
13.14
Authorised signatories
Any person specified as its authorised signatory under Schedule 2 ( Conditions precedent ) or Clause 21.3 ( Information: miscellaneous ) is authorised to sign Utilisation Requests and other notices on its behalf except where it has previously notified the Agent that the authority has been revoked.
14.
INFORMATION UNDERTAKINGS
The undertakings in this Clause 21 remain in force from the original date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force, unless the Agent (acting on the instructions of the Majority Lenders) otherwise consents in writing.
14.1
Financial statements
The Company shall supply to the Agent:
(a)
as soon as available and in any event within 60 days of the end of each of the first three fiscal quarters of each fiscal year of the Original Guarantor, a copy of the quarterly report for such quarter for the Original Guarantor, containing a consolidated balance sheet and consolidated statements of income and for the period consisting of the fiscal year then elapsed, for the Original Guarantor, containing consolidated statements of stockholders’ equity and cash flows;
(b)
as soon as available and in any event within 120 days after the end of each fiscal year of the Original Guarantor, a copy of the consolidated annual audit report for such year for the Original Guarantor, containing financial statements (including a consolidated balance sheet, consolidated statements of income, retained earnings and cash flows of the Original Guarantor) for such year, accompanied by an opinion of a nationally recognized independent public accountant. The opinion shall be unqualified (as to going concern, scope of audit and disagreements over the accounting or other treatment of offsets) and shall state that such consolidated financial statements present fairly the consolidated financial position of the Original Guarantor as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as stated therein) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards.
14.2
Compliance Certificate
(a)
The Original Guarantor shall supply to the Agent, with each set of financial statements delivered pursuant to paragraphs (a) or (b) of Clause 21.1 ( Financial statements ), a compliance certificate for the quarter or year, as applicable, executed by an authorised financial officer of the Original Guarantor, stating that:

 
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(i)
in the case of the financial statements delivered under Clause 21.1 for such quarter, that such financial statements fairly present the financial condition of the Original Guarantor and its Subsidiaries as at the dates indicated and the results of operations of the Original Guarantor and its Subsidiaries and cash flow for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise stated therein), subject to the absence of footnotes and changes resulting from audit and normal year-end adjustment;
(ii)
stating that such authorised financial officer has reviewed the terms of this Agreement and has made, or caused to be made under his or her supervision, a review in reasonable detail of the transactions and financial condition of the Original Guarantor and its Subsidiaries during the accounting period covered by such financial statements and that such authorized financial officer does not have knowledge of the existence, as at the date of the compliance certificate, of any condition or event that constitutes an Event of Default or a Potential Event of Default or, if any such condition or event exists, specifying the nature thereof and what action the Company has taken, is taking and proposes to take with respect thereto; and
(iii)
demonstrating in reasonable detail compliance at the end of such accounting periods with the restrictions contained in Clause 22 ( Financial Covenants ).
14.3
Information: miscellaneous
The Original Guarantor shall supply to the Agent:
(a)
by no later than five days after any authorised financial officer of the Original Guarantor becomes aware of the occurrence of an Event of Default or Potential Event of Default continuing on the date of such statement, a statement of an authorised financial officer of the Company setting forth details of such Event of Default or Potential Event of Default and the action which the Company has taken and proposes to take with respect thereto;
(b)
promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports that the Original Guarantor or any of its Subsidiaries sends to its stockholders generally, and copies of all regular, periodic and special reports, and all registration statements, that the Original Guarantor or any of its Subsidiaries files with ASIC or any governmental authority that may be substituted therefor, or with any national securities exchange;
(c)
promptly after the commencement thereof, notice of all material actions, suits and proceedings before any court or government department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting the Original Guarantor or any of its Subsidiaries, of the type described in Clause 20.6 ( Litigation );
(d)
promptly after the occurrence thereof, notice of the following:

 
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(i)
any event which makes any of the representations contained in Clause 20.11 ( Environmental matters ) inaccurate; or
(ii)
the receipt by the Original Guarantor of any notice, order, directive or other communication from a governmental authority alleging violations of or noncompliance with any Environmental Law which would reasonably be expected to have a material adverse effect on the business, financial condition or operations of the Original Guarantor and its Subsidiaries, taken as a whole; and
(e)
such other information respecting the business, financial condition or operations of the Original Guarantor and any of the Subsidiaries as any Lender through the Agent may from time to time reasonably request.
In lieu of furnishing to the Agent paper copies of the documents required to be delivered pursuant to Clause 21.1(a), Clause 21.1(b), Clause 21.3(b), Clause 21.3(c) and Clause 21.3(e), the obligations to deliver such documents or information shall be deemed to be satisfied upon the relevant documents or information being publicly available at the Internet website of the Original Guarantor located at http://www.dxc.com or through the SEC’s EDGAR system; provided that with respect to documents required to be delivered pursuant to Clause 21.3(e), the Original Guarantor shall notify the Agent when such documents are so filed or so posted.
14.4
"Know your customer" checks
(a)
If:
(i)
the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the original date of this Agreement;
(ii)
any change in the status of an Obligor after the original date of this Agreement;
(iii)
any change in the authorised signatories of an Obligor after the original date of this Agreement; or
(iv)
a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,
obliges the Agent or any Lender (or, in the case of paragraph (iv) above, any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or, in the case of the event described in paragraph (iv) above, on behalf of any prospective new Lender) in order for the Agent, such

 
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Lender or, in the case of the event described in paragraph (iv) above, any prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
(b)
The Company shall by not less than 10 Business Days' prior written notice to the Agent, notify the Agent (which shall promptly notify the Lenders) of its intention to request that one of its Subsidiaries becomes an Additional Obligor pursuant to Clause 26 ( Changes to the Obligors ).
(c)
Following the giving of any notice pursuant to paragraph (b) above, if the accession of such Additional Obligor obliges the Agent or any Lender to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, the Company shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself or on behalf of any Lender) or any Lender (for itself or on behalf of any prospective new Lender) in order for the Agent or such Lender or any prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the accession of such Subsidiary to this Agreement as an Additional Obligor.
(d)
The Company shall promptly supply, or procure the supply of, such documentation and other evidence reasonably requested by the Agent (for itself or on behalf of any Finance Party) from time to time in relation to an Obligor or an Additional Obligor to enable the Finance Party to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to the Finance Party.

 
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SECTION 22
FINANCIAL COVENANTS
15.
FINANCIAL COVENANTS
15.1
Minimum Interest Coverage Ratio
The Original Guarantor shall not permit at the end of any quarterly financial reporting period the ratio of Consolidated EBITDA to Consolidated Interest Expense for the period of four consecutive fiscal quarters ending on the last day of such quarterly financial reporting period, taken as a single period, to be less than 3.00 to 1.00.
15.2
Consolidated Total Debt to Consolidated EBITDA Ratio
The Original Guarantor will not permit at the end of any quarterly financial reporting period the ratio of Consolidated Total Debt as of the last day of such quarterly financial reporting period to Consolidated EBITDA for the period of four consecutive fiscal quarters ending on the last day of such quarterly financial reporting period, taken as a single period, to exceed 3.00 to 1.00.
SECTION 23
GENERAL UNDERTAKINGS
16.
GENERAL UNDERTAKINGS
The undertakings in this Clause 23 remain in force from the original date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force, unless the Agent (acting on the instructions of the Majority Lenders) otherwise consents in writing.
16.1
Compliance with Laws
The Original Guarantor shall comply, and cause each of its Subsidiaries to comply, with all applicable laws, rules, regulations and orders, except to the extent any non-compliance would not reasonably be expected to have a material adverse effect on the business, financial condition or operations of the Original Guarantor and its Subsidiaries, taken as a whole, such compliance to include, without limitation, complying with all Environmental Laws and paying before the same become delinquent all Taxes imposed upon it or upon its property except to the extent contested in good faith.
16.2
Corporate existence
The Original Guarantor will, and will cause each of its Significant Subsidiaries to, at all times maintain its fundamental business and preserve and keep in full force and effect its corporate existence and all material rights, franchises and licenses necessary or desirable in the normal conduct of its business, in each case as applicable, except (i) as permitted under Clause 23.7 ( Restrictions on Fundamental Changes ) and (ii) if, in the reasonable business judgment of the Original Guarantor, it is in the business interest of the Original Guarantor or such Subsidiary not to preserve and maintain such legal existence (except with respect to the Original Guarantor), rights (charter and statutory), franchises and licenses, and such failure to preserve the same would not reasonably be expected to have a material

 
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adverse effect on the business, financial condition or operations of the Original Guarantor and the Subsidiaries, taken as a whole.
16.3
Maintenance of insurance
The Original Guarantor will and will cause each of its Significant Subsidiaries to maintain insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as are usually insured by companies engaged in similar businesses. Notwithstanding the foregoing, the Original Guarantor and such Subsidiaries may maintain a plan or plans of self-insurance to such extent and covering such risks as is usual for companies of comparable size engaged in the same or similar business, which plans shall include, among other things, adequate reserves for the risks that are self-insured. On request the Original Guarantor will advise the Agent and the Lenders concerning any such plan or plans for self-insurance.
16.4
Visitation rights
Once per calendar year, at any reasonable time and from time to time during normal business hours and with reasonable prior notice, an Obligor shall permit the Agent or any of the Lenders or any agents or representatives thereof (at their sole cost and expense), to visit the properties of, that Obligor and any of its Subsidiaries, and to discuss the affairs, finances and accounts of that Obligor and any of its Subsidiaries with any of their officers, employees, or if an Event of Default is continuing, with their independent certified public accountants; provided that if an Event of Default is continuing, such visits shall not be limited to once per calendar year.
16.5
Keeping of books
The Original Guarantor shall keep, and will cause each of its Significant Subsidiaries to keep, in all material respects, proper books of record and account in accordance with GAAP.
16.6
Securities
The Original Guarantor will not create or suffer to exist, or permit any of its Significant Subsidiaries to create or suffer to exist, any Security upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of such Subsidiaries to assign, any right to receive income, in each case to secure or provide for the payment of any Debt of any Person, unless the Original Guarantor's obligations hereunder shall be secured equally and ratably with, or prior to, any such Debt; provided however that the foregoing restriction shall not apply to the following Securities which are permitted:
(a)
Customary Permitted Securities;
(b)
securities in favour of the United States to secure amounts paid to the Original Guarantor or any of its Subsidiaries as advance or progress payments under government contracts entered into by it so long as such Securities cover only special bank accounts into which only such advance or progress payments are deposited and supplies covered by such government contracts and material and other property acquired for or allocated to the performance of such government contracts;

 
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(c)
attachment, judgment and other similar Securities arising in connection with legal proceedings, provided that any such judgment does not constitute an Event of Default;
(d)
Securities on accounts receivable resulting from the sale of such accounts receivable;
(e)
Securities on assets of any Significant Subsidiary existing at the time such Person becomes a Significant Subsidiary or is merged into or consolidated with the Company or a Significant Subsidiary (other than any such Security created in contemplation of becoming a Significant Subsidiary);
(f)
purchase money Securities, including any purchase money security interest as defined in the PPSA, upon or in any asset acquired or held by any Obligor or any Significant Subsidiary (including any capital interest in any Person) to secure the purchase price of such asset or to secure Debt incurred solely for the purpose of financing the acquisition of or construction of improvements on or with respect to any such asset (provided that the amount of Debt secured by such Security does not exceed 100% of the purchase price of such asset and transaction costs relating to such acquisition or the costs of such construction) and Securities existing on such asset at the time of its acquisition (other than any such Security created in contemplation of such acquisition); and the interest of the lessor thereof in any asset that is subject to a Capital Lease;
(g)
Securities on deposits securing obligations under cash pooling and multi-currency notional pooling programs;
(h)
Securities, other than Securities described in clauses (a) through (g) and in clauses (i) and (j), to secure Debt not in excess of an aggregate of the greater of US$500,000,000 (or its equivalent in any other currency or currencies) and 5% of the shareholders’ equity of the Original Guarantor;
(i)
Securities resulting from any extension, renewal or replacement (or successive extensions, renewals or replacements), in whole or in part, of any Debt secured by any Security referred to in clauses (e) and (f) so long as (x) the aggregate principal amount of any such Debt shall not increase as a result of any such extension, renewal or replacement and (y) Securities resulting from any such extension, renewal or replacement shall cover only such property which secured the Debt that is being extended, renewed or replaced; and
(j)
Securities securing Debt owing to the Original Guarantor or any of its Subsidiaries.
16.7
Restrictions on fundamental changes
The Original Guarantor will not, and will not permit any of its Significant Subsidiaries to, merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of the assets of the Original Guarantor and its Subsidiaries, taken as a whole (whether now owned or hereafter acquired), to any Person (other than the Original Guarantor or any Subsidiary of the Original

 
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Guarantor, so long as the Original Guarantor, directly or indirectly, owns 80% or more of the voting stock thereof), or enter into any partnership, joint venture, syndicate, pool or other combination, unless:
(a)
no Event of Default or Potential Event of Default has occurred and is continuing or would result therefrom; and
(b)
in the case of any consolidation or merger involving the Company or the Original Guarantor, either:
(i)
the Company or, as the case may be, the Original Guarantor, is the surviving entity; or
(ii)
the Person surviving or resulting from such consolidation or merger shall have assumed the obligations of the Company or, as the case may be, the Original Guarantor, hereunder in an agreement or instrument reasonably satisfactory in form and substance to the Agent and such surviving corporation shall have delivered, for the benefit of the Lenders and the Agent, such other documents as may reasonably be requested, including, without limitation, information in respect of “know your customer” and similar requirements, an incumbency certificate and an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Majority Lenders,
to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof.

 
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SECTION 24
EVENTS OF DEFAULT
17.
EVENTS OF DEFAULT
Each of the events or circumstances set out in Clause 24 is an Event of Default (save for Clause 24.12 ( Acceleration )).
17.1
Non-payment
An Obligor does not pay any principal of the Utilisations when the same becomes due and payable or an Obligor shall fail to pay any interest on the Utilisations or any fees or other amounts payable hereunder within five days of the date due.
17.2
Misrepresentation
Any representation or warranty made by an Obligor herein or in connection with this Agreement shall prove to have been incorrect in any material respect when made.
17.3
Other obligations
An Obligor does not comply with any of the following:
(a)
any term, covenant or agreement contained in clause 23.2 ( Corporate existence ) (with respect to the existence of the Original Guarantor), clause 22 ( Financial covenants ), clause 23.6 ( Securities ) or 23.7 ( Restrictions on Fundamental Changes ); or
(b)
any other term, covenant or agreement contained in this Agreement on its part to be performed or observed if the failure to perform or observe such other term, covenant or agreement shall remain unremedied for 30 days after the earlier to occur of:
(i)
written notice thereof having been given to the relevant Obligor by the Agent at the request of any Lender; or
(ii)
actual knowledge thereof by the relevant Obligor of such failure.
17.4
Failure to pay Debt
Any of the following occurs:
(a)
the Original Guarantor or any of its Significant Subsidiaries shall fail to pay any principal of or premium or interest on any of its Debt or any payment obligations in respect of guarantees of the Original Guarantor or any such Significant Subsidiary of Debt owed to any Person other than the Original Guarantor and the Subsidiaries which is outstanding in a principal amount of at least US$250,000,000 (or its equivalent in any other currency or currencies) in the aggregate (but excluding Debt arising under this Agreement), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt or guarantee; or

 
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(b)
any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or
(c)
any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment or by a required prepayment of insurance proceeds or by a required prepayment as a result of formulas based on asset sales or excess cash flow), redeemed, purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof.
17.5
Insolvency and insolvency proceedings
Any of the following occurs:
(a)
an Obligor or any Significant Subsidiary does not generally pay its debts as such debts become due, or admits in writing its inability to pay its debts generally, or makes a general assignment for the benefit of creditors;
(b)
any proceeding shall be instituted by or against an Obligor or any Significant Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or
(c)
an Obligor or any Significant Subsidiary shall take any corporate or partnership action to authorize any of the actions set forth above in clause 24.5.
17.6
Judgement
(a)
Any judgment or order for the payment of money in excess of US$250,000,000 (or its equivalent in any other currency or currencies) shall be rendered against an Obligor or any Significant Subsidiary and is not promptly paid by that Obligor or such Significant Subsidiary and either:
(i)
enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or
(ii)
there shall be any period of 30 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect;

 
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provided, however, that any such judgment or order shall not be an Event of Default under this paragraph 24.6 if and to the extent that:
(A)
the amount of such judgment or order is covered by a valid and binding policy of insurance covering payment thereof;
(B)
such insurer shall be rated at least “A-” by A.M. Best Company and the Company deems the claims recovery as “probable” in its financial statements; and
(C)
such insurer has been notified of, and has not disputed the claim made for payment of, the amount of such judgment or order.
17.7
ERISA
(a)
There occurs one or more ERISA Events which individually or in the aggregate results in liability to the Original Guarantor or any of its ERISA Affiliates in excess of US$250,000,000 (or its equivalent in any other currency or currencies) over the amount previously reflected for any such liabilities, in accordance with GAAP, on the financial statements delivered pursuant to Clause 20.5 ( Condition of the Original Guarantor ).
(b)
The Original Guarantor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred an aggregate Withdrawal Liability for all years to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Original Guarantor and its ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds US$250,000,000 (or its equivalent in any other currency or currencies).
(c)
The Original Guarantor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is insolvent, in reorganization or is being terminated or has been determined to be in "endangered" or "critical" status, within the meaning of Title IV or ERISA, if as a result of such event the aggregate annual contributions of the Company and its ERISA Affiliates to all Multiemployer Plans that are then insolvent, in reorganization or being terminated or have been determined to be in endangered or critical status have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan year of such Multiemployer Plan immediately preceding the plan year in which the event occurs by an amount exceeding, in each case, resulting in a liability to the Original Guarantor or its ERISA Affiliates of more than US$250,000,000 (or its equivalent in any other currency or currencies).
17.8
Ownership of the Original Guarantor
Any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Original Guarantor (or other securities convertible into such securities) representing 35% or more of the combined

 
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voting power of all securities of the Original Guarantor entitled to vote in the election of directors, other than securities having such power only by reason of the happening of a contingency; provided that if the Original Guarantor shall become a wholly owned Subsidiary of a publicly owned Person whose beneficial ownership is, immediately after the Original Guarantor shall become such a wholly owned subsidiary of such Person, substantially identical to that of the Original Guarantor immediately prior to such circumstance (a Holding Company ), such circumstance shall not be an Event of Default under this clause 24.8 unless the beneficial ownership of such Holding Company shall be acquired as set forth in this Clause 24.8.
17.9
Unlawfulness
It is or becomes unlawful for an Obligor to perform any of its obligations under the Finance Documents.
17.10
Repudiation
An Obligor repudiates a Finance Document or evidences an intention to repudiate a Finance Document.
17.11
Vitiation of Finance Documents
A provision of a Finance Document is or becomes or is claimed by a party other than a Finance Party to be wholly or partly invalid, void, voidable or unenforceable in any material respect.
17.12
Acceleration
On and at any time after the occurrence of an Event of Default which is continuing the Agent may, and shall if so directed by the Majority Lenders, by notice to the Company:
(a)
cancel the Total Commitments whereupon they shall immediately be cancelled;
(b)
declare that all or part of the Utilisations, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or
(c)
declare that all or part of the Utilisations be payable on demand, whereupon they shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders.

 
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SECTION 25
CHANGES TO PARTIES
18.
CHANGES TO THE LENDERS
18.1
Assignments and novations by the Lenders
Subject to this Clause 25, a Lender (the " Existing Lender ") may:
(a)
assign any of its rights; or
(b)
novate any of its rights and obligations,
to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (including credit derivatives) (other than any vulture fund, distressed debt fund, special situations fund or other fund which principally invests in distressed debt) (the " New Lender "), so long as there will be at least two Lenders after doing so.
18.2
Conditions of assignment or novation
(a)
The consent of the Company is required for an assignment or novation by an Existing Lender, unless the assignment or novation is:
(i)
to another Lender or an Affiliate of a Lender; or
(ii)
made at a time when an Event of Default is continuing; or
(iii)
to any fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
(b)
The consent of the Company to an assignment or novation must not be unreasonably withheld or delayed or subject to unreasonable conditions. The Company will be deemed to have given its consent ten Business Days after the Existing Lender has requested it unless consent is expressly refused by the Company within that time.
(c)
A Lender shall not assign or novate rights to a person whom the officers of the relevant Existing Lender involved on a day to day basis in the administration of the applicable Facility know to be an Offshore Associate of the relevant Borrower.
(d)
An assignment will only be effective on:
(i)
receipt by the Agent (whether in the Assignment Agreement or otherwise) of written confirmation from the New Lender (in form and substance reasonably satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties as it would have been under if it was an Original Lender; and
(ii)
performance by the Agent of all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to such

 
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assignment to a New Lender, the completion of which the Agent shall promptly notify to the Existing Lender and the New Lender.
(e)
A novation will only be effective:
(i)
if the procedure set out in Clause 25.5 ( Procedure for novation ) is complied with; and
(ii)
performance by the Agent of all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to such novation to a New Lender, the completion of which the Agent shall promptly notify to the Existing Lender and the New Lender.
(f)
If:
(i)
a Lender assigns or novates any of its rights or obligations under the Finance Documents or changes its Facility Office; and
(ii)
as a result of circumstances existing at the date the assignment, novation or change occurs, an Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 14 ( Tax gross-up and indemnities ) or Clause 15 ( Increased Costs ),
then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, novation or change had not occurred. This paragraph (f) shall not apply:
(iii)
in respect of an assignment or novation made in the ordinary course of the primary syndication of the applicable Facility; or
(iv)
where the payment is in relation to Australian Withholding Tax and there are at least two Lenders after the assignment, novation or change, and the New Lender, or Lender acting through its new Facility Office, is not an Offshore Associate of the Borrower. In such instances, the New Lender, or Lender acting through its new Facility Office will be entitled to full payment under Clause 14 ( Tax gross-up and indemnities ).
(g)
Each New Lender, by executing the relevant Transfer Certificate or Assignment Agreement, confirms, for the avoidance of doubt, that the Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the novation or assignment becomes effective in accordance with this Agreement and that it is bound by that decision to the same extent as the Existing Lender would have been had it remained a Lender.
(h)
A Lender may not assign or novate any of its rights or obligations under the Finance Documents or change its Facility Office, if the New Lender or the Lender acting

 
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through its new Facility Office would be entitled to exercise any rights under Clause 9.1 ( Illegality ) as a result of circumstances existing as at the date the assignment, novation or change is proposed to occur.
18.3
Assignment or novation fee
The New Lender shall, on the date upon which an assignment or novation takes effect, pay to the Agent (for its own account) a fee of A$5,000; provided that the Agent may, in its sole discretion, elect to waive such fee in the case of any assignment or novation.
18.4
Limitation of responsibility of Existing Lenders
(a)
Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:
(i)
the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;
(ii)
the financial condition of any Obligor or any other person;
(iii)
the performance and observance by any Obligor or any other person of its obligations under the Finance Documents or any other documents; or
(iv)
the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,
and any representations or warranties implied by law are excluded.
(b)
Each New Lender confirms to the Existing Lender and the other Finance Parties that it:
(i)
has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities and any other person in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender in connection with any Finance Document; and
(ii)
will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities and any other person whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.
(c)
Nothing in any Finance Document obliges an Existing Lender to:
(i)
accept a novation or re-assignment from a New Lender of any of the rights and obligations assigned or novated under this Clause 25; or
(ii)
support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor or any other person of its obligations under the Finance Documents or otherwise.
18.5
Procedure for novation

 
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(a)
Subject to the conditions set out in Clause 25.2 ( Conditions of assignment or novation ) a novation is effected in accordance with paragraph (e) below when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to paragraphs (b) and (c) below, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.
(b)
The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.
(c)
The Agent may refrain from executing a Transfer Certificate pending satisfaction of Clause 25.2(d)(ii) and acting reasonably, may delay executing a Transfer Certificate pending a payment, distribution or Utilisation under or in respect of the Finance Documents.
(d)
Each Party other than the Existing Lender irrevocably authorises the Agent to execute any Transfer Certificate on its behalf.
(e)
On the Transfer Date:
(i)
to the extent that in the Transfer Certificate the Existing Lender seeks to novate its rights and obligations under the Finance Documents each of the Obligors and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (being the " Discharged Rights and Obligations ");
(ii)
each of the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor and the New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender;
(iii)
the Agent, the MLABs, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the novation and to that extent the Agent, the MLABs and the Existing Lender shall each be released from further obligations to each other under the Finance Documents;
(iv)
the New Lender shall become a Party as a "Lender" and entitled to the benefits of any other document entered into by the Agent as agent for the Lenders

 
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and will be bound by obligations equivalent to the Relevant Obligations (as defined in Clause 25.6(c)(ii) below); and
(v)
for the purposes of this Agreement rights and obligations will be taken to have been transferred under a Transfer Certificate even though it operates as a novation and rights and obligations are replaced rather than transferred.
18.6
Procedure for assignment
(a)
Subject to the conditions set out in Clause 25.2 ( Conditions of assignment or novation ) an assignment may be effected in accordance with paragraph (c) below when the Agent executes an otherwise duly completed Assignment Agreement delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Assignment Agreement appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Assignment Agreement.
(b)
The Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.
(c)
On the Transfer Date:
(i)
the Existing Lender will assign absolutely to the New Lender the rights under the Finance Documents expressed to be the subject of the assignment in the Assignment Agreement;
(ii)
the Existing Lender will be released by each Obligor and the other Finance Parties from the obligations owed by it (the " Relevant Obligations ") and expressed to be the subject of the release in the Assignment Agreement; and
(iii)
the New Lender shall become a Party as a "Lender" and entitled to the benefits of any other document entered into by the Agent as agent for the Lenders and will be bound by obligations equivalent to the Relevant Obligations.
(d)
Lenders may utilise procedures other than those set out in this Clause 25.6 to assign their rights under the Finance Documents (but not, without the consent of the relevant Obligor or unless in accordance with Clause 25.5 ( Procedure for novation ), to obtain a release by that Obligor from the obligations owed to that Obligor by the Lenders nor the assumption of equivalent obligations by a New Lender) provided that they comply with the conditions set out in Clause 25.2 ( Conditions of assignment or novation ).
18.7
Copy of Transfer Certificate or Assignment Agreement to Company
The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate or an Assignment Agreement, send to the Company a copy of that Transfer Certificate or Assignment Agreement.

 
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SECTION 26
CHANGES TO THE OBLIGORS
19.
CHANGES TO THE OBLIGORS
19.1
Assignments and novation by Obligors
No Obligor may, except as permitted in Clause 23.7, assign any of its rights or novate any of its rights or obligations under the Finance Documents without the prior written consent of all Lenders.
19.2
Additional Borrowers
(a)
Subject to compliance with the provisions of paragraphs (c) and (d) of Clause 21.4 ( "Know your customer" checks ), the Original Guarantor may request that any of its wholly owned Subsidiaries becomes an Additional Borrower. That Subsidiary shall become an Additional Borrower if:
(i)
the Majority Lenders approve the addition of that Subsidiary;
(ii)
the Company delivers to the Agent a duly completed and executed Accession Letter;
(iii)
the Company confirms that no Default is continuing or would occur as a result of that Subsidiary becoming an Additional Borrower; and
(iv)
the Agent has received all of the documents and other evidence listed in Part II of Schedule 2 ( Conditions precedent ) in relation to that Additional Borrower, each in form and substance reasonably satisfactory to the Agent acting on the instructions of all Lenders.
(b)
The Agent shall notify the Company and the Lenders promptly upon being satisfied that it has received (in form and substance reasonably satisfactory to it acting on the instructions of all Lenders) all the documents and other evidence listed in Part II of Schedule 2 ( Conditions precedent ).
(c)
The Agent shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever as a result of giving any such notification.
19.3
Resignation of a Borrower
(a)
The Company may request that a Borrower (other than the Company) ceases to be a Borrower by delivering to the Agent a Resignation Letter.
(b)
The Agent shall accept a Resignation Letter and notify the Company and the Lenders of its acceptance if:
(i)
no Default is continuing or would result from the acceptance of the Resignation Letter (and the Company has confirmed this is the case); and
(ii)
the Borrower is under no actual or contingent obligations as a Borrower under any Finance Documents,

 
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whereupon that company shall cease to be a Borrower and shall have no further rights or obligations under the Finance Documents as a Borrower (and without prejudice to any obligations it may have as a Guarantor).
19.4
Additional Guarantors
(a)
Subject to compliance with the provisions of paragraphs (c) and (d) of Clause 21.4 ( "Know your customer" checks ), the Original Guarantor may request that any of its wholly owned Subsidiaries become an Additional Guarantor. That Subsidiary shall become an Additional Guarantor if:
(i)
the Company delivers to the Agent a duly completed and executed Accession Letter executed as a deed; and
(ii)
the Agent has received all of the documents and other evidence listed in Part II of Schedule 2 ( Conditions precedent ) in relation to that Additional Guarantor, each in form and substance reasonably satisfactory to the Agent acting on the instructions of all Lenders.
(b)
The Agent shall notify the Company and the Lenders promptly upon being satisfied that it has received (in form and substance reasonably satisfactory to it acting on the instructions of all Lenders) all the documents and other evidence listed in Part II of Schedule 2 ( Conditions precedent ).
(c)
The Agent shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever as a result of giving any such notification.
19.5
Repetition of Representations
Delivery of an Accession Letter constitutes confirmation by the relevant Subsidiary that the Repeating Representations are true and correct in relation to it as at the date of delivery as if made by reference to the facts and circumstances then existing.
19.6
Resignation of a Guarantor
(a)
The Original Guarantor may request that a Guarantor (other than the Original Guarantor) ceases to be a Guarantor by delivering to the Agent a Resignation Letter.
(b)
The Agent shall accept a Resignation Letter and notify the Company and the Lenders of its acceptance if:
(i)
no Default is continuing or would result from the acceptance of the Resignation Letter (and the Company has confirmed this is the case); and
(ii)
all the Lenders have consented to the Company's request; and
whereupon that company shall cease to be a Guarantor and shall have no further rights or obligations under the Finance Documents as a Guarantor.
20.
RESTRICTION ON DEBT PURCHASE TRANSACTIONS
20.1
Prohibition on Debt Purchase Transactions by the Group

 
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The Company shall not, and shall procure that each other member of the Group and each Borrower Affiliate shall not, be a Lender or enter into any Debt Purchase Transactions or beneficially own or control all or a material part of the equity of an entity that is a Lender or a party to a Debt Purchase Transaction.
20.2
Disenfranchisement on Debt Purchase Transactions entered into by Borrower Affiliates
(a)
Subject to Clause 25.2(c) ( Conditions of assignment or novation ), for so long as a Borrower Affiliate (i) beneficially owns any participation in a Utilisation drawn utilising a Commitment or (ii) has entered into a Debt Purchase Transaction relating to such a participation or Commitment and such agreement or arrangement has not been terminated:
(i)
in ascertaining whether the Majority Lenders, all Lenders or Lenders representing any given percentage of the Total Commitments give a consent, approval, waiver, amendment, instructions or other decision under the Finance Documents such participation and Commitment shall be deemed to be zero; and
(ii)
for the purposes of Clause 38.2 ( All Lender matters ), such Borrower Affiliate or the person with whom it has entered into such sub-participation, other agreement or arrangement shall be deemed not to be a Lender (unless it is a Lender with another Commitment and is not a Borrower Affiliate).
(b)
Each Lender shall promptly notify the Agent in writing if:
(i)
it knowingly enters into a Debt Purchase Transaction with a Borrower Affiliate; or
(ii)
such transaction is terminated or ceases to be with a Borrower Affiliate.
(c)
Each Borrower Affiliate that is a Lender agrees that:
(i)
unless the Agent otherwise agrees, it shall not attend or participate any meeting or conference call of Lenders or be entitled to receive the agenda or any minutes; and
(ii)
in its capacity as Lender, unless the Agent otherwise agrees, it shall not be entitled to receive any report or other document prepared at the behest of, or on the instructions of, the Agent or one or more of the Lenders.

 
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SECTION 28
THE FINANCE PARTIES
21.
ROLE OF THE AGENT, THE MLABS AND THE REFERENCE BANKS
21.1
Appointment of the Agent
(a)
Each of the MLABs and the Lenders appoints the Agent to act as its agent under and in connection with the Finance Documents. The Agent will be agent for the MLABs and the Lenders except as described in paragraph (c) below.
(b)
Each of the MLABs and the Lenders authorises the Agent to perform the duties, obligations and responsibilities and to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.
(c)
Where the Agent provides services in connection with the administration of the Utilisations, that is when it calculates rates and amounts, keeps records, receives and distributes payments and information received under Clauses 21.1 ( Financial Statements ) and 21.3 ( Information: miscellaneous ), and receives and deals with Utilisation Requests and Selection Notices, it does not provide those services as agent for the MLABs or the Lenders, but as principal, but the remainder of this Clause 28 still applies.
21.2
Instructions
(a)
The Agent shall:
(i)
unless a contrary indication appears in a Finance Document, exercise or refrain from exercising any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by:
(A)
all Lenders if the relevant Finance Document stipulates the matter is an all Lender decision; and
(B)
in all other cases, the Majority Lenders if the relevant Finance Document stipulates the matter is a Majority Lender decision; and
(ii)
not be liable for any act (or omission) if it acts (or refrains from acting) in accordance with paragraph (i) above.
(b)
The Agent shall be entitled to request instructions, or clarification of any instruction, from the Majority Lenders (or, if the relevant Finance Document stipulates the matter is a decision for any other Lender or group of Lenders, from that Lender or group of Lenders) as to whether, and in what manner, it should exercise or refrain from exercising any right, power, authority or discretion. The Agent may refrain from acting unless and until it receives any such instructions or clarification that it has requested.

 
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(c)
Save in the case of decisions stipulated to be a matter for any other Lender or group of Lenders under the relevant Finance Document and unless a contrary indication appears in a Finance Document, any instructions given to the Agent by the Majority Lenders shall override any conflicting instructions given by any other Parties and will be binding on all Finance Parties.
(d)
The Agent may refrain from acting in accordance with any instructions of any Lender or group of Lenders until it has received any indemnification and/or security that it may in its discretion require (which may be greater in extent than that contained in the Finance Documents and which may include payment in advance) for any cost, loss or liability which it may incur in complying with those instructions. The Agent may specify that the security be cash, in which case the Company must provide it on request, failing which each Lender must on request pay its proportion of the cash according to its Commitment. Any amount recovered by the Agent under any security will be taken to be an amount paid by the party which provided that security.
(e)
In the absence of instructions, the Agent may act (or refrain from acting) as it considers to be in the best interest of the Lenders.
(f)
The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender's consent) in any legal or arbitration proceedings relating to any Finance Document.
21.3
Duties of the Agent
(a)
The Agent's duties under the Finance Documents are solely mechanical and administrative in nature.
(b)
Subject to paragraph (c) below, the Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party.
(c)
Without prejudice to Clause 25.7 ( Copy of Transfer Certificate or Assignment Agreement to Company ), paragraph (b) above shall not apply to any Transfer Certificate or to any Assignment Agreement.
(d)
Except where a Finance Document specifically provides otherwise, the Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.
(e)
If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.
(f)
If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent or the MLABs) under this Agreement it shall promptly notify the other Finance Parties.

 
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(g)
The Agent shall have only those duties, obligations and responsibilities expressly specified in the Finance Documents to which it is expressed to be a party (and no others shall be implied).
(h)
If the Agent receives a request by a Lender, the Agent will provide a privacy notice (in the form recommended by the Asia Pacific Loan Market Association (Australian Branch) or as otherwise directed by a Finance Party) to a representative of the officers of an Obligor whose personal information has been collected on behalf of the Finance Parties, which details the manner in which personal information collected in connection with this Agreement may be used and disclosed by the Finance Parties.
21.4
Role of the MLABs
Except as specifically provided in the Finance Documents, the MLABs have no obligations of any kind to any other Party under or in connection with any Finance Document.
21.5
No fiduciary duties
(a)
Nothing in any Finance Document constitutes the Agent or a MLAB as a trustee or fiduciary of any other person.
(b)
Neither the Agent nor any MLAB shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.
21.6
Business with the Group
The Agent and the MLABs may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.
21.7
Rights and discretions
(a)
The Agent may:
(i)
rely on any representation, communication, notice or document believed by it to be genuine, correct and appropriately authorised;
(ii)
assume that:
(A)
any instructions received by it from the Majority Lenders, any Lenders or any group of Lenders are duly given in accordance with the terms of the Finance Documents; and
(B)
unless it has received notice of revocation, that those instructions have not been revoked; and
(iii)
rely on a written statement from any person:
(A)
as to any matter of fact or circumstance which might reasonably be expected to be within the knowledge of that person; or
(B)
to the effect that such person approves of any particular dealing, transaction, step, action or thing,

 
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as sufficient evidence that that is the case and, in the case of paragraph (A) above, may assume the truth and accuracy of that statement.
(b)
The Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that:
(i)
no Default or has occurred (unless it has actual knowledge of a Default arising under Clause 24.1 ( Non-payment ));
(ii)
any right, power, authority or discretion vested in any Party or any group of Lenders has not been exercised; and
(iii)
any notice or request made by the Company (other than a Utilisation Request or Selection Notice) is made on behalf of and with the consent and knowledge of all the Obligors.
(c)
The Agent may engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts or professional advisers.
(d)
Without prejudice to the generality of paragraph (c) above or paragraph (e) below, the Agent may at any time engage and pay for the services of any lawyers to act as independent counsel to the Agent (and so separate from any lawyers instructed by the Lenders) if the Agent in its reasonable opinion deems this to be necessary.
(e)
The Agent may rely on the advice or services of any lawyers, accountants, tax advisers, surveyors or other professional advisers or experts (whether obtained by the Agent or by any other Party) and shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever arising as a result of its so relying.
(f)
The Agent may act in relation to the Finance Documents through its officers, employees, secondees and agents.
(g)
Unless a Finance Document expressly provides otherwise the Agent may disclose to any other Party any information it reasonably believes it has received as Agent under this Agreement.
(h)
Without limiting paragraph (g) above, the Agent may disclose the identity of a Defaulting Finance Party to the other Finance Parties and the Company and shall disclose it on the written request of the Company or the Majority Lenders.
(i)
Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor any MLAB is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.
(j)
Notwithstanding any provision of any Finance Document to the contrary, the Agent is not obliged to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties, obligations or responsibilities or the

 
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exercise of any right, power, authority or discretion if it has grounds for believing the repayment of such funds or adequate indemnity against, or security for, such risk or liability is not reasonably assured to it.
(k)
The Parties need not enquire whether any instructions from all or a percentage of Lenders or the Majority Lenders have been given to the Agent or as to the terms of those instructions. As between the other Parties on the one hand and the Agent and Lenders on the other, everything done by the Agent under or in relation to the Finance Documents will be taken to be authorised.
21.8
Responsibility for documentation
Neither the Agent nor any MLAB is responsible or liable for:
(a)
the adequacy, accuracy or completeness of any information (whether oral or written) supplied by the Agent, any MLAB, an Obligor or any other person given in or in connection with any Finance Document or the transactions contemplated in the Finance Documents or any other agreement, arrangement or document; or
(b)
the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document; or
(c)
any determination as to whether any information provided or to be provided to any Finance Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise.
21.9
No duty to monitor
The Agent shall not be bound to enquire:
(a)
whether or not any Default has occurred;
(b)
as to the performance, default or any breach by any Party of its obligations under any Finance Document or any other agreement, arrangement or document; or
(c)
whether any other event specified in any Finance Document has occurred.
21.10
Exclusion of liability
(a)
Without limiting paragraph (b) below (and without prejudice to any other provision of any Finance Document excluding or limiting the liability of the Agent), the Agent will not be liable for:
(i)
any damages, costs or losses to any person, any diminution in value, or any liability whatsoever arising as a result of taking or not taking any action under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct;
(ii)
exercising, or not exercising, any right, power, authority or discretion given to it by, or in connection with, any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of,

 
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under or in connection with, any Finance Document, other than by reason of its gross negligence or wilful misconduct; or
(iii)
without prejudice to the generality of paragraphs (i) and (ii) above, any damages, costs or losses to any person, any diminution in value or any liability whatsoever (including, without limitation, for negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) arising as a result of:
(A)
any act, event or circumstance not reasonably within its control; or
(B)
the general risks of investment in, or the holding of assets in, any jurisdiction,
including (in each case and without limitation) such damages, costs, losses to any person, any diminution in value or any liability arising as a result of: nationalisation, expropriation or other governmental actions; any regulation, currency restriction, devaluation or fluctuation; market conditions affecting the execution or settlement of transactions or the value of assets (including any Disruption Event); breakdown, failure or malfunction of any third party transport, telecommunications, computer services or systems; natural disasters or acts of God; war, terrorism, insurrection or revolution; or strikes or industrial action.
(b)
No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of the Agent may rely on this Clause.
(c)
The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose.
(d)
Nothing in this Agreement shall oblige the Agent or the MLABs to carry out:
(i)
any "know your customer" or other checks in relation to any person; or
(ii)
any check on the extent to which any transaction contemplated by this Agreement might be unlawful for any Lender,
on behalf of any Lender and each Lender confirms to the Agent and the MLABs that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or the MLABs.

 
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(e)
Without prejudice to any provision of any Finance Document excluding or limiting the Agent's liability, any liability of the Agent arising under or in connection with any Finance Document shall be limited to the amount of actual loss which has been suffered (as determined by reference to the date of default of the Agent or, if later, the date on which the loss arises as a result of such default) but without reference to any special conditions or circumstances known to the Agent at any time which increase the amount of that loss. In no event shall the Agent be liable for any loss of profits, goodwill, reputation, business opportunity or anticipated saving, or for special, punitive, indirect or consequential damages, whether or not the Agent has been advised of the possibility of such loss or damages.
21.11
Lenders' indemnity to the Agent
(a)
Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent, within three Business Days of demand, against any cost, expense, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by the Agent (otherwise than by reason of the Agent's gross negligence or wilful misconduct) (or, in the case of any cost, expense, loss or liability pursuant to Clause 32.11 ( Disruption to Payment Systems etc. ) notwithstanding the Agent's negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) in acting as Agent under the Finance Documents (unless the Agent has been reimbursed by an Obligor pursuant to a Finance Document).
(b)
A Lender's share will be the proportion of its share of the Total Commitments or, if the Total Commitments are then zero, its share of the Total Commitments immediately prior to their reduction to zero. Where a Lender's Commitment has been reduced to zero, but it has a participation in any outstanding Utilisations, then for this purpose its Commitment will be taken to be the aggregate amount of its participation (and the Total Commitments calculated accordingly).
(c)
If any Lender fails to pay its share of any amount due under paragraph (a) one or more other Lenders may pay all or part of that share to the Agent. In that case, the defaulting Lender must immediately pay each such paying Lender the amount paid by that paying Lender together with interest equal to the rate from time to time certified by the paying Lender to be its cost of funds plus a margin of 2% per annum, compounding monthly.
(d)
If any Lender fails to provide its share of security to the Agent when requested under Clause 28.7 ( Rights and discretions ) one or more other Lenders may provide all or part of that share on its behalf. Where that security is cash the non providing Lender must immediately pay each Lender that provided cash the amount provided by it together with interest equal to its cost of funds plus a margin of 2% per annum, compounding monthly.
21.12
Resignation of the Agent

 
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(a)
The Agent may resign and appoint one of its Affiliates acting through an office in Australia as successor by giving notice to the Lenders and the Company.
(b)
Alternatively the Agent may resign by giving 30 days' notice to the Lenders and the Company, in which case the Majority Lenders (after consultation with the Company) may appoint a successor Agent which shall be a bank with an office in Australia, or an Affiliate of any such bank with an office in Australia.
(c)
If the Majority Lenders have not appointed a successor Agent in accordance with paragraph (b) above within 30 days after notice of resignation was given, the retiring Agent (after consultation with the Company) may appoint a successor Agent (acting through an office in the same time zone as Australia).
(d)
The retiring Agent shall make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents. The Company shall, within five Business Days of demand, reimburse the retiring Agent for the amount of all costs and expenses (including legal fees) properly incurred by it in making available such documents and records and providing such assistance save for where the Agent is a Defaulting Finance Party.
(e)
The Agent's resignation notice shall only take effect upon the appointment of a successor.
(f)
Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents (other than its obligations under paragraph (d) above) but shall remain entitled to the benefit of Clause 16.3 ( Indemnity to the Agent ) and this Clause 28 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date). Any successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.
(g)
After consultation with the Company, the Majority Lenders may, by notice to the Agent, require it to resign in accordance with paragraph (b) above. In this event, the Agent shall resign in accordance with paragraph (b) above (or, if at any time the Agent is a Defaulting Finance Party, by giving any shorter notice determined by the Majority Lenders).
(h)
The Agent shall resign in accordance with paragraph (b) above (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to paragraph (c) above) if on or after the date which is three months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either:
(i)
the Agent fails to respond to a request under Clause 14.7 ( FATCA Information ) and a Lender reasonably believes that the Agent will not be (or

 
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will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
(ii)
the information supplied by the Agent pursuant to Clause 14.7 ( FATCA Information ) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or
(iii)
the Agent notifies the Company and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;
and (in each case) a Lender reasonably believes that a Party will be required to make a FATCA Deduction that would not be required if the Agent were a FATCA Exempt Party, and that Lender, by notice to the Agent, requires it to resign.
(i)
The costs and expenses related to the appointment of a successor Agent under this Clause 28.12 shall be borne by:
(i)
the retiring Agent if it has voluntarily resigned or is a Defaulting Finance Party (but only up to a maximum aggregate amount equal to such component of the current annual fee paid to the Agent under the Fee Letter as relates solely to its performance of agency (and not other) functions); or
(ii)
the Company in all other circumstances (including, without limitation, if the Agent is removed from office in accordance with paragraph (h)).
(j)
Amounts under this Clause 28.12 which are expressed to be at the retiring Agent's or the Company’s expense include all associated Taxes and costs, including stamp duty, in connection with any resignation, change or replacement of the Agent.
21.13
Confidentiality
(a)
In acting as agent for the MLABs and the Lenders, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.
(b)
If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it.
21.14
Relationship with the Lenders
(a)
The Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Agent's principal office as notified to the Finance Parties from time to time) as the Lender acting through its Facility Office:
(i)
entitled to or liable for any payment due under any Finance Document on that day; and

 
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(ii)
entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day,
unless it has received not less than five Business Days' prior notice from that Lender to the contrary in accordance with the terms of this Agreement.
(b)
Any Lender may by notice to the Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or despatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and electronic mail address and/or any other information required to enable the sending and receipt of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address, department and officer by that Lender for the purposes of Clause 34.2 ( Addresses ) and the Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Lender.
(c)
The Agent may rely on or receive instructions from any attorney acting on behalf of a Lender, or any person acting on behalf of a Lender whose title or acting title includes the word Manager, Head, Executive, Director or President or cognate expressions, or any secretary or director of a Lender.
21.15
Credit appraisal by the Lenders
Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms to the Agent and the MLABs that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to:
(a)
the financial condition, status and nature of each member of the Group;
(b)
the legality, validity, priority, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document;
(c)
whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document; and
(d)
the adequacy, accuracy or completeness of any information provided by the Agent, any Party or by any other person under or in connection with any Finance Document, the transactions contemplated by any Finance Documents or any other agreement, arrangement or document.
21.16
Role of Reference Banks

 
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(a)
No Reference Bank is under any obligation to provide a quotation or any other information to the Agent.
(b)
No Reference Bank will be liable for any action taken by it under or in connection with any Finance Document, or for any Reference Bank Quotation, unless directly caused by its gross negligence or wilful misconduct.
(c)
No Party (other than the relevant Reference Bank) may take any proceedings against any officer, employee or agent of any Reference Bank in respect of any claim it may have against that Reference Bank or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document, or to any Reference Bank Quotation.
(d)
Any officer, employee or agent of each Reference Bank may rely on this Clause. The Reference Bank holds the benefit of this Clause on trust for any such officer, employee or agent.
21.17
Third party Reference Banks
This Agreement constitutes an irrevocable offer by each Party to each Reference Bank, which accepts the offer by consenting to be a Reference Bank and providing a Reference Bank Quotation. It may rely on Clause 28.16 ( Role of Reference Banks ) and Clause 42 ( Confidentiality of Funding Rates and Reference Bank Quotations ).
21.18
Agent's management time
Any amount payable to the Agent under Clause 16.3 ( Indemnity to the Agent ), Clause 18 ( Costs and expenses ) and Clause 28.11 ( Lenders' indemnity to the Agent ) shall include the cost of utilising the Agent's management time or other resources and will be calculated on the basis of such reasonable daily or hourly rates as the Agent may notify to the Company and the Lenders, and is in addition to any fee paid or payable to the Agent under Clause 13 ( Fees ).
21.19
Deduction from amounts payable by the Agent
If any Party owes an amount to the Agent under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.
SECTION 29
CONDUCT OF BUSINESS BY THE FINANCE PARTIES
22.
CONDUCT OF BUSINESS BY THE FINANCE PARTIES
No provision of this Agreement will:
(a)
interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

 
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(b)
oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or
(c)
oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

 
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SECTION 30
SHARING AMONG THE FINANCE PARTIES
23.
SHARING AMONG THE FINANCE PARTIES
23.1
Payments to Finance Parties
If a Finance Party (a " Recovering Finance Party ") receives or recovers (including by combination of accounts or set off) any amount from an Obligor other than in accordance with Clause 32 ( Payment mechanics ) and applies that amount to a payment due under the Finance Documents then:
(a)
the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery to the Agent;
(b)
the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 32 ( Payment mechanics ), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and
(c)
the Recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the " Sharing Payment ") equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 32.5 ( Partial payments ).
23.2
Redistribution of payments
The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) (the " Sharing Finance Parties ") in accordance with Clause 32.5 ( Partial payments ) towards the obligations of that Obligor to the Sharing Finance Parties.
23.3
Recovering Finance Party's rights
(a)
Unless paragraph (b) applies:
(i)
the receipt or recovery referred to in Clause 30.1 ( Payments to Finance Parties ) will be taken to have been a payment for the account of the Agent and not to the Recovering Finance Party for its own account, and the liability of the relevant Obligor to the Recovering Finance Party will only be reduced to the extent of any distribution retained by the Recovering Finance Party under Clause 30.1(c) ( Payments to Finance Parties ); and
(ii)
(without limiting sub-paragraph (i)) the relevant Obligor shall indemnify the Recovering Finance Party against a payment under Clause 30.1(c) ( Payments to Finance Parties ) to the extent that (despite sub-paragraph (i)) its liability has been discharged by the recovery or payment.
(b)
Where:

 
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(i)
the amount referred to in Clause 30.1 ( Payments to Finance Parties ) above was received or recovered otherwise than by payment (for example, set off); and
(ii)
the relevant Obligor, or the person from whom the receipt or recovery is made, is insolvent at the time of the receipt or recovery, or at the time of the payment to the Agent, or becomes insolvent as a result of the receipt or recovery,
then the following will apply so that the Finance Parties have the same rights and obligations as if the money had been paid by the relevant Obligor to the Agent for the account of the Finance Parties and distributed accordingly:
(iii)
each other Finance Party will assign to the Recovering Finance Party an amount of the debt owed by the relevant Obligor to that Finance Party under the Finance Documents equal to the amount received by that Finance Party under Clause 30.2 ( Redistribution of payments );
(iv)
the Recovering Finance Party will be entitled to all rights (including interest and voting rights) under the Finance Documents in respect of the debt so assigned; and
(v)
that assignment will take effect automatically on payment of the Sharing Payment by the Agent to the other Finance Party.
23.4
Reversal of redistribution
If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:
(a)
each Sharing Finance Party shall, upon request of the Agent, pay to the Agent for the account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay) (the " Redistributed Amount ");
(b)
as between the relevant Obligor and each relevant Sharing Finance Party, an amount equal to the relevant Redistributed Amount will be treated as not having been paid by that Obligor and the relevant Obligor shall indemnify the Sharing Finance Party against a payment under sub-paragraph (a) to the extent that the relevant Obligor's liability has been discharged by the recovery or payment; and
(c)
to the extent necessary, any debt assigned under paragraph (b) of Clause 30.3 ( Recovering Finance Party's rights ) will be reassigned.
23.5
Exceptions
(a)
This Clause 30 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and

 
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enforceable claim (or right of proof in an administration) against the relevant Obligor.
(b)
A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:
(i)
it notified that other Finance Party of the legal or arbitration proceedings; and
(ii)
that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.
SECTION 31
PUBLIC OFFER
24.
PUBLIC OFFER
24.1
MLAB's representations, warranties and undertakings
Mizuho Bank, Ltd., in its capacity as a MLAB, undertakes, represents and warrants to the Borrowers as follows:
(a)
As manager it has made or will make invitations to become a Facility A Lender under this Agreement to at least ten parties prior to the date that is 30 days following the original date of this Agreement, each of whom will be disclosed to the Borrowers.
(b)
At least 10 of the parties to whom that MLAB will make invitations referred to in paragraph (a) are not and will not, as at the date the invitations are made, to the knowledge of the relevant officers of that MLAB involved in the transaction, be Associates of an MLAB or any other invitee.
(c)
It has not made and will not make offers or invitations referred to in paragraph (a) to parties whom its relevant officers involved in the transaction on a day to day basis are aware are Offshore Associates of the relevant Borrower.
24.2
Borrower’s confirmation
Each Borrower confirms that none of the potential invitees whose names were disclosed to it by Mizuho Bank, Ltd., in its capacity as a MLAB, before Effective Date No. 1 were known or suspected by it to be an Offshore Associate of that Borrower or an Associate of any other such invitee. Each Borrower will notify that MLAB within 3 Business Days if it knows or suspects that any potential invitee notified to it under Clause 31.1(a) is an Offshore Associate of that Borrower or an Associate of any other invitee.
24.3
Lenders’ representations and warranties
MUFG Bank, Ltd., in its capacity as a Facility A Lender, and each Facility A Lender who accedes to this Agreement as a result of receiving an invitation under clause 31.1(a)

 
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represents and warrants to each Borrower that at the time it received the invitation it was carrying on the business of providing finance, or investing or dealing in securities, in the course of operating in financial markets.
24.4
Information
Each MLAB, and each Facility A Lender will provide to the Company when reasonably requested by the Company any factual information in its possession or which it is reasonably able to provide to assist the Company to demonstrate (based upon tax advice received by the Company) that Section 128F of the Tax Act has been satisfied where to do so will not in the MLAB 's or Lender’s reasonable opinion breach any law or regulation or any duty of confidence.
24.5
Co-operation if Section 128F requirements not satisfied
If, for any reason, the requirements of Section 128F of the Tax Act have not been satisfied in relation to interest payable on Loans (except to an Offshore Associate of a Borrower), then on request by the Agent, an MLAB, or the Company, each Party shall co-operate and take steps reasonably requested with a view to satisfying those requirements:
(a)
where a Finance Party breached Clause 31 ( MLAB's representations, warranties and undertakings ) or Clause 31.3 ( Lenders' representations and warranties ), at the cost of that Finance Party; or
(b)
in all other cases, at the cost of the Company.

 
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SECTION 32
ADMINISTRATION
25.
PAYMENT MECHANICS
25.1
Payments to the Agent
(a)
On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor or Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time in immediately available funds or if agreed by the Agent in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.
(b)
Payment shall be made to such account at the city of the Agent with such bank as the Agent, in each case, specifies.
(c)
Payment by an Obligor to the Agent for the account of a Finance Party satisfies the Obligor's obligations to make that payment.
25.2
Distributions by the Agent
Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 32.3 ( Distributions to an Obligor ) and Clause 32.4 ( Clawback and pre-funding ) be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than five Business Days' notice with a bank specified by that Party in Australia.
25.3
Distributions to an Obligor
The Agent may (with the consent of the Obligor or in accordance with Clause 33 ( Set-off )) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.
25.4
Clawback and pre-funding
(a)
Where a sum is to be paid by a Party (the Payer ) to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.
(b)
Unless paragraph (c) below applies, if the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.
(c)
If the Agent has notified the Lenders that it is willing to make available amounts for the account of a Borrower before receiving funds from the Lenders then if and

 
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to the extent that the Agent does so but it proves to be the case that it does not then receive funds from a Lender in respect of a sum which it paid to a Borrower:
(i)
the Borrower to whom that sum was made available shall on demand refund it to the Agent; and
(ii)
the Lender by whom those funds should have been made available or, if that Lender fails to do so, the Borrower to whom that sum was made available, shall on demand pay to the Agent the amount (as certified by the Agent) which will indemnify the Agent against any funding cost incurred by it as a result of paying out that sum before receiving those funds from that Lender.
(d)
The Payer will still remain liable to make the assumed payment, but until the other Party does repay the Agent under paragraph (b), the Payer's liability will be to the Agent in the Agent's own right.
25.5
Agent a Defaulting Finance Party
(a)
If, at any time, the Agent becomes Defaulting Finance Party, a Party which is required to make a payment under the Finance Documents to the Agent for the account of other Parties under Clause 32.1 ( Payments to the Agent ) may instead on the due date for payment either pay that amount direct to the required payee or pay that amount to an interest-bearing account held in the name of the payer and designated as a trust account for the benefit of the payee or payees with a bank rated at least A- by Standard & Poor’s Rating Services or Fitch Ratings Ltd or A3 by Moody’s Investors Services Limited or a comparable rating from an internationally recognised credit rating agency.
(b)
All interest accrued on the trust account will be for the benefit of the beneficiaries of that trust account pro rata to their respective entitlements.
(c)
A Party which has made a payment under paragraph (a) shall be discharged of the relevant payment obligation under the Finance Documents and shall not take any credit risk with respect to the amounts in the trust account.
(d)
Promptly upon the appointment of a successor Agent under Clause  28.12 ( Resignation of the Agent ), each Party which has made a payment to a trust account under paragraph (a) shall give all requisite instructions to the bank to transfer the amount (together with any accrued interest) to the successor Agent for distribution under Clause 32.2 ( Distributions by the Agent ).
25.6
Partial payments

 
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(a)
If the Agent receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Agent shall apply that payment towards the obligations of that Obligor under the Finance Documents in the following order:
(i)
first , in or towards payment pro rata of any amounts payable but unpaid in respect of fees, costs, expenses, losses or liabilities of the Agent under the Finance Documents;
(ii)
secondly , in or towards payment pro rata of all amounts (including interest) payable by the Obligor to Lenders in respect of amounts or security paid or provided by the Lenders to the Agent in place of another Lender under Clause 28.11(c) or 28.11(d) ( Lenders' indemnity to the Agent );
(iii)
thirdly , in or towards payment pro rata of all amounts payable by the Obligor to Lenders in respect of amounts or security paid by the Lenders to the Agent under Clause 28.11(a) ( Lenders' indemnity to the Agent ) or Clause 28.2 ( Instructions ) plus interest on such amounts.
(iv)
fourthly , in or towards payment pro rata of any accrued interest, fees or commission due but unpaid under this Agreement;
(v)
fifthly , in or towards payment pro rata of any principal due but unpaid under this Agreement; and
(vi)
sixthly , in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.
(b)
The Agent shall, if so directed by all Lenders, vary the order set out in paragraphs (a)(ii) to (a)(vi) above inclusive.
(c)
Paragraphs (a) and (b) above will override any appropriation made by an Obligor.
25.7
No set-off by Obligors
All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.
25.8
Business Days
(a)
Any payment under the Finance Documents which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).
(b)
During any extension of the due date for payment of any principal or Unpaid Sum under this Agreement interest is payable on the principal or Unpaid Sum at the rate payable on the original due date.
25.9
Currency of account
(a)
Subject to paragraphs (b) to (c) below, Australian dollar is the currency of account and payment for any sum due from an Obligor under any Finance Document.

 
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(b)
Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.
(c)
Any amount expressed to be payable in a currency other than Australian dollars shall be paid in that other currency.
25.10
Change of currency
(a)
Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:
(i)
any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (after consultation with the Company); and
(ii)
any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably).
(b)
If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Company) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Market and otherwise to reflect the change in currency.
25.11
Disruption to payment systems etc.
If either the Agent determines (in its discretion) that a Disruption Event has occurred or the Agent is notified by the Company that a Disruption Event has occurred:
(a)
the Agent may, and shall if requested to do so by the Company, consult with the Company with a view to agreeing with the Company such changes to the operation or administration of the Facilities as the Agent may deem necessary in the circumstances;
(b)
the Agent shall not be obliged to consult with the Company in relation to any changes mentioned in paragraph (a) if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes;
(c)
the Agent may consult with the Finance Parties in relation to any changes mentioned in paragraph (a) but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;
(d)
any such changes agreed upon by the Agent and the Company shall (whether or not it is finally determined that a Disruption Event has occurred) be binding upon the Parties as an amendment to (or, as the case may be, waiver of) the terms of the

 
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Finance Documents notwithstanding the provisions of Clause 38 ( Amendments and Waivers );
(e)
the Agent shall not be liable for any damages, costs or losses to any person, any diminution in value or any liability whatsoever (including, without limitation for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 32.11; and
(f)
the Agent shall notify the Finance Parties of all changes agreed pursuant to paragraph (d) above.
25.12
Anti-money laundering
(a)
A Finance Party may delay, block or refuse to process any payment or other transaction without incurring any liability if the Finance Party knows or reasonably suspects that the transaction or the application of its proceeds will:
(i)
breach, or cause a Finance Party to breach, any applicable laws or regulations of any jurisdiction (including any sanctions); or
(ii)
allow the imposition of any penalty on the Finance Party or its Affiliates under any such law or regulation,
including where the transaction or the application of its proceeds involves any entity or activity the subject of any applicable sanctions of any jurisdiction binding on the Finance Party or its Affiliate, or the direct or indirect proceeds of unlawful activity.
(b)
As soon as practicable after a Finance Party becomes aware that it will delay, block or refuse to process a transaction under paragraph (a), it will notify the Company and the Agent and consult in good faith but in each case only to the extent the Finance Party determines it is legally permitted to do so. In making that determination the Finance Party shall act reasonably.
(c)
The Company shall promptly advise the Agent if any Obligor enters into any Finance Document in the capacity as agent and promptly supply, or procure the supply of, such information as may be reasonably requested by the Agent (for itself or on behalf of any Finance Party) from time to time in relation to any principal for which an Obligor may be acting.
(d)
Each Obligor undertakes to exercise its rights and perform its obligations under the Finance Documents in accordance with all applicable laws or regulations relating to anti-money laundering, counter-terrorism financing or sanctions.
25.13
"Know your customer"
Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary "know

 
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your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.
SECTION 33
SET-OFF
26.
SET-OFF
If a Default is continuing a Finance Party may, but need not, set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any obligation owed by that Finance Party to that Obligor (whether or not matured), regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.
SECTION 34
NOTICES
27.
NOTICES
27.1
Communications in writing
Any communication or document to be made or delivered under or in connection with the Finance Documents:
(a)
must be in writing;
(b)
in the case of:
(i)
a notice by an Obligor; or
(ii)
a specification of a bank or account by the Agent under paragraph (b) of Clause 32.1 ( Payments to the Agent ) or a Lender under Clause 32.2 ( Distributions by the Agent ),
must be signed by an authorised signatory of the sender (directly or with a facsimile signature), subject to Clause 34.5 ( Email communication ), Clause 34.7 ( Communication through secure website ) and Clause 34.8 ( Reliance ), and
(c)
unless otherwise stated, may be made or delivered by fax, by letter, by email or as specified in Clause 34.7 ( Communication through secure website ).
27.2
Addresses
The address, email address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:
(a)
in the case of the Company, that identified with its name below;

 
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(b)
in the case of each Lender or any other Original Obligor, that specified in Schedule 1 ( The Original Parties ) or notified in writing to the Agent on or prior to the date on which it becomes a Party; and
(c)
in the case of the Agent, that identified with its name below,
or any substitute address, fax number, email address or department or officer as the Party may notify to the Agent (or the Agent may notify to the other Parties, if a change is made by the Agent) by not less than five Business Days' notice.
Address for service of communications:
Agent :
Address: 1800 Plaza Ten Harborside Financial Center; Jersey City, NJ 07311
Phone: (201) 626-9384
Fax: (201) 626-9935
Email: lau_agent@mizuhocbus.com
Attn: Maria Sherry
Company:     Address: Level 5B, 26 Talavera Road Macquarie Park NSW 2113
            Fax: +61 2 9034 2198
            Email: ejohnst2@dxc.com
            Attn: Emma Johnston, Director, Australia Legal
with copy to:
Address: Level 5B, 26 Talavera Road Macquarie Park NSW 2113
            Email: jbaker94@dxc.com
            Attn: Jennifer Baker, Director: Treasury – AMEA & ANZ
27.3
Delivery
(a)
Any communication or document to be made or delivered by one Party to another under or in connection with the Finance Documents will be taken to be effective or delivered:
(i)
if by way of fax, when the sender receives a successful transmission report unless the recipient informs the sender that it has not been received in legible form by any means within two hours after:
(A)
receipt, if in business hours in the city of the recipient; or
(B)
if not, the next opening of business in the city of the recipient; or
(ii)
if by way of letter or any physical communication, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address; or
(iii)
if by way of email, as specified in Clause 34.5 ( Email communication ); or
(iv)
if it complies with Clause 34.7 ( Communication through secure website ),

 
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and, in the case of a communication, if a particular department or officer is specified as part of its address details provided under Clause 34.2 ( Addresses ), if addressed to that department or officer.
(b)
All communication to or from an Obligor must be sent through the Agent.
(c)
Any communication or document made or delivered to the Company in accordance with this Clause 34 will be deemed to have been made or delivered to each of the Obligors.
(d)
A communication by fax, email or under Clause 34.7 ( Communication through secure website ) after business hours in the city of the recipient will be taken not to have been received until the next opening of business in the city of the recipient.
27.4
Notification of address, fax number and email address
Promptly upon receipt of notification of an address, fax number and email address or change of address, fax number or email address of an Obligor under Clause 34.2 ( Addresses ) or upon changing its own address, fax number or email address, the Agent shall notify the other Parties.
27.5
Communication when Agent is a Defaulting Finance Party
If and so long as the Agent is a Defaulting Finance Party, the Parties may, instead of communicating with each other through the Agent, communicate with each other directly and all the provisions of the Finance Documents which require communications to be made or notices to be given to or by the Agent are varied so that communications may be made and notices given to or by the relevant Parties directly.
27.6
Email communication
(a)
Any communication or document under or in connection with the Finance Documents may be made by or attached to an email and will be effective or delivered only:
(i)
in the case of a notice to the Agent of a Default when actually opened in legible format by the recipient Party;
(ii)
in all other cases, on the first to occur of the following:
(A)
when it is dispatched by the sender to each of the email addresses specified by the recipient, unless for each of the addresses, the sender receives an automatic notification that the e-mail has not been received (other than an out of office greeting for the named addressee) and it receives the notification before two hours after the last to occur (for all addresses) of
(1)
dispatch if in business hours in the city of the address; or
(2)
if not, the next opening of business in such city,
(B)
the sender receiving a message from the intended recipient's information system confirming delivery of the email; and

 
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(C)
the email being available to be read at one of the email addresses specified by the sender; and
(iii)
the email is in an appropriate and commonly used format, and any attached file is a pdf, jpeg, tiff or other appropriate and commonly used format.
(b)
In relation to an email with attached files:
(i)
if the attached files are more than 3 MB in total, then:
(A)
at the time of dispatch the giver of the e-mail must send a separate email without attachments notifying the recipient of the dispatch of the email; and
(B)
if the recipient notifies the sender that it did not receive the email with attached files, and the maximum size that is able to receive under its firewalls, then the sender shall promptly send to the recipient the attached files in a manner that can be received by the recipient of; and
(ii)
if the recipient of the email notifies the sender that it is unable to read the format of an attached file or that an attached file is corrupted, specifying appropriate and commonly used formats that it is able to read, the sender must promptly send to the recipient the file in one of those formats or send the attachment in some other manner; and
(iii)
if within two hours of:
(A)
dispatch of the email if in business hours in the city of the recipient; or
(B)
if not, the next opening of business in the city of the recipient,
the recipient notifies the sender as provided in subparagraph (i) (B) or (ii), then the relevant attached files will be taken not to have been received until the sender complies with that subparagraph.
(c)
An email which is a covering email for a notice signed by the Obligor's authorised signatory does not itself need to be signed by an authorised signatory.
(d)
Email and other electronic notices from the Agent generated by Loan IQ or other system software do not need to be signed,
27.7
Communication through secure website
(a)
The Agent may establish a secure website to which access is restricted to the Agent and the Lenders or the Obligors or both (and, where applicable, their respective financial and legal advisers).
(b)
After the Agent notifies the Lenders or the Company on behalf of the Obligors or both (as the case may be) of the establishment of the secure website, then any

 
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communication or document given or delivered by or to the Agent to or by Lenders or Obligors (as the case may be) other than any specified by the Agent,
(i)
may be given by means of the secure website in the manner specified by the Agent (or in the absence of such specification, as specified by the operator of the website); and
(ii)
unless otherwise agreed will be taken to be made or delivered upon satisfaction of the following:
(A)
a communication or document being posted on that secure website;
(B)
either:
(1)
receipt by the Agent of an email from the relevant website confirming that the website has sent an email to the relevant Party's email addresses nominated under paragraph (d) notifying that a communication or document has been uploaded on the website; or
(2)
the website containing or providing confirmation that the communication or document has been opened by the intended recipient; and
(C)
compliance with any other requirements specified by the Agent under paragraph (c).
(c)
By notice to the Lenders or the Company on behalf of the Obligors or both (as the case may be) the Agent acting reasonably may from time to time specify and amend rules concerning the operation of the secure website in the manner in which communications or documents may be posted, and will be taken to have been made or delivered. Those rules or moments will bind the recipients of the notice and the Agent.
(d)
When it establishes the secure website, the Agent shall nominate to the website for each Party the email address given to it by the Party under this Clause 34. Subsequently, the nominated email address for each Party for that website will be the address nominated by that Party to the secure website or by the Agent (who will notify the Party accordingly). It is the responsibility of each Party to ensure that the email address nominated for it is up-to-date. The Agent is under no obligation to notify the secure website of any change in email address notified to it.
(e)
The Company consents to the inclusion in the secure website of its company logo.
(f)
Each of the other Parties agrees that the Agent is not liable for any liability, loss, damage, costs or expenses incurred or suffered by them as a result of their access or use of the secure website or inability to access or use the secure website except to the extent caused by its gross negligence or wilful misconduct.

 
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27.8
Digitally signed notices
Commencing on a date to be determined by the Agent and notified to the other parties to this Agreement, all notices with payment instructions given by the Agent shall be digitally signed by the Agent. From that date, any such notice may only be relied on by the recipient if:
(a)
the notice has a valid digital certification appearing to come from an authorised officer of the Agent;
(b)
the identity of the signer of the notice is valid or if more than one digital signature has been applied to the notice, the identity of the last signer is valid; and
(c)
the notice has not been modified since it was certified.
27.9
Reliance
(a)
Any communication or document sent under this Clause 34 can be relied on by the recipient if the recipient reasonably believes it to be genuine and (if such a signature is required under Clause 34.1(b)) it bears what appears to be the signature (original or facsimile or email) of an authorised signatory of the sender (without the need for further enquiry or confirmation).
(b)
Each Party must take reasonable care to ensure that no forged, false or unauthorised notices are sent to another Party.
27.10
English language
(a)
Any notice or other communication given under or in connection with any Finance Document must be in English.
(b)
All other documents provided under or in connection with any Finance Document must be:
(i)
in English; or
(ii)
if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.
SECTION 35
CALCULATIONS AND CERTIFICATES
28.
CALCULATIONS AND CERTIFICATES
28.1
Accounts
In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.
28.2
Certificates and Determinations

 
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Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.
28.3
Day count convention
Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 365 days or, in any case where the practice in the Relevant Market differs, in accordance with that market practice.
SECTION 36
PARTIAL INVALIDITY
29.
PARTIAL INVALIDITY
If, at any time, any provision of a Finance Document is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.
SECTION 37
REMEDIES AND WAIVERS
30.
REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under a Finance Document shall operate as a waiver of any such right or remedy or constitute an election to affirm any of the Finance Documents. No election to affirm any Finance Document on the part of any Finance Party shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law.
SECTION 38
AMENDMENTS AND WAIVERS
31.
AMENDMENTS AND WAIVERS
31.1
Required consents
(a)
Subject to Clause 38.2 ( All Lender matters ) and Clause 38.4 ( Other exceptions ) any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Obligors and any such amendment or waiver will be binding on all Parties.
(b)
The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 38.
31.2
All Lender matters

 
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(a)
An amendment or waiver of any term of any Finance Document that has the effect of changing or which relates to:
(i)
the definition of "Majority Lenders" in Clause 1.1 ( Definitions );
(ii)
a waiver of any of the conditions precedent under Clause 4.1 ( Initial conditions precedent );
(iii)
an extension to the date of payment of any amount under the Finance Documents;
(iv)
a reduction in the Margin or a reduction in the amount, or a change in the currency, of any payment of principal, interest, fees or commission payable or any other payment obligation;
(v)
an increase in any Commitment, an extension of any Availability Period or any requirement that a cancellation of Commitments reduces the Commitments of the Lenders rateably under the relevant Facility;
(vi)
any provision which expressly requires the consent of all the Lenders;
(vii)
Clause 2.2 ( Finance Parties' rights and obligations ), Clause 9.9 ( Application of Prepayments ), Clause 25 ( Changes to the Lenders ), Clause 30 ( Sharing among the Finance Parties ) or Clause 32.5 ( Partial payments ); or
(viii)
the nature or scope of the guarantee and indemnity granted under Clause 19 ( Guarantee );
shall not be made without the prior consent of all the Lenders.
(b)
Where one or more Defaulting Finance Parties have been disenfranchised under Clause 39.5 ( Disenfranchisement of Defaulting Finance Parties ), no amendment of the kind referred to in paragraph (a) which applies to Defaulting Finance Parties in a manner different from other Finance Parties may be made without the consent of the Defaulting Finance Parties.
31.3
[Reserved]
31.4
Other exceptions
An amendment or waiver which relates to the rights or obligations of the Agent or a MLAB or a Reference Bank (each in their capacity as such) may not be effected without the consent of the Agent or, as the case may be, that MLAB or that Reference Bank.
31.5
Replacement of Screen Rate
Subject to Clause 38.4 ( Other exceptions ), if any Screen Rate is not available for a currency which can be selected for a Loan, any amendment or waiver which relates to providing for another benchmark rate to apply in relation to that currency in place of that Screen Rate (or which relates to aligning any provision of a Finance Document to the use of that other benchmark rate) may be made with the consent of the Majority Lenders and the Obligors.

 
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SECTION 39
INSTRUCTIONS AND DECISIONS
32.
INSTRUCTIONS AND DECISIONS
32.1
Abstentions
In determining whether the Majority Lenders, have given instructions or a consent, approval, waiver, amendment or other decision, a Lender will be deemed to have Commitments or a participation of zero if it has so elected by notice to the Agent.
32.2
Transferees bound
A consent, approval, waiver, amendment or other decision by a Lender or any instruction to the Agent by a Lender binds that Lender's assigns and successors unless revoked under Clause 39.3 ( Limitations on revocation ).
32.3
Limitations on revocation
Any instructions, consent, approval, waiver, amendment or other decision by the Majority Lenders may be revoked only by the Majority Lenders, and may not be revoked if the decision has been acted upon.
32.4
Failure to respond
If any Lender fails to respond to a request for instructions, consent, approval, waiver, amendment or other decision in relation to any Finance Document within 10 Business Days of that request (or any longer period agreed by the Company and the Agent), that Lender, its Commitment and its participation shall not be included for the purpose of calculating the Total Commitments or participations under the relevant Facilities when ascertaining whether all Lenders or Lenders with any relevant percentage of Total Commitments and/or participations have responded to that request. This Clause does not apply to a request for instructions, consent, approval, waiver, amendment or other decision or vote in relation to the matters referred to in Clauses 38.2(a)(iv) and 38.2(a)(v) ( All Lender matters ).
32.5
Disenfranchisement of Defaulting Finance Parties
(a)
For so long as a Defaulting Finance Party has any Available Commitment, in ascertaining the Majority Lenders or whether any given percentage (including, for the avoidance of doubt, unanimity) of the Total Commitments or the Commitments of any specified group of Lenders or the agreement of all Lenders or all of any specified group of Lenders has been obtained in respect of any request for instructions, consent, approval, waiver, amendment or other decision under the Finance Documents, that Defaulting Finance Party's Commitments will be reduced by the amount of its Available Commitments.
(b)
For the purposes of this Clause 39.5, the Agent may assume that the following Lenders are Defaulting Finance Parties:
(i)
any Lender which has notified the Agent that it has become a Defaulting Finance Party;

 
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(ii)
any Lender in relation to which the relevant officers of the Agent having day to day conduct of its role are aware that any of the events or circumstances referred to in the definition of " Defaulting Finance Party " has occurred,
unless it has received notice to the contrary from the Lender concerned (together with any supporting evidence reasonably requested by the Agent) or the Agent is otherwise aware that the Lender has ceased to be a Defaulting Finance Party.
32.6
Replacement of a Defaulting Finance Party
(a)
The Company may, at any time a Lender has become and continues to be a Defaulting Finance Party, by giving five Business Days' prior written notice to the Agent and such Lender require that Defaulting Finance Party to do one of the following under Clause 25 ( Changes to the Lenders ) and the Defaulting Finance Party shall comply with the notice:
(i)
transfer all of its rights and obligations under this Agreement;
(ii)
transfer all of the undrawn Commitment of the Lender; or
(iii)
transfer all of its rights and obligations in respect of the Facilities,
to a Lender or another bank, financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (including credit derivatives) (a " Replacement Lender ") selected by the Company, and which (unless the Agent is a Defaulting Finance Party) is acceptable to the Agent (acting reasonably), which confirms its willingness to assume and does assume all the obligations or all the relevant obligations of the transferring Lender (including the assumption of the transferring Lender's participations or unfunded participations (as the case may be) on the same basis as the transferring Lender).
(b)
Any transfer of rights and obligations of a Defaulting Finance Party pursuant to this Clause 39 shall be subject to the following conditions:
(i)
the Company shall have no right to replace the Agent;
(ii)
neither the Agent nor the Defaulting Finance Party shall have any obligation to the Company to find a Replacement Lender;
(iii)
the transfer must take place no later than ten days after the notice referred to in paragraph (a) above; and
(iv)
in no event shall the Defaulting Finance Party be required to pay or surrender to the Replacement Lender any of the fees received by the Defaulting Finance Party pursuant to the Finance Documents.

 
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SECTION 40
CONFIDENTIALITY
33.
CONFIDENTIALITY
33.1
Confidential Information
Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 40.2 ( Disclosure of Confidential Information ), and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information. To the extent that Confidential Information comprises personal information of any officer, director or employee of an Obligor, each Finance Party agrees to hold that personal information in accordance with the Australian Privacy Principles.
33.2
Disclosure of Confidential Information
Any Finance Party may disclose:
(a)
to any of its Affiliates and Related Funds and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this paragraph (a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;
(b)
to any person:
(i)
to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents or which succeeds (or which may potentially succeed) it as Agent and, in each case, to any of that person's Affiliates, Related Funds, Representatives and professional advisers;
(ii)
with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Obligors and to any of that person's Affiliates, Related Funds, Representatives and professional advisers;
(iii)
appointed by any Finance Party or by a person to whom paragraph (b)(i) or (ii) above applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf

 
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(including, without limitation, any person appointed under paragraph (c) of Clause 28.14 ( Relationship with the Lenders ));
(iv)
who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in paragraph (b)(i) or (b)(ii) above;
(v)
to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation (except this paragraph does not permit the disclosure of any information under section 275(4) of the PPSA unless section 275(7) of the PPSA applies);
(vi)
to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes (except this paragraph does not permit the disclosure of any information under section 275(4) of the PPSA unless section 275(7) of the PPSA applies);
(vii)
who is a Party; or
(viii)
with the consent of the Company;
in each case, such Confidential Information as that Finance Party shall consider appropriate if:
(A)
in relation to paragraphs (b)(i), (b)(ii) and (b)(iii) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;
(B)
in relation to paragraph (b)(iv) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;
(C)
in relation to paragraphs (b)(v) and (b)(vi) above, the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances; and

 
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(c)
to any person appointed by that Finance Party or by a person to whom paragraph (b)(i) or (b)(ii) above applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this paragraph (c) if the service provider to whom the Confidential Information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Company and the relevant Finance Party; and
(d)
to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents and/or the Obligors if the rating agency to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information.
33.3
Disclosure to numbering service providers
(a)
Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Facilities and/or one or more Obligors the following information:
(i)
names of Obligors;
(ii)
country of domicile of Obligors;
(iii)
place of incorporation of Obligors;
(iv)
original date of this Agreement;
(v)
Clause 46 ( Governing law );
(vi)
the names of the Agent and the MLABs;
(vii)
date of each amendment and restatement of this Agreement;
(viii)
amounts of, and names of, the Facilities (and any tranches);
(ix)
amount of Total Facility Commitments;
(x)
currencies of the Facilities;
(xi)
type of Facilities;
(xii)
ranking of Facilities;
(xiii)
Termination Date for Facilities;

 
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(xiv)
changes to any of the information previously supplied pursuant to paragraphs (i) to (xiii) above; and
(xv)
such other information agreed between such Finance Party and the Company,
to enable such numbering service provider to provide its usual syndicated loan numbering identification services.
(b)
The Parties acknowledge and agree that each identification number assigned to this Agreement, the Facilities and/or one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider.
(i)
Each Obligor represents that none of the information set out in paragraphs (a)(i) to (a)(xv) above is, nor will at any time be, unpublished price-sensitive information.
(c)
The Agent shall notify the Company and the other Finance Parties of:
(i)
the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Facilities and/or one or more Obligors; and
(ii)
the number or, as the case may be, numbers assigned to this Agreement, the Facilities and/or one or more Obligors by such numbering service provider.
33.4
Entire agreement
This Clause 40 constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.
33.5
Inside information
Each of the Finance Parties acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.
33.6
Notification of disclosure
Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Company:
(a)
of the circumstances of any disclosure of Confidential Information made pursuant to paragraphs (v) and (vi) of Clause 40.2 ( Disclosure of Confidential Information ) except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and

 
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(b)
upon becoming aware that Confidential Information has been disclosed in breach of this Clause 40.
33.7
Continuing obligations
The obligations in this Clause 40 are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of twelve months from the earlier of:
(a)
the date on which all amounts payable by the Obligors under or in connection with this Agreement have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and
(b)
the date on which such Finance Party otherwise ceases to be a Finance Party.
SECTION 41
PPSA PROVISIONS
34.
PPSA PROVISIONS
34.1
Exclusion of certain provisions
Where any Finance Party has a security interest (as defined in the PPSA) under any Finance Document, to the extent the law permits:
(a)
for the purposes of sections 115(1) and 115(7) of the PPSA:
(i)
each Finance Party with the benefit of the security interest need not comply with sections 95, 118, 121(4), 125, 130, 132(3)(d) or 132(4) of the PPSA; and
(ii)
sections 142 and 143 of the PPSA are excluded;
(b)
for the purposes of section 115(7) of the PPSA, each Finance Party with the benefit of the security interest need not comply with sections 132 and 137(3);
(c)
each Party waives its right to receive from any Finance Party any notice required under the PPSA (including a notice of a verification statement;
(d)
if a Finance Party with the benefit of a security interest exercises a right, power or remedy in connection with it, that exercise is taken not to be an exercise of a right, power or remedy under the PPSA unless the Finance Party states otherwise at the time of exercise. However, this Clause does not apply to a right, power or remedy which can only be exercised under the PPSA; and
(e)
if the PPSA is amended to permit the Parties to agree not to comply with or to exclude other provisions of the PPSA, the Agent may notify the Company and the Finance Parties that any of these provisions is excluded, or that the Finance Parties need not comply with any of these provisions.
This does not affect any rights a person has or would have other than by reason of the PPSA and applies despite any other Clause in any Finance Document.
34.2
Further assurances

 
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Whenever the Agent reasonably requests an Obligor to do anything:
(a)
to ensure any Finance Document (or any security interest (as defined in the PPSA) or other Security under any Finance Document) is fully effective, enforceable and perfected with the contemplated priority;
(b)
for more satisfactorily assuring or securing to the Finance Parties the property the subject of any such security interest or other Security in a manner consistent with the Finance Documents; or
(c)
for aiding the exercise of any power in any Finance Document,
the Obligor shall do it promptly at its own cost. This may include obtaining consents, signing documents, getting documents completed and signed and supplying information, delivering documents and evidence of title and executed blank transfers, or otherwise giving possession or control with respect to any property the subject of any security interest or Security.
SECTION 42
FUNDING RATES AND REFERENCE BANK QUOTATIONS
35.
CONFIDENTIALITY OF FUNDING RATES AND REFERENCE BANK QUOTATIONS
35.1
Confidentiality and disclosure
(a)
The Agent and each Obligor agree to keep each Funding Rate (and, in the case of the Agent, each Reference Bank Quotation) confidential and not to disclose it to anyone, save to the extent permitted by paragraphs (b), (c) and (d) below.
(b)
The Agent may disclose:
(i)
any Funding Rate (but not, for the avoidance of doubt, any Reference Bank Quotation) to the relevant Borrower pursuant to Clause 10.5 ( Notification of rates of interest ); and
(ii)
any Funding Rate or any Reference Bank Quotation to any person appointed by it to provide administration services in respect of one or more of the Finance Documents to the extent necessary to enable such service provider to provide those services if the service provider to whom that information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Agent and the relevant Lender or Reference Bank, as the case may be.
(c)
The Agent may disclose any Funding Rate or any Reference Bank Quotation, and each Obligor may disclose any Funding Rate, to:
(i)
any of its Affiliates and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives if any person to whom that Funding Rate or Reference Bank Quotation is to be given

 
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pursuant to this paragraph (i) is informed in writing of its confidential nature and that it may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of that Funding Rate or Reference Bank Quotation or is otherwise bound by requirements of confidentiality in relation to it;
(ii)
any person to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation if the person to whom that Funding Rate or Reference Bank Quotation is to be given is informed in writing of its confidential nature and that it may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of the Agent or the relevant Obligor, as the case may be, it is not practicable to do so in the circumstances;
(iii)
any person to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes if the person to whom that Funding Rate or Reference Bank Quotation is to be given is informed in writing of its confidential nature and that it may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of the Agent or the relevant Obligor, as the case may be, it is not practicable to do so in the circumstances; and
(iv)
any person with the consent of the relevant Lender or Reference Bank, as the case may be.
(d)
The Agent's obligations in this Clause 42 relating to Reference Bank Quotations are without prejudice to its obligations to make notifications under Clause 10.5 ( Notification of rates of interest ) provided that (other than pursuant to paragraph (b)(i) above) the Agent shall not include the details of any individual Reference Bank Quotation as part of any such notification.
35.2
Related obligations
(a)
The Agent and each Obligor acknowledge that each Funding Rate (and, in the case of the Agent, each Reference Bank Quotation) is or may be price-sensitive information and that its use may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and the Agent and each Obligor undertake not to use any Funding Rate or, in the case of the Agent, any Reference Bank Quotation for any unlawful purpose.
(b)
The Agent and each Obligor agree (to the extent permitted by law and regulation) to inform the relevant Lender or Reference Bank, as the case may be:

 
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(i)
of the circumstances of any disclosure made pursuant to Clause 42.1 (c)(ii) ( Confidentiality and disclosure ) above except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and
(ii)
upon becoming aware that an information has been disclosed in breach of this Clause 42.
35.3
No Event of Default
No Event of Default will occur under Clause 24.3 ( Other Obligations ) by reason only of an Obligor's failure to comply with this Clause 42.
36.
COUNTERPARTS
Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.
37.
INDEMNITIES AND REIMBURSEMENT
All indemnities and reimbursement obligations (and any other payment obligations of any Obligor) in each Finance Document are continuing and survive termination of the Finance Document, repayment of the Utilisations and cancellation or expiry of the Commitments.
38.
ACKNOWLEDGEMENT
Except as expressly set out in the Finance Documents none of the Asia Pacific Loan Market Association, the Finance Parties or any of their advisers have given any representation or warranty or other assurance to any Obligor in relation to the Finance Documents and the transactions they contemplate, including as to tax or other effects. The Obligors have not relied on any of them or on any conduct (including any recommendation) by any of them. The Obligors have obtained their own tax and legal advice.
The Code of Banking Practice does not apply to the Finance Documents and the transactions under them.

 
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SECTION 46
GOVERNING LAW AND ENFORCEMENT
39.
GOVERNING LAW
This Agreement is governed by the laws of Victoria.
SECTION 47
ENFORCEMENT
40.
ENFORCEMENT
40.1
Jurisdiction
(a)
The courts having jurisdiction in the state of Victoria have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement or any non-contractual obligation arising out of or in connection with this Agreement) (a " Dispute ").
(b)
The Parties agree that those courts are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.
(c)
This Clause 47.1 is for the benefit of the Finance Parties only. As a result, no Finance Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.
40.2
Service of process
Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in Australia):
(a)
irrevocably appoints the Company as its agent for service of process in relation to any proceedings in connection with any Finance Document; and
(b)
agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned.
41.
CONTRACTUAL RECOGNITION OF BAIL-IN
(a)
Notwithstanding any other term of any Finance Document or any other agreement, arrangement or understanding between the Parties, each Party acknowledges and accepts that any liability of any Party to any other Party under or in connection with the Finance Documents may be subject to Bail-In Action by the relevant Resolution Authority and acknowledges and accepts to be bound by the effect of:
(i)
any Bail-In Action in relation to any such liability, including (without limitation):
(A)
a reduction, in full or in part, in the principal amount, or outstanding amount due (including any accrued but unpaid interest) in respect of any such liability;

 
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(B)
a conversion of all, or part of, any such liability into shares or other instruments of ownership that may be issued to, or conferred on, it; and
(C)
a cancellation of any such liability; and
(ii)
a variation of any term of any Finance Document to the extent necessary to give effect to any Bail-In Action in relation to any such liability.
(b)
For the purposes of this clause 48, the following definitions apply:
" Bail-In Action " means the exercise of any Write-down and Conversion Powers.
" Bail-In Legislation " means in relation to an EEA Member Country which has implemented, or which at any time implements, Article 55 of Directive 2014/59/EU establishing a framework for the recovery and resolution of credit institutions and investment firms, the relevant implementing law or regulation as described in the EU Bail-In Legislation Schedule from time to time.
" EEA Member Country " means any member state of the European Union, Iceland, Liechtenstein and Norway.
" EU Bail-In Legislation Schedule " means the document described as such and published by the Loan Market Association (or any successor person) from time to time.
" Resolution Authority " means any body which has authority to exercise any Write-down and Conversion Powers.
" Write-down and Conversion Powers " means in relation to any Bail-In Legislation described in the EU Bail-In Legislation Schedule from time to time, the powers described as such in relation to that Bail-In Legislation in the EU Bail-In Legislation Schedule.
This Agreement has been entered into on the date stated at the beginning of this Agreement.

 
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Schedule 1     
THE ORIGINAL PARTIES
Part I
The Original Obligors
Name of Original Borrower
Jurisdiction of incorporation and company Registration number

Address for Service of Notice
DXC Technology Australia Pty Limited
Australia
ACN 008 476 944
Level 5B, 26 Talavera Road Macquarie Park NSW 2113

Name of Original
Guarantor
Jurisdiction of incorporation and company Registration number

Address for Service of Notice
DXC Technology Company
Nevada, USA
Tax ID#: 95-2043126
Address:
1775 Tysons Boulevard Tysons, Virginia, USA 22102
Phone: (703) 245-1766
Fax: (888) 335-2231
Email: cdiao@dxc.com
Attn: H.C. Charles Diao, Senior Vice President - Finance and Corporate Development
Part II     
Part III     

 
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Part IV     
T he Original Facility A Lenders
Name of Original Facility A Lender
Facility A Commitment
Address for Service of Notice
Mizuho Bank, Ltd., Sydney Branch
A$400,000,000
Level 33, 60 Margaret Street, Sydney NSW 2000
Phone: +61 2 8273 3944 / +61 2 8273 3993
Email: richita.aswani@mizuho-cb.com / Scott.agustin@mizuho-cb.com
Attn: Richita Aswani and Scott Agustin

MUFG Bank, Ltd.
A$400,000,000
Level 26, 1 Macquarie Place, Sydney NSW 2000
Phone: +61 3 9602 8912 / +61 2 9296 1350
Email:michael_love@au.mufg.jp / adrian_buddle@au.mufg.jp
Attn: Michael Love and Adrian Buddle

Total
A$800,000,000
 

 
 
 


 
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Schedule 2     
CONDITIONS PRECEDENT
Part I     

Conditions Precedent To Initial Utilisation
1.
Original Obligors
(a)
A verification certificate given by 2 directors or authorized officers of each Original Obligor substantially in the form as set out in Part III of this Schedule or otherwise reasonably acceptable to the Agent, with the attachments referred to in that form, and dated no earlier than 5 days before the first Utilisation Date.
(b)
All documents and other evidence reasonably requested by the Agent or an Original Lender (through the Agent) before the original date of this Agreement in order for the Agent or the Lender to carry out all necessary "know your customer" or other similar checks in relation to each Obligor and each of its authorised signatories under all applicable laws and regulations where such information is not already available to the recipient.
2.
Finance Documents
(a)
This Agreement executed by each party to it.
3.
Legal opinions
(a)
A legal opinion of Ashurst Australia, legal advisers to the MLABs and the Agent in Australia, substantially in the form distributed to the Agent prior to signing this Agreement.
(b)
A due execution legal opinion of the legal advisers to the Original Guarantor in the United States (which may be an in-house opinion), substantially in the form distributed to the Agent prior to signing this Agreement.
4.
Other documents and evidence
(a)
Evidence that any process agent referred to in Clause 47.2 ( Service of process ), if not an Original Obligor, has accepted its appointment.
(b)
A copy of any other Authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Company accordingly) in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document.
(c)
The Original Financial Statements.

 
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(d)
Evidence that the Original Obligors have insurance in place which satisfies Clause 20.10 ( Insurance ).
(e)
Evidence that the fees, costs and expenses then due from the Company pursuant to Clause 13 ( Fees ) and Clause 18 ( Costs and expenses ) have been paid or will be paid by the first Utilisation Date.


 
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Part II
Conditions Precedent Required To Be
Delivered By An Additional Obligor
1.
An Accession Letter, duly executed by the Additional Obligor and the Company.
2.
A verification certificate given by 2 directors or authorized officers of the Additional Obligor in substantially the form set out in Part III of this Schedule or otherwise reasonably satisfactory to the Agent, with the attachments referred to in that form, and dated no earlier than the date of the Accession Letter.
3.
A copy of any other Authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable in connection with the entry into and performance of the transactions contemplated by the Accession Letter or for the validity and enforceability of any Finance Document.
4.
If available, the latest audited financial statements of the Additional Obligor.
5.
A legal opinion of Ashurst Australia, legal advisers to the MLABs and the Agent in Australia.
6.
If the Additional Obligor is incorporated in a jurisdiction outside Australia, a legal opinion of the legal advisers to the MLABs and the Agent in the jurisdiction in which the Additional Obligor is incorporated.
7.
If the proposed Additional Obligor is incorporated in a jurisdiction outside Australia, evidence that the process agent specified in Clause 47.2 ( Service of process ), if not an Obligor, has accepted its appointment in relation to the proposed Additional Obligor.
8.
If the Additional Obligor was acquired by the Group, evidence (if applicable) that the provisions of Part 2J.3 of the Corporations Act 2001 (or the equivalent provisions in any other relevant jurisdiction) have been complied with in relation to the Accession Letter (if required) and the transactions contemplated under it.


 
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Part V     
Form of Verification Certificate
From:        [Borrower/Original Obligor/Additional Obligor]
To:        [Agent]
DXC Technology Australia Pty Limited – Syndicated Facility Agreement originally dated 27 November 2018 as amended from time to time (the "Agreement")
[I am a director/authorized officer]/[We are directors/authorized officers] of [        ] of [address] (" Company ") and [am]/[are each] authorised to execute this Certificate in the name of the Company.
[I/We] refer to the Agreement. Terms defined in the Agreement shall have the same meaning in this certificate unless given a different meaning in this certificate.
Attached are complete copies of the following:
1.
In the case of the Original Guarantor only, the constitutional documents of the Original Guarantor.
2.
In the case of the Original Guarantor only, extracts of minutes of a meeting of directors of the Company authorizing: (i) the transactions contemplated by the Agreement to which the Company is or will be a party and (ii) the execution, delivery and performance by the Company of each Finance Document to which the Company is or will be a party and the execution and delivery of the other documents to be delivered by the Company in connection with the Agreement.
3.
[Any power of attorney [duly stamped and registered where necessary] under which the Company executed any Finance document to which it is expressed to be a party, executed under common seal or by two directors or a director and a secretary.]
4.
In the case of the Original Guarantor only, a certificate as to the existence and good standing (including verification of tax status, if available) of the Original Guarantor from the appropriate governmental authorities in the Original Guarantor's jurisdiction of organization.
5.
A specimen signature of each person authorised to give notices for the Company.
6.
In the case of an Obligor organized under the laws of Australia only, the Company is solvent and there are no grounds for suspecting that it will not continue to be solvent after entering into the Finance Documents to which it is intended to be a party (and after incurring any other liability which it proposes to incur around the time it enters into them). It is not prevented by Chapter 2E of the Corporations Act 2001 from entering into and performing any of the Finance Documents to which it is expressed to be a party.
7.
Borrowing or guaranteeing, as appropriate, the Total Commitments would not cause any borrowing, guaranteeing or similar limit binding on any Original Obligor to be exceeded.
8.
All necessary corporate and regulatory approvals and consents have been obtained and remain in full force and effect.

 
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9.
No Default has occurred and is continuing.
The persons named below are the persons authorised to give notices for the Company and the specimen signature appearing beside the name of each person is the true signature, or a copy of the true signature, of that person.
Name
Position
Signature
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
…………………………………            …………………………………………..
Director/Authorized Officer                Director/Authorized Officer

Schedule 3     
REQUESTS
Part I     
Utilisation Request
From:    DXC Technology Australia Pty Limited
Level 5B, 26 Talavera Road Macquarie Park NSW 2113
To:    Maria Sherry
Email: lau_agent@mizuhocbus.com
Dated:    
Dear Sirs
DXC Technology Australia Pty Limited – Syndicated Facility Agreement originally dated 27 November 2018 as amended from time to time (the "Agreement")
1.
We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.

 
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2.
We wish to borrow a Loan on the following terms:
Proposed Utilisation Date:
[         ] (or, if that is not a Business Day, the next Business Day)
Facility to be utilised:
Facility A
Amount:
A$[   ] or, if less, the Available Facility
Interest Period:
[         ]
3.
The proceeds of this Loan should be credited to [ insert account details ] , as contemplated by clause 4.4 ( Payment of Loan proceeds by the Agent ) of the Agreement.
4.
We confirm that each condition specified in Clause 4.2 ( Further conditions precedent ) is satisfied on the date of this Utilisation Request [except as described in the notice dated [*] given to you, a copy of which is attached].
5.
This Utilisation Request is irrevocable.
Yours faithfully

…………………………………
authorised signatory for
[ name of relevant Borrower ]

 
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Part II
Selection Notice
APPLICABLE TO A LOAN
From:    DXC Technology Australia Pty Limited
Level 5B, 26 Talavera Road Macquarie Park NSW 2113
To:    Maria Sherry
Email: lau_agent@mizuhocbus.com
Dated:    
Dear Sirs
DXC Technology Australia Pty Limited - Syndicated Facility Agreement originally dated 27 November 2018 as amended from time to time 2018 (the "Agreement")
1.
We refer to the Agreement. This is a Selection Notice. Terms defined in the Agreement have the same meaning in this Selection Notice unless given a different meaning in this Selection Notice.
2.
We refer to the following Loan[s] with an Interest Period ending on [           ] *  
3.
[We request that the above Loan[s] be divided into [             ] Loans with the following Interest Periods:] **  
or
[We request that the next Interest Period for the above Loan[s] is [     ]]. ***  
4.
This Selection Notice is irrevocable.
Yours faithfully
.....................................
authorised signatory for
[the Company on behalf of]
[ name of relevant Borrower ]

 
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Schedule 4     
FORM OF TRANSFER CERTIFICATE
Part I
FORM OF SINGLE LENDER TRANSFER CERTIFICATE

To:    [            ] as Agent
From:
[ The Existing Lender ] (the " Existing Lender ") and [ The New Lender ] (the " New Lender ")
Dated:    
DXC Technology Australia Pty Limited – Syndicated Facility Agreement originally dated 27 November 2018 as amended from time to time (the "Agreement")
1.
We refer to the Agreement. This is a Transfer Certificate. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.
2.
We refer to Clause 25.5 ( Procedure for novation ):
(a)
The Existing Lender and the New Lender agree to the Existing Lender and the New Lender novating [all/the part] of the Existing Lender's Commitment referred to in the Schedule with effect from and including the Transfer Date in accordance with Clause 25.5 ( Procedure for novation ) and corresponding rights and obligations.
(b)
The proposed Transfer Date is [            ].
(c)
To the extent permitted by law, the Existing Lender assigns to the New Lender all rights of action that it may have to the extent they relate to its Commitment and its corresponding rights and obligations and all sums provided under or in connection with the Commitment.
(d)
The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 34.2 ( Addresses ) are set out in the Schedule.
3.
The New Lender expressly acknowledges the limitations on the Existing Lender's obligations set out in paragraphs (a) and (c) of Clause 25.4 ( Limitation of responsibility of Existing Lenders ).
4.
This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate.
5.
This Transfer Certificate [and any non contractual obligations arising out of or in connection with it] [is/are] governed by [ name of State law ].

 
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6.
This Transfer Certificate has been entered into on the date stated at the beginning of this Transfer Certificate.
7.
[ Where the transferee is a trustee under Australian law of a fund, this certificate may if the Agent agrees contain a provision limiting its liability under the Finance Documents to fund assets except to the extent its right to apply the fund assets towards satisfaction of that liability is impaired because of a breach of trust or other impropriety, such provision to be in the following form or as otherwise agreed by the Agent. The Agent's decision is its own. It need not consult or obtain instructions and is not bound by instructions.
(a)
Trustee enters into and performs this Agreement and the transactions it contemplates only as trustee of the Trust, except where expressly stated otherwise. This applies also in respect of any past and future conduct (including omissions) relating to this Agreement or those transactions.
(b)
Under and in connection with this agreement and those transactions and conduct:
(i)
Trustee’s liability (including for negligence) is limited to the extent it can be satisfied out of the assets of the Trust. Trustee need not pay any such liability out of other assets;
(ii)
another party may only do the following (but any resulting liability remains subject to this Clause):
(A)
prove and participate in, and otherwise benefit from, any form of insolvency administration of Trustee but only with respect to Trust assets;
(B)
exercise rights and remedies with respect to Trust assets, including set-off;
(C)
enforce its security (if any) and exercise contractual rights; and
(D)
bring any other proceedings against Trustee, seeking relief or orders that are not inconsistent with the limitations in this Clause
and may not otherwise:
(E)
bring proceedings against Trustee;
(F)
take any steps to have Trustee placed into any form of insolvency administration (but this does not prevent the appointment of a receiver, or a receiver and manager, in respect of Trust assets); or
(G)
seek by any means (including set-off) to have a liability of Trustee to that party (including for negligence) satisfied out of any assets of Trustee other than Trust assets.
(c)
Paragraphs (a) and (b) apply despite any other provision in this Agreement but do not apply with respect to any liability of Trustee to another party (including for negligence) to the extent that Trustee has no right or power to have Trust assets applied towards satisfaction of that liability, or its right or power to do so is subject to a deduction, reduction, limit or requirement to make good, in any

 
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case because Trustee has acted beyond power or improperly in relation to the Trust.
(d)
The limitation in paragraph (b)(i) is to be disregarded for the purposes (but only for the purposes) of the rights and remedies described in paragraph (b)(ii), and interpreting this agreement and any security for it, including determining the following:
(i)
whether amounts are to be regarded as payable (and for this purpose damages or other amounts will be regarded as a payable if they would have been owed had a suit or action barred under paragraph (b)(ii) been brought);
(ii)
the calculation of amounts owing; or
(iii)
whether a breach or default has occurred,
but any resulting liability will be subject to the limitations in this Clause.]


 
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THE SCHEDULE
Commitment/rights and obligations to be transferred
[ insert relevant details ]
[ Facility Office address, fax number and attention details for notices and account details for payments, ]
[Existing Lender]
[New Lender]
By:
By:
This Transfer Certificate is [executed as a deed and] accepted by the Agent and the Transfer Date is confirmed as [           ].
[Agent]
By:


 
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PART II
FORM OF SYNDICATION TRANSFER CERTIFICATE
[ This is only to be inserted for underwritten transactions ]
To:    [ ] as Agent
From:    The parties set out in part 1 of the Schedule (each an " Existing Lender ") and the parties set out in part 2 of the Schedule (each a " New Lender ")
Dated:
DXC Technology Australia Pty Limited – Syndicated Facility Agreement originally dated 27 November 2018 as amended from time to time (the "Agreement")
1.
We refer to the Agreement. This is a Transfer Certificate. Terms used in the Agreement will have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.
2.
We refer to Clause 25.5 ( Procedure for novation ):
(a)
The Existing Lenders and the New Lenders agree to the Existing Lenders and the New Lenders novating all or part of the Existing Lenders' Commitments, rights and obligations in accordance with Clause 25.5 ( Procedure for novation ) so that as from the Transfer Date the Commitments will be as set out in the Schedule and each New Lender and Existing Lender will have the corresponding rights and obligations. Each Existing Lender's Commitments, rights and obligations being novated are allocated among the New Lenders rateably according to the New Lenders' respective Commitments specified in the Schedule.
(b)
The proposed Transfer Date is [ ].
(c)
To the extent permitted by law, the Existing Lender assigns to the New Lender all rights of action that it may have to the extent they relate to its commitment and its corresponding rights and obligations and all sums provided under or in connection with the commitment.
(d)
The Facility Office and address, fax number and attention details for notices of the New Lenders for the purposes of Clause 34.2 ( Addresses ) are set out in the Schedule.
3.
Each New Lender expressly acknowledges the limitations on the Existing Lenders' obligations set out in paragraphs (a) and (c) of Clause 25.4 ( Limitation of responsibility of Existing Lenders ).
4.
This Transfer Certificate may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Transfer Certificate.
5.
This Transfer Certificate has been entered into on the date stated at the beginning of this Transfer Certificate.
6.
This Transfer Certificate [and any non contractual obligations arising out of or in connection with it] [is/are] governed by [name of state or territory] law.

 
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7.
[ Where a transferee is a trustee under Australian law of a fund, this certificate may if the Agent agrees contain a provision limiting its liability under the Finance Documents to fund assets except to the extent its right to apply the fund assets towards satisfaction of that liability is impaired because of a breach of trust or other impropriety, such provision to be in the following form or as otherwise agreed by the Agent. The Agent's decision is its own. It need not consult or obtain instructions and is not bound by instructions.
(a)
Trustee enters into and performs this Agreement and the transactions it contemplates only as trustee of the Trust, except where expressly stated otherwise. This applies also in respect of any past and future conduct (including omissions) relating to this Agreement or those transactions.
(b)
Under and in connection with this agreement and those transactions and conduct:
(i)
Trustee’s liability (including for negligence) is limited to the extent it can be satisfied out of the assets of the Trust. Trustee need not pay any such liability out of other assets;
(ii)
another party may only do the following (but any resulting liability remains subject to this Clause):
(A)
prove and participate in, and otherwise benefit from, any form of insolvency administration of Trustee but only with respect to Trust assets;
(B)
exercise rights and remedies with respect to Trust assets, including set-off;
(C)
enforce its security (if any) and exercise contractual rights; and
(D)
bring any other proceedings against Trustee, seeking relief or orders that are not inconsistent with the limitations in this Clause
and may not otherwise:
(E)
bring proceedings against Trustee;
(F)
take any steps to have Trustee placed into any form of insolvency administration (but this does not prevent the appointment of a receiver, or a receiver and manager, in respect of Trust assets); or
(G)
seek by any means (including set-off) to have a liability of Trustee to that party (including for negligence) satisfied out of any assets of Trustee other than Trust assets.
(c)
Paragraphs (a) and (b) apply despite any other provision in this Agreement but do not apply with respect to any liability of Trustee to another party (including for negligence) to the extent that Trustee has no right or power to have Trust assets applied towards satisfaction of that liability, or its right or power to do so is subject to a deduction, reduction, limit or requirement to make good, in any case because Trustee has acted beyond power or improperly in relation to the Trust.

 
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(d)
The limitation in paragraph (b)(i) is to be disregarded for the purposes (but only for the purposes) of the rights and remedies described in paragraph (b)(ii), and interpreting this agreement and any security for it, including determining the following:
(i)
whether amounts are to be regarded as payable (and for this purpose damages or other amounts will be regarded as a payable if they would have been owed had a suit or action barred under paragraph (b)(ii) been brought);
(ii)
the calculation of amounts owing; or
(iii)
whether a breach or default has occurred,
but any resulting liability will be subject to the limitations in this Clause.]
THE SCHEDULE
Commitment/rights and obligations to be transferred
Part 1 Existing Lenders
Commitments after novation
Address Details
 
 
[Only insert if there are changes]
Part 2 New Lenders
Commitments after novation
Address Details
 
 
[Insert relevant details of address, account]

[Existing Lenders]                    
By:                            
[New Lenders] [Insert signature blocks for each New Lender]
By:
This Transfer Certificate is [executed as a deed and] accepted by the Agent on behalf of all other Parties to the Agreement and the Transfer Date is confirmed as [ ].
[Agent]

 
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Schedule 5     
FORM OF ACCESSION LETTER
To:    [        ] as Agent
From:    [ Subsidiary ] and [[•]]
Dated:    
Dear Sirs
DXC Technology Australia Pty Limited – Syndicated Facility Agreement originally dated 27 November 2018 as amended from time to time (the "Agreement")
1.
We refer to the Agreement. This is an Accession Letter. Terms defined in the Agreement have the same meaning in this Accession Letter unless given a different meaning in this Accession Letter.
2.
[ Subsidiary ] agrees to become an Additional [Borrower]/[Guarantor] and to be bound by the terms of the Agreement as an Additional [Borrower]/[Guarantor] pursuant to Clause [26.2 ( Additional Borrowers )]/[Clause 26.4 ( Additional Guarantors )] of the Agreement. [ Subsidiary ] is a company duly incorporated under the laws of [ name of relevant jurisdiction ].
3.
[The Company confirms that no Default is continuing or would occur as a result of [ Subsidiary ] becoming an Additional Borrower.]
4.
[ Subsidiary's ] administrative details are as follows:
Address:    
Fax No:    
Attention:    
5.
This Accession Letter [and any non contractual obligations arising out of or in connection with it] [is/are] governed by [name of state or territory] .
[This Accession Letter is entered into by deed.]
[Company]
[Subsidiary]
 
 

 
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Schedule 6     
FORM OF RESIGNATION LETTER
To:    [       ] as Agent
From:    [ resigning Obligor ] and [[•]]
Dated:    
Dear Sirs
DXC Technology Australia Pty Limited –Syndicated Facility Agreement originally dated 27 November 2018 as amended from time to time (the "Agreement")
1.
We refer to the Agreement. This is a Resignation Letter. Terms defined in the Agreement have the same meaning in this Resignation Letter unless given a different meaning in this Resignation Letter.
2.
Pursuant to [Clause 26.3 ( Resignation of a Borrower )]/[Clause 26.6 ( Resignation of a Guarantor )], we request that [ resigning Obligor ] be released from its obligations as a [Borrower]/[Guarantor] under the Agreement.
3.
We confirm that:
(a)
no Default is continuing or would result from the acceptance of this request; and
(b)
[                                 ] *  
4.
This Resignation Letter [and any non contractual obligations arising out of or in connection with it] [is/are] governed by [name of state or territory] .
[Company]
[Subsidiary]
By:
By:



 
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Schedule 7     
FORM OF COMPLIANCE CERTIFICATE
To:    [       ] as Agent
From:    DXC Technology Company
Dated:    
Dear Sirs
DXC Technology Australia Pty Limited – Syndicated Facility Agreement originally dated 27 November 2018 as amended from time to time 2018 (the "Agreement")
1.
I refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.
2.
I confirm that:
[each the financial statements delivered herewith fairly present the financial condition of the Original Guarantor and its Subsidiaries, as at the dates indicated and the results of operations of the Company and its Subsidiaries (or the Original Guarantor and its Subsidiaries, as applicable) and cash flow for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise stated therein), subject to the absence of footnotes and changes resulting from audit and normal year-end adjustment; and] *  
I have reviewed the terms of the Agreement and made, or caused to be made under my supervision, a review in reasonable detail of the transactions and financial condition of the Original Guarantor and its Subsidiaries, during the accounting period covered by such financial statements and I do not have knowledge of the existence, as at the date of this certificate, of any condition or event that constitutes and Event of Default or a Potential Event of Default[, or if any such condition or event exists, set out below are details of the nature of that Default and the action being taken in relation thereto:
[ details to be specified, if any ].]
3.
I confirm that as at [ date ]:
(i)
the ratio of Consolidated EBITDA to Consolidated Interest Expense was [•] : 1:00;
(ii)
the ratio of Consolidated Total Debt to Consolidated EBITDA was [•] : 1.00;
Attached to this certificate are details of our computations with respect to each of the above financial covenants.


 
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Signed:
…..............................................
 
Director / Authorised officer
 
of
 
DXC Technology Company




 
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Schedule 8     
FORM OF CONFIDENTIALITY UNDERTAKING
[ LETTERHEAD OF EXISTING LENDER ]


To [ New Lender ]
Date: [*]

Dear [*]


DXC Technology Australia Pty Limited (the "Company") –
Syndicated Facility Agreement originally dated 27 November 2018 as amended from time to time (the "Agreement")

We write on behalf of ourselves and the Company. We understand that you are considering [acquiring]/[arranging the acquisition of] an interest in the Agreement (the Proposal ). We will deliver to you the Confidential Information, and the Company permits us to deliver it, if you sign and return a copy of this letter confirming the following.

You agree with us and the Company that you will:
(a)
keep the Confidential Information (as defined below) strictly confidential and in a secure place;
(b)
use the Confidential Information only in connection with the Proposal;
(c)
only disclose the Confidential Information to:
(i)
your Related Entities (as defined in the Corporations Act 2001 (Cth)) and your and their officers and employees required to be involved in connection with the Proposal;
(ii)
an adviser or auditor involved in connection with the Proposal [ who is bound by a duty or obligation of confidence ]; or
(d)
if you do not participate in the Proposal, at our request return or destroy or permanently erase (to the extent technically practicable) any Confidential Information supplied by us (except those you are required to keep by any law or by any competent judicial, governmental, supervisory or regulatory body or in accordance with internal policy, or any extracts or copies of Confidential Information that form part of your board, committee or credit papers), and provide us with written confirmation of this; and
(e)
ensure everyone mentioned in paragraph (c) is aware of and complies with these requirements as if they had signed this letter in your place.

 
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“ Confidential Information ” means any information in any form relating to any Obligor, the Group and the [Agreement/Finance Documents] provided by us to you in connection with the Proposal, other than information which:
•
is now, or later becomes, in the public domain (other than as a result of a breach of the above requirements);
•
is required to be disclosed for the purposes of litigation or under applicable law, or by any applicable requirement of a governmental, banking, taxation or other regulatory authority or similar body where it is a practice of financial institutions to comply with those requirements or the rules of any relevant stock exchange; or
•
you can show that you lawfully already had or that you received in circumstances unrelated to the Proposal.

The above exceptions do not affect any other obligation or duty of confidence you have with respect to that information.

Your obligations under this letter will expire on the [*] anniversary of the date of this letter [ or, if earlier, the date on which you or any of your Related Entities become a party to the Agreement ].

We hold the benefit of this letter on trust for ourselves and the Company.

If a provision of this letter is inconsistent with any conditions of access to a data room maintained by a lender, or potential lender, under the Agreement, this letter prevails to the extent of that inconsistency.

This letter is governed by [*] law.


Yours faithfully
                                              
For and on behalf of
We agree to the above on behalf of




 
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Schedule 9     
TIMETABLES
Part I - Loans
 
Timetable
Delivery of a duly completed Utilisation Request (Clause 5.1 ( Delivery of a Utilisation Request ) or a Selection Notice (Clause 11.1 ( Selection of Interest Periods ))
Three Business Days prior to the Utilisation Date specified in the Utilisation Request or, in the case of the Loans to be made on the initial Utilisation Date, two Business Days prior to the Utilisation Date specified in the Utilisation Request
BBSY Bid is fixed
Quotation Day as of 10:30 a.m. Sydney time



    
    



Schedule 10     

LITIGATION AND INVESTIGATIONS
Vincent Forcier v. Computer Sciences Corporation and The City of New York : On October 27, 2014, the United States Attorney’s Office for the Southern District of New York and the Attorney General for the State of New York filed complaints-in-intervention on behalf of the United States and the State of New York, respectively, against Computer Sciences Corporation (“CSC”) and The City of New York. This action arose out of a  qui tam  complaint originally filed under seal in 2012 by Vincent Forcier, a former employee of CSC. The complaints allege that from 2008 to 2012 New York City and CSC, in its role as fiscal agent for New York City’s Early Intervention Program ("EIP"), a federal program that provides services for infants and toddlers with manifest or potential developmental delays, violated the federal and state False Claims Acts and various common law standards by allegedly orchestrating a billing fraud against Medicaid through the misapplication of default billing codes and the failure to exhaust private insurance coverage before submitting claims to Medicaid. The New York Attorney General’s complaint also alleges that New York City and CSC failed to reimburse Medicaid in certain instances where insurance had paid a portion of the claim. The lawsuits seek treble statutory damages, other civil penalties and attorneys’ fees and costs.
On January 26, 2015, CSC and the City of New York moved to dismiss Forcier’s amended  qui tam  complaint as well as the federal and state complaints-in-intervention. In June 2016, the Court dismissed Forcier’s amended complaint in its entirety. With regard to the complaints-in-intervention, the Court dismissed the federal claims alleging misuse of default diagnosis codes when the provider had entered an invalid code, and the state claims alleging failure to reimburse Medicaid when claims were subsequently paid by private insurance. The Court denied the motions to dismiss with respect to the federal and state claims relating to (i) submission of insurance claims with a code signifying that the patient’s policy ID was unknown, and (ii) submission of claims to Medicaid after the statutory deadline for payment by private insurance had passed, and state common law claims. In accordance with the ruling, the United States and the State of New York each filed amended complaints-in-intervention on September 6, 2016. In addition to reasserting the claims upheld by the Court, the amended complaints assert new claims alleging that the compensation provisions of CSC’s contract with New York City rendered it ineligible to serve as a billing agent under state law. 
On November 9, 2016, CSC filed motions to dismiss the amended complaints in their entirety. On August 10, 2017, the Court granted in part and denied in part the motions to dismiss, allowing the remaining causes of action to proceed. On January 9, 2018, the Original Guarantor answered the complaints, and asserted a counterclaim against the State of New York on a theory of contribution and indemnification. On January 30, 2018, the State of New York filed a motion to dismiss the Original Guarantor’s counterclaim. In a ruling dated September 20, 2018, the Court allowed the Original Guarantor’s counterclaim for indemnification to proceed with respect to liability for claims not arising under the Federal False Claims Act. The Parties participated in a non-binding mediation on November 29, 2017, but no settlement has been reached to date. Although deferred pending mediation, discovery has now commenced. The Original Guarantor believes that these claims are without merit and intends to continue to defend itself vigorously.
Strauch Fair Labor Standards Act Collective Action : On July 1, 2014, plaintiffs Joseph Strauch, Timothy Colby, Charles Turner, and Vernon Carre filed an action in the U.S. District Court for the District of Connecticut on behalf of themselves and a putative nationwide collective of CSC system administrators, alleging CSC’s failure to properly classify these employees as non-exempt under the federal Fair Labor Standards Act ("FLSA"). Plaintiffs allege similar state-law Rule 23 class claims pursuant to Connecticut and California statutes, including the Connecticut Minimum Wage Act, the California Unfair Competition Law, California Labor Code, California Wage Order No.


    
    



4-2001 and the California Private Attorneys General Act. Plaintiffs claim double overtime damages, liquidated damages, pre- and post-judgment interest, civil penalties, and other state-specific remedies.
In 2015 the Court entered an order granting conditional certification under the FLSA of the collective of over 4,000 system administrators, and notice of the right to participate in the FLSA collective action was mailed to the system administrators. Approximately 1,000 system administrators, prior to the announced deadline, filed consents with the Court to participate in the FLSA collective.
On June 30, 2017, the Court granted Rule 23 certification of a Connecticut state-law class and a California state-law class consisting of professional system administrators and associate professional system administrators. Senior professional system administrators were found not to qualify for Rule 23 certification under the state-law claims. On July 14, 2017, the Original Guarantor petitioned the Second Circuit Court of Appeals for permission to file an appeal of the Rule 23 decision. That petition was denied on November 21, 2017.
As a result of the Court's findings in its Rule 23 certification order, the parties entered into a stipulation to decertify the senior professional system administrators from the FLSA collective. On August 2, 2017, the Court approved the stipulation, and the FLSA collective action is currently made up of approximately 700 individuals who held the title of associate professional or professional system administrator.
A jury trial commenced on December 11, 2017. On December 20, 2017, the jury returned a verdict in favor of plaintiffs, finding that the Original Guarantor had misclassified the class of employees as exempt under federal and state laws, and finding that it had done so willfully. In a ruling dated September 21, 2018, the Court denied the Original Guarantor’s motions for judgment as a matter of law, and for decertification. Further rulings on the scope of damages are pending. The Original Guarantor disagrees with the verdict and intends to continue to defend itself vigorously, including by appealing the verdict and the final judgment of the Court.
Computer Sciences Corporation v. Eric Pulier, et al. : On May 12, 2015, CSC and its wholly owned subsidiary, ServiceMesh Inc. ("SMI"), filed a civil complaint in the Court of Chancery of the State of Delaware against Eric Pulier, the former CEO of SMI, which had been acquired by CSC on November 15, 2013. Following the acquisition, Mr. Pulier signed a retention agreement with SMI pursuant to which he received a grant of restricted stock units of CSC and agreed to be bound by CSC’s rules and policies, including CSC’s Code of Business Conduct. Mr. Pulier resigned from SMI on April 22, 2015 amid allegations that he had engaged in fraudulent transactions with two employees of the Commonwealth Bank of Australia Ltd. (“CBA”). The original complaint against Mr. Pulier asserted claims for fraud, breach of contract and breach of fiduciary duty. In an amended complaint, CSC named TechAdvisors, LLC and Shareholder Representative Services LLC ("SRS") as additional defendants. In ruling on a motion to dismiss filed by Mr. Pulier, the Court dismissed CSC’s claim for breach of the implied covenant of good faith, but allowed substantially all of the remaining claims to proceed. Mr. Pulier asserted counter-claims for breach of contract, fraud, negligent representation, rescission, and violations of the California Blue Sky securities law. With the exception of the claim for breach of his retention agreement, the Court dismissed in whole or in part each of Mr. Pulier’s counterclaims.
On December 17, 2015, CSC entered into a settlement agreement with the majority of the former equityholders of SMI, as well as with SRS acting in its capacity as the agent and attorney-in-fact for the settling equityholders. Pursuant to the settlement agreement, CSC received $16.5 million, which amount was equal to the settling equityholders’ pro rata share of the funds remaining in escrow from the transaction, which was recorded as an offset to selling, general and administrative costs in CSC’s statements of operations for the fiscal year ended March 31, 2016. On February 20, 2017, CSC, SRS and the former equityholders of SMI who remain named defendants entered into


    
    



a partial settlement agreement by which CSC received payment of some of the funds remaining in escrow.

On July 20, 2017, the Court granted a motion by the United States for a 90-day stay of discovery pending the completion of a criminal investigation. On September 27, 2017, a grand jury empaneled by the United States District Court for the Central District of California returned an indictment against Pulier, charging him with conspiracy, securities and wire fraud, obstruction of justice, and other violations of federal law (United States v. Eric Pulier, CR 17-599-AB). The Government sought an extension of the stay which the Delaware Court granted on November 3, 2017. The civil action is now stayed pending resolution of the criminal case.
Law enforcement officials in Australia have brought bribery-related charges against the two former CBA employees. One of these has since pled guilty, and in 2016 received a sentence of imprisonment. In 2016, the United States Attorney’s Office for the Central District of California announced similar criminal charges against this same CBA employee for securities fraud and wire fraud. In April 2018 the other former CBA employee was committed to stand trial in the Australian criminal courts. The Original Guarantor is cooperating with and assisting the Australian and U.S. authorities in their investigations.
On February 17, 2016, Mr. Pulier filed a complaint in Delaware Chancery Court against CSC and its subsidiary - CSC Agility Platform, Inc., formerly known as SMI - seeking advancement of his legal fees and costs. On May 12, 2016, the Court ruled that CSC Agility Platform - as the successor to SMI - is liable for advancing 80% of Mr. Pulier’s fees and costs in the underlying civil action. Mr. Pulier has also filed a complaint for advancement of the legal fees and costs incurred in connection with his defense of criminal investigations by the U.S. Government and other entities. On March 30, 2017, Mr.
Pulier filed a motion for judgment on the pleadings in this fee advancement matter. Mr. Pulier's motion for judgment on the pleadings and other advancement-related issues were argued before the Court on August 2, 2017, and, on August 7, 2017, the Court ruled substantially in Mr. Pulier's favor. On January 30, 2018, the Court reduced the Original Guarantor’s advancement obligation to only 80% of the criminal defense fees and costs sought by Mr. Pulier. In undertakings previously provided to SMI, Mr. Pulier agreed to repay all amounts advanced to him if it should ultimately be determined that he is not entitled to indemnification.
Kemper Corporate Services, Inc. v. Computer Sciences Corporation : In October 2015, Kemper Corporate Services, Inc. (“Kemper”) filed a demand for arbitration against CSC with the American Arbitration Association (“AAA”), alleging that CSC breached the terms of a 2009 Master Software License and Services Agreement and related Work Orders (the “Agreement”) by failing to complete a software translation and implementation plan by certain contractual deadlines. Kemper claimed breach of contract, seeking approximately $100 million in damages measured in part by the amount of the fees paid under the contract, as well as pre-judgment interest, and in the alternative claimed rescission of the Agreement. CSC answered the demand for arbitration denying Kemper’s claims and asserting a counterclaim for unpaid invoices for services rendered by CSC.
A single arbitrator conducted an evidentiary hearing on the merits of the claims and counterclaims in April 2017. Oral argument took place on August 28, 2017. On October 2, 2017, the arbitrator issued a partial final award, finding for Kemper on its breach of contract theory, awarding Kemper $84.2 million in compensatory damages plus prejudgment interest, denying Kemper’s claim for rescission as moot, and denying CSC’s counterclaim. Kemper moved on October 10, 2017, in federal district court in Texas to confirm the award. On November 16, 2017, the arbitrator issued a Final Award which reiterated his findings of fact and law, calculated the amount of prejudgment interest, and awarded Kemper its costs of arbitration including reasonable attorneys’


    
    



fees and expenses. On December 6, 2017, the Original Guarantor filed a motion to vacate the award in federal district court in New York. A week later, the New York court stayed the action in deference to the Texas court’s decision as to which venue was more appropriate to address the vacatur arguments. On January 12, 2018, the Original Guarantor appeared in the Texas action seeking a stay of the confirmation proceedings or a transfer of venue to New York. On March 2, 2018, the Texas court denied the venue transfer motion. The pending vacatur motion was accordingly transferred to the Texas court, and a new memorandum of law in support of the motion was filed in that jurisdiction on March 30, 2018. On August 27, 2018, the Magistrate Judge issued its Report and Recommendation denying the vacatur motion. On September 10, 2018, the Original Guarantor filed its objections to this report to the United States District Judge who reviews the decision  de novo .   On September 18, 2018, the District Court summarily accepted the Report and Recommendation without further briefing and entered a Final Judgment in the case. On September 27, 2018, the Original Guarantor filed a notice of appeal to the Fifth Circuit Court of Appeals. The Original Guarantor has also paid the portion of the judgment that is uncontested on appeal, and Kemper recorded this partial satisfaction of the judgment on September 26, 2018.
The Original Guarantor disagrees with the decision of the arbitrator and intends to continue to defend itself vigorously. The Original Guarantor is also pursuing coverage for the full scope of the award, interest, and legal fees and expenses, under the Original Guarantor 's applicable insurance policies.  
Forsyth, et al. v. HP Inc. and Hewlett Packard Enterprise :  This purported class and collective action was filed on August 18, 2016 in the U.S. District Court for the Northern District of California, against HP and HPE alleging violations of the Federal Age Discrimination in Employment Act (“ADEA”), the California Fair Employment and Housing Act, California public policy and the California Business and Professions Code. Former business units of HPE now owned by the Original Guarantor will be proportionately liable for any recovery by plaintiffs in this matter. Plaintiffs filed an amended complaint on December 19, 2016. Plaintiffs seek to certify a nationwide class action under the ADEA comprised of all U.S. residents employed by defendants who had their employment terminated pursuant to a work force reduction (“WFR”) plan on or after December 9, 2014 (deferral states) and April 8, 2015 (non-deferral states), and who were 40 years of age or older at the time of termination. Plaintiffs also seek to represent a Rule 23 class under California law comprised of all persons 40 years or older employed by defendants in the state of California and terminated pursuant to a WFR plan on or after August 18, 2012. On January 30, 2017, defendants filed a partial motion to dismiss and a motion to compel arbitration of claims by certain named and opt-in plaintiffs who had signed releases as part of their WFR packages. On September 20, 2017, the Court denied the partial motion to dismiss without prejudice, but granted defendants’ motions to compel arbitration for those named and opt-in plaintiffs. Accordingly, the Court has stayed the entire action pending arbitration for these individuals, and administratively closed the case. Plaintiffs filed a motion for reconsideration as well as a notice of appeal to the Ninth Circuit (which has been denied as premature). The reconsideration motion was denied without oral argument. In that same decision, the Court held that a joint arbitration was permissible. The Original Guarantor subsequently sought and obtained leave of Court to file a motion for reconsideration arguing that joint arbitration is not permitted under the relevant employee agreements. The Court denied the motion on April 17, 2018, ruling that interpretation of the employee agreements is an issue delegated to the arbitrator. The American Arbitration Association, which was designated to manage the arbitration process, has selected a single arbitrator to conduct the proceedings. An initial case management conference before the arbitrator was held on June 29, 2018. Pursuant to the release agreements, however, mediation is a precondition to arbitration. A mediation was held on October 4-5, 2018, and a settlement was reached with all 16 named and opt-in plaintiffs who were compelled to arbitrate. A settlement agreement has been signed. The case will continue to proceed in Court, however, with respect to other putative class members. Former business units of the Original Guarantor now owned by Perspecta will be proportionately liable for any recovery by plaintiffs in this matter.


    
    



Voluntary Disclosure of Certain Possible Sanctions Law Violations : On February 2, 2017, CSC submitted an initial notification of voluntary disclosure to the U.S. Department of Treasury, Office of Foreign Assets Control ("OFAC") regarding certain possible violations of U.S. sanctions laws pertaining to insurance premium data and claims data processed by two partially-owned joint ventures of Xchanging, which CSC acquired during the first quarter of fiscal 2017. A copy of the disclosure was also provided to Her Majesty’s Treasury Office of Financial Sanctions Implementation in the United Kingdom. The Original Guarantor’s related internal investigation is continuing, and the Original Guarantor has undertaken to cooperate with and provide a full report of its findings to OFAC when completed.
In addition to the matters noted above, the Original Guarantor is currently subject in the normal course of business to various claims and contingencies arising from, among other things, disputes with customers, vendors, employees, contract counterparties and other parties, as well as securities matters, environmental matters, matters concerning the licensing and use of intellectual property, and inquiries and investigations by regulatory authorities and government agencies. Some of these disputes involve or may involve litigation. The financial statements reflect the treatment of claims and contingencies based on management's view of the expected outcome. The Original Guarantor consults with outside legal counsel on issues related to litigation and regulatory compliance and seeks input from other experts and advisors with respect to matters in the ordinary course of business. Although the outcome of these and other matters cannot be predicted with certainty, and the impact of the final resolution of these and other matters on the Original Guarantor’s results of operations in a particular subsequent reporting period could be material and adverse, management does not believe based on information currently available to the Original Guarantor, that the resolution of any of the matters currently pending against the Original Guarantor will have a material adverse effect on the financial position of the Original Guarantor or the ability of the Original Guarantor to meet its financial obligations as they become due. Unless otherwise noted, the Original Guarantor is unable to determine at this time a reasonable estimate of a possible loss or range of losses associated with the foregoing disclosed contingent matters.




    
    


Schedule 11
[Form of Extension Request]
[Date]

To the Lenders parties to the
Agreement referred to below

DXC Technology Australia Pty Limited – Syndicated Facility Agreement
dated _______________ 2018 (the "Agreement")

Re:    Request for Extension of Termination Date
Ladies and Gentlemen:
We refer to the Agreement. This is an Extension Request. Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement.
The Company hereby requests that the Termination Date be extended for a period of one year from [●] 20[●] to [●] 20[●], as provided in Section 2.3(a) of the Agreement.
The undersigned hereby certifies, in [his/her] capacity as an authorized officer of the Company and not in [his/her] individual capacity (and without personal liability) that, as of the date of the extension of the Termination Date, the following statements will be true:
(1)    the representations and warranties of the Company contained in Clause 20 of the Agreement are correct in all material respects (except those representations and warranties qualified by materiality, which shall be true and correct) on and as of such date, as though made on and as of such date, except to the extent that any such representation or warranty expressly relates only to an earlier date, in which case it was correct in all material respects (except those representations and warranties qualified by materiality, which shall be true and correct) as of such earlier date, and
(2)    no Event of Default or Potential Event of Default has occurred and is continuing.    

DXC TECHNOLOGY AUSTRALIA PTY LIMITED


By: ____________________________________    
Name:
Title:



    



EXECUTED as an agreement.
[ execution clauses intentionally omitted ]




    
    

 
Exhibit 10.5
 
EXECUTION VERSION
EXHIBIT104AMENDMENTDE_IMAGE3.JPG Amendment Deed No. 2
DXC Technology Australia Pty Limited
ACN 008 476 944
DXC Technology Company
Mizuho Bank, Ltd.
and
Others






8 January 2019


 
 
 
 
    
    


CONTENTS
 
 
 
 
 
CLAUSE
 
 
PAGE
 
 
 
 
 
1.
INTERPRETATION
2
 
 
1.1
Definitions
2
 
 
1.2
Terms defined in the Facility Agreement
2
 
 
1.3
Rules for interpreting this document
2
2.
CONSIDERATION
3
3.
ACCESSION OF NEW MLAB
3
4.
AMENDMENT OF FACILITY AGREEMENT
3
 
 
4.1
Amendment to Facility Agreement
3
 
 
4.2
Effect of amendment         
3
 
 
4.3
Effective Date
3
5.
ACKNOWLEDGEMENTS AND CONSENTS
4
6.
EXISTING LOANS
4
7.
NOTICES
4
8.
GENERAL
4
 
 
8.1
Governing law
4
 
 
8.2
Giving effect to this document
4
 
 
8.3
Amendment
5
 
 
8.4
Counterparts
5




    


THIS DEED is made on the date set out on the front cover
BETWEEN:
(1)
DXC Technology Australia Pty Limited ACN 008 476 944 (the Company );
(2)
DXC Technology Company (the Original Guarantor );
(3)
Mizuho Bank, Ltd. and MUFG Bank, Ltd. as existing mandated lead arrangers and bookrunners (the MLABs );
(4)
JPMorgan Chase Bank, N.A. as incoming mandated lead arranger and bookrunner (the Incoming MLAB )
(5)
Mizuho Bank, Ltd., Sydney Branch, and MUFG Bank, Ltd. as existing Facility A Lenders (the Existing Facility A Lenders ); and
(6)
Mizuho Bank, Ltd., New York Branch (the Agent ).
RECITALS
The parties to this document (other than the Incoming MLAB) are parties to the Facility Agreement.
JPMorgan Chase Bank, N.A. wishes to accede to the Facility Agreement as a MLAB in the manner set out in this document.
The parties also wish to amend the Facility Agreement in the manner set out in this document.
THE PARTIES AGREE AS FOLLOWS:

    


1.
INTERPRETATION
1.1
Definitions
The following definitions apply in this document.
Amended Facility Agreement means the Facility Agreement, as amended in accordance with this document.
Effective Date has the meaning set out in clause ‎4.3 ( Effective Date ).
Existing Loans means each Loan (as defined in the Facility Agreement) which is outstanding immediately prior to the Effective Date.
Facility Agreement means the Syndicated Facility Agreement dated 27 November 2018 between the Company, the Original Guarantor, the MLAB named therein, the lenders named therein and the Agent, as amended, restated, or otherwise modified from time to time prior to the Effective Date.
1.2
Terms defined in the Facility Agreement
A term (other than a term defined in clause 1.1) that is defined in the Facility Agreement has the same meaning when used in this document.
1.3
Rules for interpreting this document
Clauses 1.2 ( Construction ) of the Facility Agreement applies as if set out in full in this document, with any necessary changes.
2.
CONSIDERATION
Each party acknowledges that it has received valuable consideration for entering into this document.
3.
ACCESSION OF NEW MLAB
With effect on and from the Effective Date:
(a)
JPMorgan Chase Bank, N.A. shall become a party to the Amended Facility Agreement as a MLAB and shall assume the obligations and acquire the rights of a MLAB under the Amended Facility Agreement;
(b)
each other party to the Amended Facility Agreement shall acquire corresponding rights against and assume corresponding obligations towards JPMorgan Chase Bank, N.A. in its capacity as a MLAB; and
(c)
JPMorgan Chase Bank, N.A. agrees to be bound by the provisions of the Amended Facility Agreement in its capacity as a MLAB.
4.
AMENDMENT OF FACILITY AGREEMENT
4.1
Amendment to Facility Agreement
(a)
The Facility Agreement is amended with effect on and from the Effective Date by making the following changes:
(i)
adding “JPMorgan Chase Bank, N.A.” to the parties defined in paragraph (4) as “MLABs” at the start of the document;
(ii)
adding “party thereto” after “MLABs” in the definition of “Amendment Deed No. 1” in Clause 1.1 ( Definitions ); and
(iii)
adding “other than JPMorgan Chase Bank, N.A.” after “MLABs” in Clause 13.1 ( Fees ).

    


(b)
Paragraph (a) does not affect any right or obligation of any party that arises before the Effective Date (including any right or obligation of JPMorgan Chase Bank, N.A. in its capacity as Lender).
4.2
Effect of amendment
(a)
Except as expressly amended by this document, no changes to the Facility Agreement are to be inferred or implied, and in all other respects the Facility Agreement is confirmed and remains in full force and effect.
(b)
With effect on and from the Effective Date, references in the Finance Documents to the Facility Agreement will be read and construed as references to the Facility Agreement as amended by this document.
4.3
Effective Date
The Effective Date ( Effective Date ) is the date on which the following conditions are satisfied:
(a)
The Agent shall have received this document executed by each party to it; and
(b)
JPMorgan Chase Bank, N.A. shall have become a Lender under the Facility Agreement with a Commitment for Facility A equal to or greater than AUD 166,666,666.67.
5.
ACKNOWLEDGEMENTS AND CONSENTS
(a)
Each party:
(i)
consents to the accession and amendments contemplated by this document;
(ii)
agrees and acknowledges that this document is a "Finance Document" for the purposes of the Facility Agreement; and
(iii)
confirms the Facility Agreement (as amended by this document) and each other Finance Document to which it is a party, and agrees that each such document will continue in full force and effect.
(b)
The Company and the Original Guarantor each confirm that any guarantee and security given or to be given by it in connection with the Facility Agreement secures all present and future obligations of each Borrower under the Amended Facility Agreement and in accordance with the terms of that guarantee or security.
(c)
Unless expressly stated otherwise, nothing in this document:
(i)
prejudices or adversely affects any right, power or remedy arising under; or
(ii)
discharges, releases or otherwise affects any liability or obligation arising under,
the Finance Documents.
6.
EXISTING LOANS
Nothing in this document constitutes or effects a termination or a repayment and readvance of any Existing Loans outstanding on the date of this document or the Effective Date and all of those Existing Loans continue under the Facility Agreement as amended by this document.
7.
NOTICES
Clause 34 ( Notices ) of the Facility Agreement applies as if set out in full in this document, with any necessary changes.
8.
GENERAL
8.1
Governing law

    


Clauses 46 ( Governing Law ) and 47 ( Enforcement ) of the Facility Agreement apply as if set out in full in this document, with any necessary changes.
8.2
Giving effect to this document
Each party must do anything (including execute any document), and must ensure that its employees and agents do anything (including execute any document), that the other party may reasonably require to give full effect to this document.
8.3
Amendment
This document can only be amended or replaced by another document signed by the parties hereto.
8.4
Counterparts
This document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this document.



    





    


EXECUTED as a deed.
COMPANY AND ORIGINAL BORROWER
EXECUTED  by DXC TECHNOLOGY AUSTRALIA PTY LIMITED
 
 




 
[ execution pages – Amendment Deed No. 2 ]
 
    
    



ORIGINAL GUARANTOR
SIGNED, SEALED AND DELIVERED  by DXC TECHNOLOGY COMPANY  
 
 

 
[ execution pages – Amendment Deed No. 2 ]
 
    
    


MLAB AND EXISTING FACILITY A LENDER
SIGNED, SEALED AND DELIVERED  by MIZUHO BANK, LTD.  
 
 
 


 
[ execution pages – Amendment Deed No. 2 ]
 
    
    



MLAB AND EXISTING FACILITY A LENDER

SIGNED, SEALED AND DELIVERED  by MUFG BANK, LTD.  
 
 


 
[ execution pages – Amendment Deed No. 2 ]
 
    
    



INCOMING MLAB

SIGNED, SEALED AND DELIVERED  by JPMORGAN CHASE BANK, N.A.  
 
 

 
[ execution pages – Amendment Deed No. 2 ]
 
    
    





 
[ execution pages – Amendment Deed No. 2 ]
 
    
    


AGENT
SIGNED, SEALED AND DELIVERED  by MIZUHO BANK, LTD., NEW YORK BRANCH  
 
 


 
[ execution pages – Amendment Deed No. 2 ]
 
    
    


Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, J. Michael Lawrie, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of DXC Technology Company;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
 
 
 
 
 
 Date:  
February 8, 2019
 
 
/s/ J. Michael Lawrie
 
 
 
 
J. Michael Lawrie President and Chief Executive Officer




Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, Paul N. Saleh, certify that:
 
1. I have reviewed this Quarterly Report on Form 10-Q of DXC Technology Company;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 
 
 
 
 
 
 Date:  
February 8, 2019
 
 
/s/ Paul N. Saleh
 
 
 
 
Paul N. Saleh
Executive Vice President and Chief Financial Officer




Exhibit 32.1
 
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
 

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, J. Michael Lawrie, President and Chief Executive Officer of DXC Technology Company (the "Company"), hereby certify that, to my knowledge:
 
(1) The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2018 , (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
 
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Dated:
February 8, 2019
 
/s/ J. Michael Lawrie
 
 
 
J. Michael Lawrie
President and Chief Executive Officer







Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
 
 
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Paul N. Saleh, Executive Vice President and Chief Financial Officer of DXC Technology Company (the "Company"), hereby certify that, to my knowledge:

(1) The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2018 , (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
 
 
 
Dated:
February 8, 2019
 
/s/ Paul N. Saleh
 
 
 
Paul N. Saleh
Executive Vice President and Chief Financial Officer